According to the principal of local law, only people with true Indonesian citizenship have the right to own a land in Indonesia. Individual foreigner who happened to be domiciled in the country may only allowed to have a private property or a home over a particular mass of land, which is referred as the “Right to Use” a land.
Furthermore, the second Article of Governmental Regulation No. 41/1996 on Residence Ownership by Foreigners residing in Indonesia stated that stand-alone house that could be owned by foreigners is the ones that built on the land protected within these numbers of considerations:
- It is built on the land included in the Rights to Use;
- It is controlled by an agreement over the ownership of the land with the holders of the right
- If it is a unit of a condominium, then it is still has to be built on Right to Use land regulations over the land of the state.
According to the Article 1 of Law GR No.41/1996, it is formulated that foreigners dwelling in Indonesia might own a house for living or a certain right of land for its residence. However, not all foreigners are eligible for this kind of right, as the aforementioned foreigners should be able to contribute the national development of this country.
The contribution of benefit by foreigners is defined under Article 1 GR No. 41/1996, and is elaborated further by the regulations issued by the Ministry of Agrarian Affairs Law No.7 of 1996 Residential Requirements and Ownership by Foreigners, namely the MR No. 7/1996 Law. The Article 1 of the aforementioned law states that foreigners who contribute for the national benefit and development are the ones who maintain and own its economic interests in the country by having an investment.
Foreigners might also own a house over the land which is controlled under legal agreement made with the rightful owner of a land. This kind of agreement is regulated under the provisions of GR No. 41/1996 under Article 3, which states that such agreement should be made by foreigners in questions and the rightful land holder under a written agreement. Later, it should be composed in the form of a deed by Conveyancing Officer of the Land (PPAT). The agreement should be recorded in land certificate and book relevant to the matter, as regulated under Article 4 of GR Regulation No. 41 of 1996.
However, certain degree of flexibility is also protected under Article 3 MR 7/1996 that states how a house is eligible for a rent through an Indonesian’s business according to the agreement made between the homeowner, the foreigners, and the relevant company in question. The time period for this sort of agreement should be made for twenty-five year period and can be extended no longer than twenty years afterwards if the foreigners in question are still residing in Indonesia.
However, in the event that the foreigner has to leave Indonesia for at least one year, the aforementioned foreigner shall assign or release the rights of land and house to another party eligible for the rights, as stated and regulated under the Article of GR No.41/1996 paragraph 1. If such task is not completed or conducted, then following the regulation under GR No 41 of 1996 Article 6 letter b in paragraph 2, the right of the house and land will be returned to the original owner of rights.
The procedures of acquiring the land and house for foreigners are stated in MR law No.7 of 1996, specifically in Article 2, paragraph 1. The procedures are as follows:
- Purchasing or building a house on the land that is included in the Right to Use over the right of land ownership;
- Purchasing a unit of condominium which is built on the land included in the Right to use over the Land of the State;
- Purchasing or building a residence on the land protected by the right of lease or ownership based on a written agreement with the legal land holder.
As for the type of dwellings that can be habituated by the foreigner, that would be houses and units of condominium that are not included in the low price or basic house classification. This law falls under the MR law No.7 of 1996, Article 2, paragraph 2.