Foreigners cannot own freehold land in Indonesia. Everything else about buying property here follows from that single fact, including the two structures you will be offered, and the ways both go wrong.
The two rights
Leasehold (Hak Sewa) is a contractual right to use land for a fixed term. You do not own it. You hold a contract with whoever does. Terms are commonly 25 or 30 years with an agreed extension.
Hak Pakai (right to use) is a registered land right, recorded at the land office rather than living only in a private agreement. Available to foreigners meeting residency conditions, with defined initial terms and extensions.
The practical difference is what stands behind your claim. Leasehold rests on a contract and on the counterparty honouring it. Hak Pakai rests on the land registry.
What due diligence actually means
Most problems we see were visible before signing. The work is unglamorous and it is the entire job.
Title. Who actually holds the underlying right, and does the certificate match the person in front of you? Inherited land with multiple heirs is a recurring source of disputes, and one signature is rarely enough.
Zoning. Land is designated for particular uses. A plot zoned for agriculture will not support a commercial villa licence regardless of what the seller says is normal locally. Zoning is checked against the spatial plan, not against precedent on the neighbouring plot.
Encumbrances. Existing mortgages, caveats, prior leases, access rights. A plot can be sold subject to obligations that are invisible unless you look.
Access. Legal access is not the same as a road that exists. Confirm the right of way is documented.
Boundaries. The certificate area and the physical area disagree more often than you would expect.
The clauses that decide your downside
Once the land checks out, the contract decides what happens when something goes wrong.
- Extension mechanics. “Extendable” is meaningless without a stated price or formula and a defined process. An extension at a price to be agreed is an extension at the landowner’s discretion.
- Transferability. Can you assign the lease without consent? If not, your exit depends on a third party’s cooperation.
- What happens to what you build. Buildings on leased land at end of term: spell it out.
- Inheritance. If you die mid-term, what passes and to whom?
- Default and dispute forum. Where is a dispute heard, and under which law?
Structure follows use
Personal use and commercial use are different problems. If the property will generate rental income, the holding structure has to accommodate the entity that lawfully operates that activity, which, for short-term rental, is not a PT PMA. Getting the property right and the operating structure wrong leaves you with an asset you cannot legally monetise.
The uncomfortable part
Nominee arrangements, land held in an Indonesian person’s name for a foreigner, are still offered and still common. They are also unenforceable. If the relationship fails, the legal owner is the person on the certificate. We do not structure them, and we would encourage you to treat anyone who does as telling you something about how they handle risk generally.
Before you sign
The cheapest moment to find a problem is before the money moves. Every item above is checkable in advance, and the cost of checking is a rounding error against the purchase price.
General guidance only, not advice on a specific transaction. Talk to us before you commit to a property.