F.A.Q. (Frequently Asked Questions): Is there a way for foreigners to open a company and buy villa to that company as a Freehold type of ownership?

In Indonesia, foreigners cannot directly own property under Freehold (Hak Milik) due to legal restrictions, but there is a legal workaround for foreigners to invest in property indirectly. This involves establishing a company under specific structures permitted by Indonesian law. Here's how it works:

Foreign-Owned Company (PT PMA) and Property Ownership

A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a foreign investment company that allows foreigners to own a business in Indonesia. Through a PT PMA, foreigners can acquire certain property rights, but not directly as Freehold. Instead, they can secure the next closest type of ownership.

Steps to Buy Property via PT PMA

1. Establish a PT PMA:

- Foreigners must register a PT PMA under Indonesia’s investment laws.

- The company must adhere to the business sectors allowed for foreign ownership (check the Positive Investment List for compliance).

2. Acquire Property Through PT PMA:

- The property is owned by the company, not the individual foreigner.

- A PT PMA can own property under a Hak Guna Usaha (Right to Cultivate), Hak Guna Bangunan (Right to Build), or Hak Pakai (Right to Use) title. These titles provide long-term control over the property, similar to Freehold in practice.

3. Duration and Extensions:

- Hak Guna Bangunan: Valid for up to 30 years, extendable for 20 years, and renewable for an additional 30 years.

- Hak Pakai: Valid for 25 years, extendable for 20 years, and renewable for 25 more years.

- These durations offer significant long-term control comparable to Freehold, though technically not the same.

4. Use the Property for Business or Residence:

- Villas purchased through a PT PMA can be used for commercial purposes, such as vacation rentals, or as private residences.

Key Considerations

1. Restrictions:

- PT PMAs cannot own Hak Milik (Freehold), but they can secure long-term control titles like Hak Guna Bangunan.

- The company must maintain active compliance with business regulations to retain property rights.

2. Costs:

- Setting up a PT PMA involves legal, administrative, and operational costs.

- Additional taxes and fees apply for foreign investors.

3. Legal Advice:

- Hiring a local legal consultant or notary familiar with property and investment laws is essential to ensure compliance.

Conclusion

While foreigners cannot directly own Freehold property in Indonesia, establishing a PT PMA provides a legitimate and practical way to gain long-term control over real estate, including villas. This approach requires careful legal and financial planning but offers a viable alternative for foreign investors.