BACKGROUND

On 21 March 2016, the Indonesian Minister of Agrarian Affairs and Spatial Layout/Head of National Land Agency issued the Ministerial Regulation No. 13 of 2016 on the Procedures for Granting, Relinquishing or Transferring Ownership of Residential Property for Foreign Citizens Domiciled in Indonesia (“MR 13/2016”), as an implementing regulation for the Government Regulation No. 103 of 2015 on the Ownership of Residential Property for Foreign Citizens Domiciled in Indonesia (“GR 103/2016”).

MR 13/2016 revoked and replaced the Ministerial Regulation No. 7 of 1996, as amended by Ministerial Regulation No. 8 of 1996 (collectively, “MR 7/1996”) regarding the same matter. 

MR 13/2016 will be effective as of the date of its promulgation by the Ministry of Law and Human Rights (“MOLHR”) but the process has not yet been completed. 

KEY PROVISIONS 

We outline several key provisions under MR 13/2016 as follows: 

  1. Procedure to Acquire Residential Properties by Foreigners 

Land Titles 

Foreign citizens who have valid residential or stay permits, can own the following residential property (“Property”) in Indonesia: 

  1. houses built on a land with a Right-to-Use title (Hak Pakai) over (i) state land, (ii) a Right-to-Manage title (Hak Pengelolaan), or (iii) a Right-to-Own title (Hak Milik);1 or
  2. apartments built on a land with a Right-to-Use title over (i) state land or (ii) Right-to-Manage title.

The requirement for foreign citizens to have valid residential or stay permits before purchasing the Property is a new requirement under MR 13/2016. 

New Property 

The foreigner citizens can only purchase a new Property directly from the developers or the land owners and prohibited to purchase the Property from the second market. 

This is also a new requirement under MR 13/2016. 

Minimum Price Thresholds 

The foreign citizens can only purchase the Property at the following minimum prices: 

Click here to view table

  1. Security Rights (Hak Tanggungan) over the Property

The Property owned by the foreign citizens can be encumbered with a security rights (hak tanggungan) provided that: 

  1. the security rights over a house built on a land with a Right-to-Use title over a Right-to-Own must first be approved by the Right-to-Own title holder; and
  2. the security rights over a house or an apartment built on a land with Right-to-Use title over a Right-toManage title must first be approved by the Right-to-Manage title holder. 
  1. Relinquishment and Transfer of the Property Rights 

Foreign citizens may also transfer the Property but if the transfer is because of inheritance, the heir must also have valid residential or stay permits. 

If the heir is no longer qualified to have valid residential or stay permits or leaving Indonesia, then within 1 year, the Property must be relinquished and transferred to a qualified party. If within such 1-year period the Property has not been relinquished or transferred, then it will be auctioned or granted to its original land title holder (i.e. the title holder of the Right-to-Own or Right-to-Manage).

  1. Going forward/Commentary 

As mentioned above, MR 13/2016 is not yet effective and we still need to see how this regulation is implemented in practice.