Property rights (and wrongs) in Indonesia

One of the strange things about living in Indonesia as a foreigner is that you can’t actually own anything.

Not a house, a car or even a motorcycle.

As for property, here is a snippet from some research I did a while back:

According to the Basic Agrarian Law, there are currently two categories of land rights (in Indonesia): adat land (customary land), which is unregistered, and certified land, which is registered at the local land office. There are five principle types of land rights for certified land.

The first is hak milik, which is equivalent to freehold title in common law jurisdictions. This title, however, can only be held by an Indonesian citizen, and not by a corporate entity, whether local or foreign. In terms of land mass, only about 1 to 3% of land in Indonesia has hak milik title.

The other four types of land rights are the right to build (HGB), the right to rent, the right to use and the right of exploitation. Although foreign companies (note: NOT individuals) can obtain these rights, they are excessively restrictive as the property must be directly used for the approved project and the rights must be renewed after a certain number of years. These types of land rights also impede spatial land planning, since if the use of the property ceases, changes, or passes to a company or foreigner, then the title may have to be handed over to the State.

In some ways, though, the idea of ownership is mere delusion anyway: cars turn to rust, houses crumble (the termites in Indonesia are a hungry bunch) and book collections quickly turn yellow in the humid tropical climate and eventually to dust.

But without property rights there is chaos. I mean just imagine slaving your guts out for most of your working life to buy a house and then being told well, sorry, actually you don’t own it.

Well incredibly, that was the case for over 5,000 families in West Jakarta who lost their battle last year in the Supreme Court against a very suspect company which, like so many of these extremely dodgy enterprises in Indonesia, doesn’t even have an office.

The case was very messy, and everyone of course DOES have ownership documents. How can that be you ask? Well the short answer to that is simply that the Indonesian land registry office is so good at doing its job that it is even capable of issuing more than one land certificate for the same plot of land! In fact, it has even been known for three or four people to be fighting for the same plot of land – for which they ALL have a legal land certificate issued by the authorities!

These are things that really need to be considered when thinking about buying property in a country like Indonesia. And in many places in Indonesia, if you buy land and don’t use it then the locals will soon take it over and build on it and in practice there is nothing that you can do. Cos who do you think the authorities will support? The rich reckless foreigner or the poor downtrodden locals? Bit of a no brainer that one.

Some of the properties that foreigners believe they are buying – but are really not – are very nice of course. Many of them are in Bali. Just be careful!