Legal Alert – Owning and Developing Apartments in Indonesia as Foreigners: Legal Framework and Practical Considerations


The legal framework governing land ownership and the issuance of ownership certificates for apartments in Indonesia is multi-faceted and nuanced, particularly for foreigners. Indonesia’s distinctive land law, Law No. 5 of 1960 on Basic Agrarian Principles (“Agrarian Law”), which is founded on the principles of customary law (hukum adat), delineates particular categories and limitations regarding land rights and ownership.

Foreign nationals and developers often face additional regulatory hurdles when acquiring property in Indonesia, necessitating an understanding of both the general principles of land ownership and the specific procedures related to Certificate of Right of Ownership over Stacked Units (Sertifikat Hak Milik Satuan Rumah Susun /“SHMSRS”). This article will explore the foundational aspects of land ownership in Indonesia, the particularities of apartment unit ownership and the SHMSRS, and the considerations for foreign investors.

General Overview of Land Ownership

The Agrarian Law principally governs Indonesia’s land ownership framework. This law delineates various types of land rights that individuals and entities can hold, emphasizing state control over land allocation and utilization. The Agrarian Law embodies the principle that land within Indonesia is ultimately controlled by the state, which grants rights to individuals and entities to utilize land within the boundaries set by law. This principle aims to achieve a balanced and equitable land distribution to support national development and social welfare.

Under the Agrarian Law, there are 6 (six) primary categories of land rights in Indonesia:

  1. Hak Milik (Right of Ownership). This is the most comprehensive form of land ownership, providing the holder with the fullest extent of ownership rights, including the right to use, enjoy, and transfer the land.[1]


  1. Hak Guna Usaha (Right to Cultivate). This right allows the holder to cultivate land for agricultural, or plantation purposes for a specific period.[2]


  1. Hak Guna Bangunan (Right to Build). This right permits the holder to construct and own buildings on land owned by the state or another party for a designated duration.[3]


  1. Hak Pakai (Right to Use). This right grants the holder the ability to use land for a specific purpose, which can include residential or commercial activities, often with a time limitation.[4]


  1. Hak Sewa (Right to Lease). This right enables the holder to lease land for building purposes for a stipulated period.[5]


  1. Hak Pengelolaan (Right to Manage). This right involves managing land for specific administrative purposes, typically granted to government entities or state-owned enterprises.[6]

Foreign nationals are subject to stringent restrictions regarding land ownership in Indonesia. Generally, they are permitted to hold only Hak Pakai (Right to Use)[7] and Hak Sewa (Right to Lease).[8] These limitations are designed to protect national interests and ensure that land remains predominantly under Indonesian control.

Ownership of Apartment Units in Indonesia

The ownership of apartment units, particularly within multi-story buildings is regulated by Law No. 20 of 2011 on Flats, as amended by Law No. 6 of 2023 on Job Creation (“Flats Law”). This legal framework introduces the concept of SHMSRS, allowing individual ownership of apartment units within a building.

As a definition an apartment unit in a multi-story building, is defined as a specific part of a building that can be owned and utilized separately, with shared ownership of common areas, objects, and land. This structure includes residential units, commercial spaces, or a combination of both​​.[9]

The Flats Law categorizes the ownership of apartment units into two main types: (i) Leasehold Rights, which are established through contractual agreements where the unit space is leased to a lessee for a specified period in exchange for rent;[10] and (ii) Freehold Rights, which involve full ownership of the unit space, formalized through the issuance of an SHMSRS.[11]

Foreign Ownership of SHMSRS

Foreign nationals are permitted to own apartment units in Indonesia through SHMSRS, subject to specific conditions outlined in Government Regulation No. 18 of 2021 on Management Rights, Land Rights, Flat Units, and Land Registration (“GR 18/2021”)​​. Foreign ownership is allowed provided the unit space is within designated areas such as Special Economic Zones, Free Trade Zones, Industrial Zones, or other specified economic zones​​.[12]

Further to the above, to own SHMRS, foreigners must meet the following criteria:

  1. Legal Residency: Foreigners must be individuals who hold valid immigration documents such as a Second Home Limited Stay Permit (KITAS Rumah Kedua) or a Second Home Permanent Stay Permit (KITAP Rumah Kedua)​​.[13]


  1. Designated Zones: The apartment must be located within an area classified as a Special Economic Zone, Free Trade Zone, Industrial Zone, or other designated economic zones that support vertical housing and have a positive economic impact on the community​​.[14]


  1. Minimum Price Requirement: There is a minimum price threshold for apartment units that can be owned by foreigners, which varies by region. For instance, in Bali Province, the minimum price for a unit space eligible for foreign ownership is IDR 2,000,000,000​​.[15]

Issuance of SHMSRS

The process of obtaining SHMSRS involves several steps:

  1. Pre-Construction. Developers must secure permits such as Building Approval (Persetujuan Bangunan Gedung) and ensure the project meets infrastructure, facility, and public utility requirements​​.[16]


  1. Construction Phase. Developers must obtain a Certificate of Worthiness (Sertifikat Laik Fungsi) upon completion of the building in order to compliance with building standards and regulations​​.[17]


  1. Separation and Registration. The units are then separated into individual ownership through a deed of separation (pertelaan), which includes detailed drawings and descriptions of the units and shared areas. This deed must be approved by local authorities and registered with the local land office​​.[18]


  1. Final Certification. Upon approval and registration, the SHMSRS is issued, initially in the developer’s name. Ownership is then transferred to the buyer through a deed of sale and purchase, which must be executed before a Land Deed Official (Pejabat Pembuat Akta Tanah/“PPAT”) and registered with the local land office​​.[19]

Considerations of Owning and Developing Apartments for Foreigners

Foreign nationals seeking to own and develop apartments in Indonesia must navigate a complex regulatory landscape to protect national interests while encouraging foreign investment. The following considerations are paramount for foreign investors:

  1. Permitted Ownership Structures

Foreigners are allowed to hold SHMSRS, which grants ownership over individual units within a multi-story building, provided the unit is located in designated economic zones such as Special Economic Zones, Free Trade Zones, Industrial Zones, or other approved areas​​.[20]

Ownership is contingent upon the individual foreigner possessing valid immigration documents, such as a Second Home Limited Stay Permit (KITAS Rumah Kedua) or a Second Home Permanent Stay Permit (KITAP Rumah Kedua)​​.[21]

  1. Minimum Investment Thresholds

Indonesian regulations stipulate a minimum purchase price for apartment unit that foreigners can buy. This threshold varies by region to ensure high-value investments. For instance, in Bali Province, the minimum price for a unit space eligible for foreign ownership is IDR 2,000,000,000​​.[22] In Jakarta, the minimum price for an apartment unit that foreigners can purchase is set at IDR 3,000,000,000. Meanwhile, in West, Central, and East Java Province, the minimum price is set at IDR 2,000,000,000.[23]

  1. Immigration and Residency Requirements

Foreign holders of SHMSRS must secure the appropriate visa and residency permits. The Second Home Limited Stay Permit (KITAS Rumah Kedua) and the Second Home Permanent Stay Permit (KITAP Rumah Kedua) are specifically designed for non-working residents intending to invest in property.[24]

These permits are valid for periods ranging from 5 to 10 years and are renewable, subject to compliance with immigration laws and regulations​​.[25]

Moreover, drawing from our shared experience, there are certain practical factors to be considered when it comes to foreigners owning and developing apartments in Indonesia, such as:

  1. Location and Zoning Compliance


  • It is important to confirm that the chosen property is within a designated zone that permits foreign ownership. This requires coordination with local government authorities and may involve verifying zoning classifications and obtaining necessary approvals​​.


  • Developers must ensure that their projects comply with local zoning laws, building codes, and environmental regulations to avoid legal complications and delays​​.[26]


  1. Legal and Financial Due Diligence


  • Conduct thorough due diligence on the legal status of the property, including verifying land titles and checking for any encumbrances or disputes​​.


  • Engage reputable legal counsel to navigate the regulatory requirements and ensure all transactions comply with Indonesian laws. This includes drafting and reviewing contracts, securing necessary permits, and handling the registration of property transfers​​.


  1. Investment and Taxation Implications


  • Understand the tax implications of owning and developing property in Indonesia. This includes property taxes, income taxes on rental income, and capital gains taxes on property sales​​.


  • Explore potential incentives for foreign investors, such as tax incentives or reduced tax rates available in certain economic zones. For instance, significant investment incentives are introduced for activities within the Nusantara Capital City (“IKN”) area. These incentives include substantial reductions in income tax for resident corporations investing in specific businesses or infrastructure projects and real estate brokerage services.[27] Additionally, there are reductions in capital gains taxes on property sales, subject to relevant laws and regulations regarding IKN.[28]


  1. Market Dynamics and Economic Factors


  • Consider the market demand and economic conditions in the chosen location. Factors such as tourism trends, local economic growth, and infrastructure development can significantly impact the value and profitability of the investment​​.


  • Stay informed about changes in government policies that could affect foreign ownership rights or property development regulations​​.


The legal framework for land ownership and the issuance of ownership certificates for apartment units in Indonesia, particularly for foreigners, is intricate and layered. The cornerstone of this framework is the Agrarian Law, which outlines the various land rights and restrictions. This is complemented by the Flats Law and relevant regulations such as GR 18/2021.

Foreign nationals can own apartment units through the SHMSRS, subject to specific conditions, including valid residency permits, minimum investment thresholds, and location within designated economic zones. The procedure to obtain SHMSRS involves multiple steps, from securing initial permits, ensuring construction compliance, to registering and transferring ownership through notarial deeds.

Foreign investors must be aware of regulatory requirements and practical considerations, such as zoning compliance, legal and financial due diligence, and understanding the tax implications. Engaging experienced legal counsel is essential to navigating these complexities and ensuring all transactions adhere to Indonesian laws.

Adhering to these procedures and considering the outlined factors enables foreign investors to successfully own and develop apartment units in Indonesia, contributing to the country’s economic growth and benefiting from the opportunities within its dynamic real estate market.


[1] Article 20 of Agrarian Law

[2] Article 28-29 of Agrarian Law

[3] Article 35 para. (1) of the Agrarian Law

[4] Article 41 of the Agrarian Law.

[5] Article 44 of the Agrarian Law.

[6] General Elucidation No. II para (2) of the Agrarian Law jo. Article 1 Para (3) GR 18/2021.

[7] Article 42 point b of the Agrarian Law.

[8] Article 45 point b of the Agrarian Law.

[9] Article 1 para. 10 of GR 18/2021.

[10] Article 21 para. (2) of the Flats Law.

[11] Article 46 and Article 47 of the Flats Law.

[12] Elucidation of Article 144 para. (1) point c of the Flats Law.

[13] Article 69 para. (1) of GR 18/2021.

[14] Elucidation of Article 144 para. (1) point c of the Flats Law.

[15] Decree of the Minister of Agrarian and Spatial Planning/Head of the National Land Agency Number 1241/SK-HK.02/IX/2022 dated 12 September 2022.

[16] Article 253 – Article 262 Government Regulation No. 16 of 2021 on Buildings (“GR 16/2021”).

[17] Article 282 – Article 292 GR 16/2021.

[18] Article 47 para. (3) of the Flats Law.

[19] Article 90 GR 18/2021.

[20] Elucidation of Article 144 para. (1) point c of the Flats Law.

[21] Article 69 para. (1) GR 18/2021.

[22] Decree of the Minister of Agrarian and Spatial Planning/Head of the National Land Agency Number 1241/SK-HK.02/IX/2022 dated 12 September 2022.

[23] Ibid.

[24] Article 56 para. (2) of Minister of Law and Human Rights Regulation No. 22 of 2023 on Visas and Stay Permits.

[25] Minister of Law and Human Rights Regulation No. 11 of 2024 on Visas and Residence Permits.

[26] Government Regulation No. 40 of 2021 on the Organization of Special Economic Zones.

[27] Article 28 of Government Regulation No. 12 of 2023 regarding Business Licenses, Ease of Doing Business, and Investment Facilities at the New Capital City of Nusantara (“GR 12/2023”).

[28] Article 27 of GR 12/2023.

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