The document summarizes land ownership laws and regulations in Indonesia for foreigners. It discusses how the principle of nationality prohibits foreign ownership but allows certain land rights through derivatives. It also examines the legal issues with nominee agreements used to circumvent restrictions. The document proposes that foreigners pursue permitted land rights through investment schemes instead of illegal evasion. It concludes by recommending that notaries refuse nominee agreements and provide lawful alternatives to interested foreigners.

1. Legal Brief
Normative Considerations for Foreigners of Land
Ownership: Advancing Legal Fairness in Indonesia

2. Unlocking the Legal Puzzle: Foreigner and Land
Ownership in Indonesia
A H R P L e g a l B r i e f
Based on data from the Central Statistics Agency (Badan Pusat Statistik / “BPS”) , as compiled by the
Investment Coordinating Board (Badan Koordinasi Penanaman Modal / “BKPM”), foreign investment
inflows into Indonesia have consistently increased significantly. In 2021, the total foreign direct investment
amounted to $31,093 million US Dollars, realized across 27,271 projects. Subsequently, there was a
substantial increase, reaching its highest peak in the last decade in 2022, with foreign direct investment
totaling $45,605 million US Dollars, realized across 32,681 projects.
Not only within the scope of sectoral business activities, but the indirect economic influence of foreign investment can also be
triggered by the tourism sector, considering Indonesia's tropical paradise. Data from the BPS and the Indonesian Ministry of
Tourism (Kementerian Pariwisata) shows that the number of foreign visitor arrivals in Indonesia reached its peak in the pre-
pandemic year of 2019 with a total of 16.106.954 contributing to the country's foreign exchange earnings of $16.9 billion US
Dollars. Even during this endemic period, foreign visitor arrivals have begun to recover, with a total of 122,221 visits contributing
$4.26 billion US Dollars to the nation's foreign exchange reserves. The total immigration residence permits issued reached
446.156 and were predominantly dominated by Visit Stay Permits (ITK) totaling 316.919. The Limited Stay Permits (ITAS) issued
amounted to 128.093, while Permanent Stay Permits (ITAP) numbered 1.144.
As is known, behind the massive increase in investment value and prospectus lies a strong line of business or enterprise. Property ownership stands
as the bedrock of a robust business foundation. It not only provides stability but also, from an accounting perspective, offers a tangible asset that can
withstand the test of time, serving as a cornerstone for future growth and prosperity. From a practical perspective, Operational Necessity. For some
businesses, owning properties such as offices, factories, or stores is essential to effectively conduct their operations. For example, manufacturers
may need production facilities, and retail companies may require physical stores.
Even in the private sphere, foreigners are interested in owning property in Indonesia solely due to: (i) Indonesia's economic growth; (ii) as a
secondary residence; (iii) portfolio diversification.
In the other hand, Indonesian agrarian law provisions adhere to the principle of nationalism, which
explicitly prohibits foreign nationals from owning land in Indonesia. Consequently, this impacts
foreign investment sector businesses that may wish to own a property/land as part of their
investments or instruments of business. As a result, foreign businesses must seek legal alternatives
such as nominee agreements or partnerships with local entities to access the required land.

3. Indonesia’ Legal Landscape on Land
In the bigger perspective, the Indonesian land regulation regime dissect property right over land into two right, namely:
Right-to-Manage (Hak Pengelolaan / “HPL”) and Land Titles (Hak atas Tanah). However, before being classified under
these two rights, all land within jurisdiction of Indonesia or ‘unclaimed land’ is referred to as State Land.
Right to Manage
HPL is the right of control of the state whose part of its implementation
authorities are delegated to holders of Right-to-Manage.
In which means by holder are limited to:
The holder of Right-to-Manage is given the authority to:
Central Government agencies;
Regional Governments;
state-owned enterprises/regional-
owned enterprises;
state-owned legal entities/regional-
owned legal entities;
Land Bank Agency;
legal entities that are appointed
by the Central Government.
formulate Land designation, use, and utilization plans in accordance
with the spatial plan;
use and utilize all or part of the Right-to-Manage Land to be used
independently or to be cooperated with other parties; and
determine tariffs and/or mandatory annual fees from other parties in
accordance with an agreement.
Land Titles
Land Titles are rights that are obtained from legal relationships
between the titleholder and the Land, including aboveground space
and/or underground space to control, own, use, and utilize, as well as
maintain the Land, aboveground space, and/or underground space.
Land Titles, consist of:
Article 21 (1) Agrarian Law strictly stipulated only Indonesian citizens may have a right of ownership. Further, Article 21 (2) regulate the government
determine which legal entities may have a right of ownership and the conditions thereof. This regulation is an embodiment of the principle of nationality.
Based on above regulations, it can be concluded that the management of property land in Indonesia by foreign nationals is still possible
using derivative Land Titles other than Right to Own or Right to Manage as long as it is directly appointed by the Central Government
through a Legal Entity subject.
As an emphasis, based on the provisions of the above regulations, individual foreigner will never be able to own ownership rights over
land.
Right to Own, a right of ownership is the hereditary, strongest and
fullest right upon land which one may hold.
Right to Cultivate, a right to work on land directly controlled by the
State for a period of 25 years and may be extended of 35 years.
Right to Build, right to construct and possess buildings on land
which is not their own for a maximum period of 30 years and may be
extended of 20 years.
Right to Use, is a right to use, and/or to collect products from land
directly controlled by the State or land owned by another individual
which grants authority and obligations as determined in the relevant
right-granting decree by the official who is authorized to grant it or in
agreement with the land-owner, where the agreement is not a land
lease agreement or land exploitation agreement, given that
everything is possible as long as it does not contradict the agrarian
law.
A H R P L e g a l B r i e f

4. Cracking the Nominee Agreement
As a result of the application of the principle of nationality, the alternative to individual foreign nationals owning
property is circumvented through a nominee agreement, is an agreement between a foreign national (WNA)
and an Indonesian entity acting as the "nominee". In this agreement, the nominee agrees to declare that they
are the legal owner of the land but act on behalf of the foreign national (WNA) and relinquish control and
benefits of the land to the WNA within Power of Attorney.
Beneficial Owner Nominee
Agreement and
Power of Attorney
Executed
Ownership
The Legal Validity of Nominee Agreement
The legal validity of a contract is regulated
by Article 1320 of the Civil Code, which
must be fulfilled as follows:
1) the agreement of the parties binding
themselves;
2) the capacity to enter into an agreement;
3) a specific subject matter; and
4) a lawful cause.
Therefore, it can be concluded that a nominee agreement in the context of land ownership by foreign nationals
(WNA) comprises the following elements:
The existence of a power of attorney agreement
between two parties, namely the Beneficial
Owner as the grantor of authority and the
Nominee as the recipient of authority, based on
the trust of the Beneficial Owner in the Nominee.
The authority to Nominee that
granted is specific and limited in
terms of legal actions.
The Nominee acts as if they were
the representative of the Beneficial
Owner before the law.
PROS
PROS
Article 26 (2) Agrarian Law:
“Any sale and purchase, exchange, grant, testamentary gift and other
actions which are intended to directly or indirectly transfer right of
ownership to a foreign citizen, to a citizen who in addition to their
Indonesian citizenship has foreign citizenship or to a legal entity
except for those stipulated by the Government, are null and void by
law and the land fell to the State, provided that the rights of other
parties that encumbered them remain to continue and all payments
that have been received by the owner cannot be reclaimed
Due to the absence of specific regulations regarding nominee agreements, legally, such agreements fall into the category of special
agreements (innominate agreements). Furthermore, it is evident that the nominee agreement violates the provisions of Article 21 (1) and
26 (2) of the Agrarian Law, rendering the Nominee Agreement null and void. As a consequence, since the nominee agreement falls under
legal evasion, in the event of a detrimental breach by either party, the aggrieved party could not claim damages.
A H R P L e g a l B r i e f

5. The Alternative Way to Own through
Foreign Investment [1/2]
The government provides ease of service and/or licensing to investment companies
to obtain:
a. land rights;
b. immigration service facilities; and
c. import licensing facility.
Foreign Investment/penanaman modal asing (“PMA”) is an investment activity to
conduct business in the territory of the Republic of Indonesia carried out by foreign
investors, either using foreign capital entirely or jointly with domestic investors.
Foreign Investment
Foreign investors are individual foreign citizens, foreign business entities, and/or
foreign governments investing in the territory of the Republic of Indonesia.
Foreign Investors
Ease of land rights services that can be owned by foreign investors as regulated in
Investment Law and Agrarian Law include the right to cultivate, the right to build,
and the right to use.
A H R P L e g a l B r i e f

6. The Alternative Way to Own through
Foreign Investment [2/2]
Land rights can be granted and extended for investment activities, with conditions
including:
investment made in the long term and related to changes in the structure of the Indonesian
economy which is more competitive
2 investment with an investment risk level that requires a long-term return on capital in
accordance with the type of investment activity carried out
3
capital investment that does not require a large area
1
4
investment using state land rights
5 investment that does not disturb society's sense of justice and does not harm the public
interest
Land rights can be renewed after evaluating that the land is still being used and cultivated
properly in accordance with the circumstances, nature and purpose of the granting of
rights.
The granting and extension of land rights that are granted and can be
renewed can be stopped or canceled by the Government if the investment
company neglects the land, harms the public interest, uses or utilizes the
land not in accordance with the aims and objectives of the granting of land
rights, and violates the provisions of the laws and regulations in land
sector.
A H R P L e g a l B r i e f

7. Singapore
Benchmarking Across ASEAN Nations
Malaysia
Thailand
The Singapore government has been imposing restrictions on foreign ownership of private residential property in Singapore
since 1973. Foreigners may not acquire or purchase restricted residential property without obtaining approval from the Minister
for Law. Under the Residential Property Act (“RPA”).
Each applicant is assessed on a case-by-case basis, taking into consideration, including but not limited to, the following factors:
a. Applicant should be a permanent resident of Singapore for at least five years; and
b. Applicant must make exceptional economic contribution to Singapore. This is assessed taking into consideration factors
such as your employment income assessable for tax in Singapore.
Non-Malaysian citizens and foreign companies are allowed to buy properties in Malaysia provided that they comply with certain
requirements and restrictions imposed under the NLC, the Guidelines on the Acquisition of Properties (“EPU Guidelines”) issued
by the Economic Planning Unit (“EPU”), and the relevant rules and regulations that may be imposed by the state authorities.
Foreigners who intend to acquire properties in Malaysia should take note and comply with the following four (4) main
requirements:
a. Minimum Threshold on Purchase Price;
b. Off-limit (types) of Properties;
c. Foreigner Consent Application; and
d. Real Property Gain Tax application on Foreigners
Foreigners are under the Land Code Act prohibited from owning land in Thailand therefore making it impossible for foreigners to
obtain outright ownership over land and house in Thailand. Foreigners are allowed to own a unit in a condominium building under
the Condominium Act.
Land ownership in Thailand is governed by the Land Code Act and under Thai land laws only Thai nationals are allowed to own
land or have a confirmed right of possession of land. Foreigners may not own land unless there is a treaty or exemption allowing
the foreigner to own land in Thailand. Thailand has currently no treaty with any country allowing a foreigner to acquire land in
Thailand. Any foreigner who violates foreign land ownership restrictions could be fined and/or sent to jail for a term of up to 2
years.
A H R P L e g a l B r i e f

8. Proposing Solutions: A Path Forward
A H R P L e g a l B r i e f
Notary, as a public official who is given the authority to make an authentic deed,
must firmly refuse if there are parties who deliberately want to enter into a
nominee agreement, especially if it is in the interests of foreigners who wishes to
control land with freehold status which clearly violates the provisions as stipulated
in the Agrarian Law.
It is best for a notary as an official who understands the law to provide direction to
the foreigner party if they wishes to control land within the territory of Indonesia
according to the prevailing laws which governs the provisions of land rights in
Indonesia.

9. Conclusion & Debugging Questions
A H R P L e g a l B r i e f
01
02
In the context of privatization, land ownership in Indonesia by foreigners has been explicitly
prohibited by the Agrarian Law, also referred to as the Principle of Nationality. However,
foreigners can still exercise rights over land through its Land Title’ derivative.
The consequence of the Principle of Nationality is the occurrence of legal evasion through
a Nominee Agreement between a foreigner as the beneficial owner and Indonesian citizens
as the Nominee. Nevertheless, with reference to the requirement for a valid contract being
a lawful cause, it can be concluded that the Nominee Agreement is void in law. In other
words, in the event of a dispute by the aggrieved party, damages cannot be claimed
because the agreement is never considered to exist.
The government provides ease of service and/or licensing to investment companies to
obtain land rights. Ease of land rights services that can be owned by foreign investors
as regulated in Investment Law and Agrarian Law include the right to cultivate, the right
to build, and the right to use.

10. We will continue to follow the developments on this topic and provide additional information as it becomes
available. If you have any questions on this topic, please contact:
M. Sakti Tambunan
sakti@ahrplaw.com
Putra Pengayoman
putra@ahrplaw.com
Muhammad Farisi
farisi@ahrplaw.com
This publication has been prepared by AHRP for educational and informational purposes only. The information contained in this publication is not
intended and should not be construed as legal advice. Due to the rapidly changing nature of law, AHRP makes no warranty or guarantee concerning
the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your
circumstances before deciding to take any action.
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