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A Timeline For Land Purchases In Indonesia

Friday, 23 September 2011 04:17

While every purchase is different and timelines can vary widely, here is a summary of the key milsestones to expect, and how long they take in a ‘perfect’ scenario.

Please note that while land with existing certificates transacts very quickly, final certification of land that is bought without certificates in place at the start can take many months. The longest we have seen has taken up to 2 years, (though this is less usual.)

Please note that buying land under a PMA and HGB title requires much longer leadtimes if the PMA has not yet been established, and in order to transfer the title from freehold to HGB (please call us for a more detailed explanation of such purchases: Bill O’Donnell +65 81801508

Buying Certificated Land**:

1) An MOU will be signed by both parties and a deposit of 10-25% of the purchase price paid. This deposit is refundable only if there are issues with the land ownership/title*.

2) 30 days is then allowed for due diligence on the certificates.

3) Full payment is due at the signing of the Sales and Purchase agreement for freehold land, or on signing the Lease Agreement once due diligence is completed.

4) It then takes 6-8 months for the certificate to be changed to the new owners name for land held under Hak Milik (freehold), or HGB  title. This is not unusual but is simply the time it takes to process the change of names. The transfer of names on lease agreements is done within a week.

The land is however held by the new owners once the sales and purchase agreement is signed, and all permitted building works and so on can start prior to receiving the amended certificates.

Buying Land Without Certificates (Sporadik Land)**:

1) An MOU will be signed by both parties and a deposit of 10-25% of the purchase price paid. This deposit is refundable only if there are issues with the land ownership/title*. Further progressive payments may be agreed between the buyer and seller as finalizing the transaction can take some 18 months (see 2 below).

2) Due diligence is carried out in two stages, firstly on the sporadik land, and then once the certificates have been created, on the new certificates. This process takes 12-18 months (and sometimes longer for very large transactions).

3) Full payment is then due on signing the Sales and Purchase or Lease agreement. The newly created certificates will then be transferred into the new owners name as outlined above above.

* Please take detailed legal advice before making any investment and before paying deposits.

** Always consult a lawyer for detailed advise on how to proceed with your transactions and to determine the title that is appropriate for your investment and circumstances.

Last modified on Monday, 14 May 2012 20:22

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Glossary of Land Title / Key Terms

Hak Guna Bangunan [HGB] - Building Rights Title: The transferable right to build and own buildings on land. HBG titles can be granted to foreign investment [PMA] companies. PMA companies can be 100% foreign owned. HGB title rights are granted for 30 years, renewable for an additional 20-30.

Hak Guna Usaha [HGU] - Land Cultivation Rights Title: The right to use state-owned land for agriculture, for 35 years extendable by 25 years. Agricultural use includes crop cultivation. cattle-rearing, plantations and fishing.

Hak Milik – Freehold Title: Cannot be held by non-Indonesians.

Hak Pakai [HP] – The Right To Use Title: The non-transferable right to use the land for any purpose. Granted for up to 25 years, extendable for another 20.

Hak Sewa - The Right To Rent Title: A lease on the land from the freeholder, usually for 30 years renewable for an additional 20. The name on the title remains that of the freeholder.

"Ijin Mendirikan Bangunan [IMB]" - A building permit

"Pondok Wisata" - A license to operate a guesthouse

"Sporadik" – Land that has been registered but has no physical certificate. A certificate under the owners name can be drawn up.

Please note that certain titles can be held by resident / non-resident foreigners or by foreign investment companies, others cannot. For more information please click here. Always take detailed legal advice before investing.


 

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