Hak Pakai vs PT PMA: How Foreigners Legally Own Property in Indonesia in 2026

Foreigners cannot own freehold land in Indonesia. That has been the rule since the Basic Agrarian Law of 1960 (UU No. 5/1960), and Government Regulation No. 28 of 2025 did not change it. What did change is the operating environment around the two structures that foreigners actually use: Hak Pakai (Right to Use) held in your own name, and PT PMA (Perseroan Terbatas Penanaman Modal Asing) holding HGB (Right to Build) title. Choosing between them is the most important legal decision a foreign buyer makes in Indonesia, and the wrong choice creates a problem that often does not surface until you try to sell or extend.

What the law actually says

The Basic Agrarian Law reserves Hak Milik (full freehold) for Indonesian citizens. Articles 21 and 26 are explicit: any transfer of freehold land to a foreigner is void, and the land reverts to the state. Article 41 creates Hak Pakai, a right to use land owned by the state or by another party, granted by decree or by agreement. Article 35 creates Hak Guna Bangunan (HGB), a right to build on and use land for a fixed term. Foreigners can hold Hak Pakai directly. They cannot hold HGB directly, but a PT PMA (an Indonesian legal entity with foreign shareholders) can.

Government Regulation No. 18 of 2021 set the operating terms for foreign Hak Pakai: an initial grant of 30 years, extendable by 20, renewable by another 30, for a maximum of 80 years. The same regulation confirmed that foreigners must hold a valid stay permit (KITAS or KITAP) to register Hak Pakai. If the stay permit lapses for more than one year and the holder does not transfer the title or apply for a new permit, the title can revert to the state.

PP No. 28 of 2025 reorganized the business licensing system and confirmed the PT PMA as the standard vehicle for foreign investment in property. The minimum paid-up capital for a PT PMA remains IDR 10 billion per business classification, with IDR 2.5 billion required up front. A PT PMA can hold HGB title for 30 years, extendable by 20, renewable by 30, for the same 80-year ceiling.

Hak Pakai in practice

Hak Pakai is the simpler structure. The foreign buyer signs the purchase deed (Akta Jual Beli) at a PPAT (Land Deed Official) and the National Land Agency (BPN) registers the title in the foreigner's name. The property must meet minimum price thresholds set by the relevant provincial regulation. In Bali, the threshold for an apartment in Badung Regency is IDR 5 billion, and a landed house must meet a similar minimum depending on location.

Two limitations matter. First, Hak Pakai property cannot be used for commercial purposes. Renting the property short-term on a serviced basis is the grey area most foreign buyers run into, and Indonesian tax authorities have started auditing villa rental income reported under personal Hak Pakai ownership. Second, the title is tied to the stay permit. If you lose your KITAS and cannot replace it, you have one year to transfer the property or it goes back to the state.

PT PMA in practice

PT PMA is the structure for anyone who plans to rent the property out commercially, run a villa, or own multiple units. The company holds HGB title on the land and SHM (or HGB) on any building. The company itself can be 100% foreign-owned for most property classifications under the 2025 Positive Investment List.

Setup costs typically run USD 3,000 to USD 8,000 with a reputable agency, plus the paid-up capital. Annual compliance, including tax filings and the LKPM investment report to the Investment Coordinating Board (BKPM), adds another USD 2,000 to USD 4,000 per year. The company needs a registered office, at least two shareholders, one director (who can be foreign, with a KITAS), and a commissioner.

The advantage is structural certainty. The land sits inside a corporate balance sheet, the company can take rental income legally and pay the appropriate tax, and the title is not tied to any individual's immigration status. The disadvantage is administrative overhead. A foreigner who buys a single villa for personal use and ends up with a PT PMA has paid for complexity they did not need.

Nominee structures and why they fail

A nominee structure puts an Indonesian citizen on the title as the legal owner, with a side agreement (a power of attorney, a loan document, or a series of contracts) giving the foreigner economic control. These were once common in Bali and remain heavily marketed by certain agents.

The Constitutional Court ruled in Decision No. 21/PUU-V/2007 that nominee arrangements designed to circumvent the foreign ownership restriction are void. The land reverts to the nominee, the side agreements are unenforceable, and the foreigner has no legal recourse. Cases reach the courts almost every year. The current 2025–2026 guidance from every reputable legal practice in Indonesia is the same: do not use nominees, use leasehold, Hak Pakai, or PT PMA.

How to choose

Hak Pakai works if you intend personal use, you can sustain a KITAS or KITAP, and you are buying a single property above the price threshold. PT PMA works if you intend rental income, multiple properties, or commercial use, and you can absorb the setup and compliance cost.

Leasehold (Hak Sewa) is the third option for shorter horizons. A leasehold contract on freehold land is enforceable, transparent, and does not require a stay permit. Lease terms in Bali commonly run 25 to 30 years, sometimes with extension clauses negotiated up front. Yields on leasehold villas have compressed as supply has grown but the entry price is dramatically lower than freehold-equivalent structures.

Verifying what you are actually buying

Whatever structure you use, the title certificate (sertifikat tanah) should be checked at the local BPN office before any deposit. The certificate identifies the title type (Hak Milik, HGB, Hak Pakai), the registered owner, the parcel boundaries, and any encumbrances. A PPAT notary will run this check as part of due diligence, but the foreign buyer should ask to see the certificate and the BPN search result directly.

For new-build purchases, the developer's track record is the next layer. Look at past projects, the company's NIB (business identification number), and whether previous buyers actually received their certificates on the original schedule. Platforms like Bektu compile delivery records for Indonesian developers across Bali and Jakarta, which makes it easier to verify claims that an agent or developer cannot.