Can Foreigners Own Land in Indonesia? 2025 Legal Guide
How Foreigners Can Legally Own Land and Build in Indonesia: The Complete 2025 Guide
Indonesia has long been a magnet for foreigners seeking tropical beauty, low cost of living, and a more intentional lifestyle. But despite its appeal, the rules around foreign land ownership have remained one of the most misunderstood—and often misrepresented—aspects of investing or relocating here.
If you are considering buying land, building a home, or starting a business in Indonesia, this comprehensive 2025 guide will walk you through everything you need to know. From legal structures to zoning, taxes, permits, and key pitfalls, this is the definitive resource to understand how foreign nationals can legally and sustainably own and build in Indonesia.
Understanding Land Ownership in Indonesia
The Indonesian Constitution states that land is controlled by the state and intended for the benefit of the people. Foreigners are not allowed to directly own freehold land (Hak Milik), which is the most complete and perpetual form of land ownership in the country. However, over the years, several legal pathways have been developed to allow foreign investment and long-term land control.
The most common and secure structure is through a PMA (Penanaman Modal Asing) — a foreign-owned company registered in Indonesia. A PMA allows full control over land and buildings under an HGB (Hak Guna Bangunan) title.
The PMA Company Structure
A PMA is a foreign-owned limited liability company (PT PMA) registered with the Indonesian Investment Coordinating Board (BKPM). It gives foreigners the legal right to:
Purchase land under HGB title
Build permanent structures
Operate a business
Rent, lease, or sell the property
Unlike nominee arrangements (where locals hold land titles on behalf of foreigners, often illegally), the PMA structure is 100 percent legal, transparent, and protected under Indonesian investment law.
Key requirements to set up a PMA include:
At least two shareholders (can be individuals or entities)
A registered business address in Indonesia
A minimum investment plan of IDR 10 billion (approximately USD 650,000), although only a fraction must be realized upfront
A clear business classification under the Indonesian Standard Business Classification (KBLI)
Many PMAs in the property space register under KBLI codes such as:
68111 (Real Estate Owned or Leased)
55100 (Short Stay Accommodation)
41012 (Villa Construction)
Once the PMA is established, it can acquire land through HGB title and begin the process of permitting and building.
What Is HGB (Hak Guna Bangunan)?
HGB is a land title that gives the right to build and use the land for up to 30 years, with possible extensions of 20 and 30 years (a total of 80 years). It is the strongest form of land control a foreigner can obtain through a PMA.
HGB land can be sold or leased
The rights are transferable
The PMA can mortgage the land and use it as collateral
If the PMA company is sold, the land and property transfer with it. This makes HGB the ideal structure for retreats, villas, Airbnb investments, or commercial projects.
Zoning Laws and What You Can Build
One of the most overlooked elements in buying land in Indonesia is zoning. Local government regulations determine what kind of activity is permitted on a piece of land.
Common zoning categories include:
Pariwisata (Tourism): Allows villas, hotels, resorts, retreats, eco-lodges, and rentals
Permukiman (Residential): Allows personal homes but not rentals or commercial activity
Perkebunan/Protected/Green Zone: No legal construction allowed
Many investors have fallen into legal traps by building in agricultural or protected zones, particularly in Bali. In 2024, over 40 villas in Bingin were demolished due to violations of zoning and permit regulations.
When buying land, always request:
A copy of the spatial zoning map (RTRW/ITR)
Proof of land certification and existing permits
Confirmation that the land is within the yellow (buildable) or pink (tourism) zones
Projects like Sumba Sunset Cliff in West Sumba are an example of responsible development. The land is pre-zoned for tourism, certified for HGB, and comes with guidance to ensure all building and business activities are aligned with local law.
The Permit Process: From Land to Operation
Once land is purchased through a PMA, there are several permits and certificates required before construction and operations can begin.
1. PBG (Persetujuan Bangunan Gedung)
Formerly known as IMB, this is the building permit. It confirms that your structure meets all spatial, environmental, and design regulations.
2. SLF (Sertifikat Laik Fungsi)
This is an occupancy certificate issued after the building is complete. It's required before the property can be legally used or rented.
3. Environmental Documents
Depending on the size of your project, you may need an Environmental Management Effort (UKL-UPL) or Environmental Impact Assessment (AMDAL).
4. NIB (Business ID) and Operational Licenses
All PMA businesses must be registered in the Online Single Submission (OSS) system and obtain a NIB to operate legally. If you're renting your space, additional tourism licenses may be required.
Navigating this process is much smoother in areas like Sumba where the bureaucracy is less dense and projects like Sumba Sunset Cliff offer guidance.
Costs and Timelines
Here is a general breakdown of costs for a foreigner buying land and building in Indonesia through a PMA:
Land (2,000 sqm): approximately $54,000
PMA setup (one-time): between $2,500 and $3,000
HGB title conversion: usually included in the legal setup
Permits (PBG, SLF, etc.): approximately $3,000 to $6,000
Construction of an eco villa: ranges from $50,000 to $150,000 or more depending on design
Operational setup: approximately $500 to $2,000
Timelines vary, but you can expect:
PMA setup: 2 to 4 weeks
Land acquisition and HGB registration: 2 to 4 weeks
Permit approvals: 2 to 3 months
Construction: 6 to 12 months
Taxes and Annual Obligations
As a foreign-owned company, a PMA is subject to Indonesian tax regulations:
Corporate Income Tax: 22 percent of net profit
Withholding Tax: On dividends, interest, royalties, and certain services
Property Tax (PBB): Annual tax based on land and building value
Reporting Requirements: Annual LKPM (Investment Activity Report), audited financials if revenue is over IDR 50 billion
It's advisable to hire a local accountant familiar with PMA structures to remain compliant and optimize your tax strategy.
Risks and Mistakes to Avoid
While owning land legally in Indonesia is entirely possible, it requires diligence and respect for local law. Common pitfalls include:
Using nominee structures (illegal and unenforceable)
Building in the wrong zone
Skipping permits to save time
Ignoring cultural protocols or community expectations
Ethical, long-term ownership means respecting the land, engaging with local consultants, and committing to transparency.
A Case for Frontier Locations Like Sumba
Indonesia is vast, and while Bali dominates the headlines, it is far from the only opportunity. Frontier destinations like Sumba, Flores, and South Lombok are emerging as smart alternatives for intentional development.
These areas offer:
Lower land prices
Clearer zoning regulations
Fewer speculative investors
Untapped tourism potential
Higher community impact and legacy opportunity
Sumba in particular offers unique cultural depth, dramatic natural beauty, and supportive local governments keen to welcome responsible foreign investors.
Final Thoughts
Foreigners can legally and securely own and build in Indonesia if they choose the right structure, follow the rules, and work with trustworthy professionals. A PMA with HGB land title is the gold standard for ethical, long-term investment.
As interest shifts from crowded, overbuilt hubs to emerging regions like Sumba, those who move early, do it right, and build with purpose will find not only a return on investment but a chance to create something lasting.
If you’re ready to explore legal ownership in West Sumba, learn more at www.sumbasunsetcliff.com or check out our full guide on How to Build on Sumba Sunset Cliff.