Real Estate 2026 Comparisons

Indonesian real estate law is primarily governed by Law No 5 of 1960 on Basic Agrarian Principles (the “Agrarian Law”), which provides the foundation for land rights, land ownership and control, and the relationship between the state and holders of rights over land. Real estate matters in Indonesia commonly involve land, buildings, spatial planning, licensing, housing, condominium, environmental and tax considerations. As a result, the applicable legal framework is spread across several statutes and implementing regulations.

The main sources of law include:

• Law No 6 of 2023 on the Enactment of Government Regulation (GR) in Lieu of Law No 2 of 2022 on Job Creation into Law (the “Job Creation Law”);
• Law No 20 of 2011 on Condominiums, as amended by the Job Creation Law (“Law 20/2011”);
• Law No 1 of 2011 on Housing and Residential Areas, as amended by the Job Creation Law;
• Law No 26 of 2007 on Spatial Planning, as amended by the Job Creation Law;
• Law No 28 of 2002 on Buildings, as amended by the Job Creation Law;
• GR No 48 of 2025 on the Control of Abandoned Areas and Land;
• GR No 21 of 2021 on Spatial Planning Administration (“GR 21/2021”);
• GR No 18 of 2021 on Management Rights, Land Rights, Condominium Units and Land Registration (“GR 18/2021”);
• GR No 16 of 2021 on the Implementing Regulation of Law No 28 of 2002 on Buildings;
• GR No 13 of 2021 on the Implementation of Condominiums;
• GR No 14 of 2016 on the Implementation of Housing and Residential Areas as amended by Government Regulation No. 12 of 2021;
• GR No 24 of 1997 on Land Registration, as amended by GR 18/2021 (“GR 24/1997”); and
• Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency (Kementerian Agraria dan Tata Ruang/Badan Pertanahan Nasional or ATR/BPN) Regulation No 18 of 2021 on Procedures for the Determination of Management Rights and Land Rights.

Indonesia’s real estate market over the past 12 months has shown mixed but gradually improving performance, supported by temporary value added tax (VAT) incentives for certain landed houses and condominium units. Recovery remains uneven. Industrial estates, logistics facilities and data centres have remained among the strongest-performing sectors, supported by demand from electric vehicle-related industries, e-commerce, domestic distribution and digital infrastructure.

One notable development was PT Lippo Cikarang Tbk’s participation in the government’s 3 Million Homes Programme through the provision of approximately 31.3 hectares of land in the Meikarta area, Cikarang, for subsidised residential towers. Danantara Indonesia was also reported to support the project financing, with the initial development plan involving approximately IDR14 trillion to IDR16 trillion.

Inflationary pressures, construction costs and financing conditions have increased development costs and limited buyer affordability, particularly for middle-income buyers. Developers have responded with phased projects, smaller units and promotional pricing, while lenders have applied more selective financing standards.

PropTech adoption has increased through digital property platforms, online mortgage applications and virtual marketing. Blockchain and decentralised finance-based real estate initiatives remain limited, partly because financial technology innovation is subject to Financial Services Authority (Otoritas Jasa Keuangan or OJK) testing and supervision. Developers have also relied more on joint ventures, phased development and internal funding, while lenders have generally preferred restructuring, refinancing and closer monitoring over aggressive foreclosure.

The most significant reforms affecting Indonesian real estate are not new pending proposals, but the continued implementation of the Job Creation Law framework. This framework replaced the traditional Building Permit (Izin Mendirikan Bangunan) with the Building Approval (Persetujuan Bangunan Gedung or PBG) regime, which emphasises technical building standards. It also introduced Spatial Utilisation Activity Conformity approval (Kesesuaian Kegiatan Pemanfaatan Ruang or KKPR) to confirm consistency with spatial planning before land is utilised.

These reforms are already in force and continue to be implemented through supporting regulations, including GR No 28 of 2025 on the Implementation of Risk-Based Business Licensing (“GR 28/2025”). Their effectiveness depends on the readiness of central and regional authorities to harmonise spatial planning instruments, zoning maps, building approval processes and the Online Single Submission (OSS) system.

Pursuant to the Agrarian Law and GR 18/2021, Indonesia recognises the following categories of land rights.

• Freehold Title (Hak Milik or HM): HM is the strongest land right in Indonesia and may be held indefinitely, but is limited to Indonesian individuals and certain Indonesian legal entities designated by the government.
• Management Right (Hak Pengelolaan or HPL): HPL is a right to control and manage land, but is not equivalent to private ownership. It may be held only by eligible holders, including government bodies, state-owned or regional-owned enterprises, land bank bodies and designated legal entities.
• Right to Build (Hak Guna Bangunan or HGB): HGB authorises its holder to construct and own buildings on land for a specified period. It may be held by Indonesian individuals and Indonesian legal entities, and may be granted over state land, HM land or HPL land.
• Right to Cultivate (Hak Guna Usaha or HGU): HGU authorises cultivation for agricultural, fishery or livestock activities. It may be held by Indonesian individuals and Indonesian legal entities, and may be granted over state land or HPL land.
• Right to Use (Hak Pakai or HP): HP gives the right to use and/or derive benefits from land and may be held by a broader range of parties, including foreign individuals and foreign legal entities with representatives in Indonesia.
• Right to Lease for Building (Hak Sewa untuk Bangunan or HS): HS allows the contractual use of another party’s land for building purposes.

Foreign-owned Indonesian companies commonly use HGB or HP for commercial real estate, depending on land use and licensing requirements. Law 20/2011 also recognises Ownership Rights over Condominium Units (Hak Milik atas Satuan Rumah Susun or HMSRS), which grants separate ownership over an individual condominium unit together with proportional rights over common areas, common objects and common land.

In Indonesia, real estate ownership is primarily determined by the underlying land right rather than the building type. Transfers of registered land rights and HMSRS are generally governed by GR 18/2021 and GR 24/1997. A transfer may be preceded by a conditional sale and purchase agreement, but the registrable transfer must be evidenced by a deed made before a Land Deed Official (Pejabat Pembuat Akta Tanah or PPAT) and registered with the relevant Land Office.

The same general title transfer framework applies to most real estate asset classes. For residential, condominium, industrial, office, retail or hotel properties, the main differences usually arise from ownership eligibility, spatial planning, building approval, business licensing and operational permits, rather than a separate land title transfer procedure. Contractual rights such as HS are primarily governed by the lease arrangement and usually transferred through novation, assignment or amendment of the underlying agreement.

A lawful transfer of registered land rights or HMSRS is generally effected through a deed made before a PPAT. For a sale and purchase, this is typically documented in a deed of sale and purchase. The PPAT deed, together with the required supporting documents, must then be submitted to the relevant Land Office for registration. Under GR 24/1997, the PPAT is required to submit the deed and supporting documents to the Land Office no later than seven days after signing.

Real estate rights in Indonesia are registered through the land registration system. Transfers of registered land rights and HMSRS are recorded by updating the relevant land book and certificate to reflect the new registered holder. Contractual rights such as HS are generally transferred through novation, assignment or amendment of the underlying lease agreement. Title insurance is generally uncommon, so buyers typically rely on legal due diligence before completion.

Buyers, usually with legal counsel, conduct due diligence before acquiring real estate to confirm the asset’s legal status and identify transaction issues. Material findings are typically addressed through conditions precedent, representations and warranties, indemnities or specific completion deliverables.

Depending on the asset, due diligence usually covers:

• ownership status and land right type;
• validity and remaining term of the land certificate;
• seller authority and required approvals;
• registered mortgages or encumbrances;
• dispute status;
• zoning and permitted use;
• building approvals and licences; and
• transfer taxes and costs.

Buyers generally rely on seller documents, certificate checks through the Land Office or PPAT, and contractual protection, as public information may not capture all legal or practical risks.

In Indonesia, representations and warranties (R&W) in commercial real estate transactions are primarily contractual and negotiated between the parties. Seller R&W commonly cover ownership and authority to transfer, validity of land title, absence of mortgages, encumbrances, disputes or third-party claims, compliance with relevant permits and taxes, and accuracy of disclosed documents. Buyer R&W usually cover capacity, authority, funding capability and accuracy of information provided.

The Indonesian Civil Code (ICC) provides general seller warranties on peaceful possession and hidden defects. However, there is no commonly used statutory warranty regime specifically tailored to commercial real estate matters, such as detailed building condition or asbestos warranties. Buyers therefore usually rely on due diligence and contractual remedies, while survival periods, liability caps and security arrangements are commercially negotiated. R&W insurance remains uncommon in Indonesia.

Investors should primarily consider land ownership eligibility, type and term of land right, transfer requirements, registered encumbrances and land restrictions. For foreign investors, this is important because certain land rights may only be held by Indonesian individuals or Indonesian legal entities. If held by an ineligible party, the right may need to be released or transferred to an eligible party within the statutory period.

Investors should also consider foreign investment restrictions, OSS licensing, zoning and permitted use, building approvals, environmental requirements and acquisition taxes. Where investment is made through a foreign-owned Indonesian company, foreign investment (Penanaman Modal Asing or PMA) requirements may apply, including minimum investment value and issued and paid-up capital requirements. These issues should be checked early because they may affect transaction structure, timing, conditions precedent and completion mechanics.

In principle, environmental liability in Indonesia is linked to the party responsible for causing pollution or environmental damage, rather than automatically shifting to a buyer solely because it acquires the land. Indonesian environmental law recognises liability for parties whose activities cause environmental pollution or damage, including strict liability for certain high-risk activities involving hazardous substances, hazardous waste or serious environmental threats.

Accordingly, liability for soil pollution or contamination generally rests with the polluter or the party responsible for the relevant business or activity. However, a buyer may still face practical exposure if contamination is discovered after completion, especially if it controls the site, continues the relevant activity or the original polluter cannot be identified or pursued. For this reason, environmental due diligence, contractual indemnities and specific remediation obligations are important in real estate transactions.

Permitted land use in Indonesia is determined through the applicable spatial planning framework, primarily the Spatial Plan (Rencana Tata Ruang or RTR) and the Detailed Spatial Plan (Rencana Detail Tata Ruang or RDTR). Buyers may conduct preliminary checks through available government spatial information systems, including the OSS system and the GISTARU platform managed by ATR/BPN. However, buyers should still confirm whether the intended use of the land is consistent with the applicable RTR or RDTR.

For business activities, this conformity is generally confirmed through KKPR. Where the relevant RDTR has been integrated with the OSS system, KKPR may be issued through a confirmation process. Where RDTR is not available or has not been integrated with the OSS system, KKPR is generally processed through an approval-based assessment.

Indonesian planning law does not generally use private development agreements with public authorities to override zoning requirements. Co-operation or support arrangements may be used for infrastructure, utilities or project facilitation, but the project must still comply with spatial planning, KKPR, building approval and business licensing requirements.

Governmental acquisition of land is possible for development in the public interest under Law No 2 of 2012 on Land Procurement for Development in the Public Interest, as amended by the Job Creation Law. Public interest purposes include infrastructure, public facilities, defence and security, and other categories specified under that law. The process must follow the statutory land procurement procedure and provide proper and fair compensation to entitled parties.

The key stages are planning, preparation, implementation and handover. These generally involve preparation of the land procurement planning document, public consultation, location determination, land inventory, compensation appraisal, deliberation, payment or court deposit of compensation and release of rights. Compensation may be in cash, replacement land, resettlement, share ownership or other agreed forms, and objections may be submitted to the relevant district court.

Taxes depend on whether the transaction is structured as an asset deal or share deal. In an asset deal, the seller is generally subject to final income tax, typically at 2.5% of the gross transfer value. The buyer is generally subject to Acquisition Duty on Land and Building Rights (Bea Perolehan Hak atas Tanah dan Bangunan or BPHTB) at a maximum rate of 5% of the acquisition value after deduction of the applicable non-taxable threshold. Stamp duty applies to relevant documents, and VAT may apply if the seller is a taxable entrepreneur and the transaction falls within the VAT regime.

In a share deal, the land remains registered under the company, so BPHTB is generally not triggered solely by the share transfer. Share transfers are instead subject to the applicable income tax treatment, depending on the seller and whether the shares are listed or unlisted. Indonesia does not generally impose a separate real estate transfer tax solely because of a partial ownership transfer or change of control, unless another taxable event occurs.

Proprietary rights over real estate are strictly designated to Indonesian party, namely HM, which is not available to foreign investors, as noted in 2.1 Categories of Property Rights. Foreign individuals and foreign legal entities with representatives in Indonesia may generally hold HP, while PMA companies may either hold HGB or HP, depending on land use and licensing requirements.

For residential property, foreigners may acquire certain landed houses or condominium units, subject to immigration status, title, minimum price, land area, number of plots or units, and residential-use requirements.

Where foreign investors acquire or develop real estate through an incorporated Indonesian company, they should also consider PMA requirements, OSS licensing, zoning, building approval and sector-specific requirements.

If a land right is held by an ineligible party, it must generally be transferred or released within the statutory period, otherwise the right may cease to be valid by operation of law.

Commercial real estate acquisitions in Indonesia are generally financed through bank loans, shareholder loans, syndicated or club financing, equity injections, mezzanine financing, or capital markets instruments such as bonds or notes. Bank loans remain the most common domestic debt financing source, while syndicated financing, mezzanine structures and capital markets instruments are more common for larger projects, portfolios or property-owning company acquisitions.

Large portfolio acquisitions are often structured as share acquisitions rather than direct asset transfers, mainly for tax, licensing and administrative efficiency. Financing may be arranged at the acquisition vehicle level, target company level or through a mix of equity and debt. Real Estate Investment Trusts (Dana Investasi Real Estat or DIRE) are an alternative financing structure, but are less commonly used than conventional bank financing, shareholder funding or corporate acquisition structures.

Security over real estate is typically created through a mortgage right (Hak Tanggungan or HT) over eligible land rights. HT may encumber HM, HGU, HGB and certain HP over state land that are registered and transferable. Buildings, plants and other works attached to the land may also be covered if they form an integral part of the land and are expressly included in the mortgage deed.

HT is granted through a Deed of Granting Mortgage (Akta Pemberian Hak Tanggungan or APHT) made before a PPAT and becomes effective upon registration with the Land Office. Lenders commonly also require supporting security, such as fiduciary security over receivable or movable assets, share pledges, corporate guarantees, sponsor support and contractual security over project proceeds or key documents.

Indonesian law generally permits security over eligible land rights to be granted in favour of foreign lenders. In cross-border real estate, infrastructure and project financing transactions, foreign lenders may act as secured creditors under HT or other supporting security arrangements. However, the security does not give the foreign lender direct ownership of the underlying land, and enforcement must follow Indonesian security enforcement procedures.

There is generally no prohibition on repayment to a foreign lender under a security document or loan agreement. However, offshore borrowings and cross-border foreign currency payments may be subject to Bank Indonesia reporting, foreign exchange administration and supporting document requirements. These are generally compliance and reporting requirements, rather than restrictions on the foreign lender’s ability to receive repayment.

The granting of HT generally involves PPAT fees, stamp duty, registration fees and administrative costs. Since APHT must be registered with the Land Office, HT registration is subject to Non-Tax State Revenue (Penerimaan Negara Bukan Pajak or PNBP), with the tariff generally determined by reference to the secured value. VAT may also apply to professional service fees if the relevant service provider is a taxable entrepreneur.

For enforcement, additional costs depend on the route and may include auction fees, court fees, appraisal fees, legal fees and other administrative costs relating to realisation of the secured asset.

Before granting security over its real estate assets, an Indonesian company must comply with its articles of association (AoA), corporate approval requirements and applicable laws, including Law No 40 of 2007 on Limited Liability Companies (Perseroan Terbatas or PT), as amended by the Job Creation Law (the “Company Law”). Depending on the transaction structure, the value of the secured assets and the company’s AoA, approval from the board of directors (BoD), board of commissioners (BoC), or shareholders may be required. In particular, shareholder approval is generally required where the company transfers or encumbers assets representing more than 50% of its net assets in one or more transactions, whether related or unrelated.

Indonesian law does not recognise a broad “financial assistance” prohibition in the same way as some common law jurisdictions. However, BoD must still act in good faith, with due care and in the company interest. In practice, the company should be able to demonstrate corporate authority, proper approvals and sufficient corporate benefit before granting security, especially where the security supports obligations of another group company or third party.

Upon default, HT may generally be enforced through public auction based on the first-ranking HT holder’s statutory enforcement right or the executorial title in the HT certificate. HT may also be enforced through private sale if agreed by the grantor and holder of HT, and if this sale is expected to achieve the highest sale price. Lenders typically issue default notices and observe contractual cure periods before commencing enforcement.

Enforcement timing depends on borrower co-operation, auction process, objections and court involvement, and may range from several months to several years. There are no general pandemic-related foreclosure moratoria currently in force. Lenders often consider restructuring, settlement or voluntary sale before enforcement. Transfers of non-performing loans or receivables may occur through assignment of receivables (cessie) or asset management arrangements, although the market is not as liquid or standardised as in some other jurisdictions.

Existing secured debt may be subordinated to newly created debt through contractual arrangements among creditors, such as subordination or intercreditor agreements. These arrangements may regulate payment priority, enforcement control, turnover of proceeds and distribution of recoveries, but do not by themselves change the registered ranking of HT.

Priority over security is generally determined by registration order, so an earlier-registered HT generally ranks ahead of a later-registered HT. If the parties intend to alter the actual security ranking, the existing HT may need to be released, re-registered or otherwise adjusted through land registration. These arrangements are common in syndicated financing, refinancing, project financing, acquisition financing and debt restructuring.

A lender holding or enforcing security over real estate is not typically liable for environmental pollution solely because it holds security over the asset. Environmental liability is generally linked to the party whose business, activity or conduct causes the pollution or environmental damage, including strict liability for certain high-risk activities. However, a lender may face exposure if it takes possession or control of the property, operates the relevant business or directly contributes to the pollution. Lenders therefore commonly require environmental due diligence, borrower undertakings, representations and indemnities for higher-risk assets.

Security interests validly created before a borrower’s bankruptcy or suspension of debt payment obligations (Penundaan Kewajiban Pembayaran Utang or PKPU) under Law No 37 of 2004 on Bankruptcy and PKPU are not automatically void solely because insolvency proceedings commence. Secured creditors holding HT, fiduciary security or pledge are generally treated as separatist creditors and retain rights over their collateral. In bankruptcy, enforcement rights are subject to a statutory stay of up to 90 days from the bankruptcy declaration.

In PKPU, enforcement actions are also affected while PKPU remains in effect, although secured creditors retain their secured status. Security interests or other pre-bankruptcy transactions may be challenged through a claw-back action (actio pauliana) if they prejudice creditors and the statutory requirements are satisfied.

There does not appear to be a separate recording or similar tax imposed specifically on mortgage loans or mezzanine loans related to real estate in Indonesia. However, loan and security documents may be subject to stamp duty, while HT registration is subject to PNBP, with the tariff generally determined by reference to the secured value. Professional fees for notaries, PPATs or advisers may also apply, and VAT may apply to those service fees if the relevant service provider is a taxable entrepreneur.

Land use, development, design and construction in Indonesia are governed through spatial planning, business licensing, environmental and building regulatory frameworks. GR 21/2021 sets the main spatial planning framework, while GR 28/2025 governs risk-based business licensing through OSS. Environmental approvals may also be required depending on the nature and scale of the development.

ATR/BPN plays a central role in spatial planning and land administration. Provincial and regional governments administer the relevant Regional Spatial Plan (Rencana Tata Ruang Wilayah) and RDTR, which determine permitted land use and form the basis for KKPR. Building compliance is separately regulated through the PBG and Certificate of Worthiness (Sertifikat Laik Fungsi or SLF) framework, generally administered by regional governments and competent technical authorities.

Construction activities may also be subject to construction services requirements, including contractor licensing, competency, safety and construction contract requirements.

Development is generally obtained through a combination of land control, spatial conformity, environmental approval, building approval and business licensing. KKPR confirms consistency with the applicable spatial planning framework. If RDTR has been integrated with OSS, KKPR is generally processed through confirmation; otherwise, it is processed through approval.

KKPR does not authorise construction. Developers typically need to secure land rights or contractual rights, obtain environmental approval where required, obtain PBG before construction and obtain SLF before use or occupation. Certain projects may also require arrangements with public bodies where government land, public infrastructure, utilities, access roads or public-private co-operation are involved.

Third parties may challenge certain administrative approvals, subject to standing, timing and the nature of the approval. Planning and zoning restrictions are generally enforced through administrative supervision and sanctions, including warnings, suspension, fines, coercive measures, licence suspension or revocation.

The most common entity used to hold real estate assets in Indonesia is PT. Where foreign investors are involved, the PT will generally have PMA status and may hold eligible land rights, such as HGB or HP, subject to land ownership, business licensing and foreign investment requirements. For larger acquisitions or joint venture investments, investors commonly use or acquire shares in a property-owning PT, with any joint venture arrangements documented in a shareholders’ agreement or joint venture agreement.

DIRE is also recognised in Indonesia as an alternative real estate investment vehicle, but it is structured as a regulated collective investment contract between an investment manager and a custodian bank, rather than an ordinary corporate landholding entity. It is therefore more relevant as an investment structure providing economic exposure to real estate assets than as a direct ownership vehicle for investors.

PT

A PT is constituted through a notarial deed of establishment and obtains legal entity status upon approval by the Minister of Law (MoL). Its AoA generally regulates the company’s name, domicile, business activities, capital structure, shares, governance, shareholder approvals, amendments and liquidation. A PT has shareholders, a BoD and a BoC, and generally requires at least two shareholders, one director and one commissioner.

A PT does not receive a specific real estate tax benefit solely because it is used as a holding vehicle. It is generally subject to corporate income tax at 22% on taxable income, while transfers of land and/or buildings may trigger final income tax, BPHTB, VAT and stamp duty. A PT with PMA status is also subject to foreign investment capital and investment value requirements.

DIRE

DIRE is formed through a collective investment contract between an investment manager and a custodian bank. Its key features are found in the contract and OJK rules, including provisions on participation units, portfolio composition, investment management, custodian arrangements, valuation, disclosure and investor rights.

The main tax benefit of DIRE is the specific final income tax treatment for qualifying transfers of real estate into certain collective investment contract structures, which may be subject to final income tax at 0.5% of the gross transfer value. Main costs include investment manager fees, custodian fees, compliance costs and taxes on relevant income, transfers or distributions.

Indonesia recognises a REIT-like vehicle in the form of DIRE. Unlike an ordinary company or common law trust, DIRE is structured as a collective investment contract with characteristics as noted in 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity. DIRE may be offered publicly, with participation units listed on the Indonesia Stock Exchange, or established without a public offering by submitting the collective investment contract to OJK.

Foreign investors may participate in DIRE by holding participation units, as they do not directly acquire title to the underlying real estate assets. Its main advantages include professional management, custodian oversight, regulated disclosure, potential liquidity if listed, and economic exposure to real estate. Key requirements include a notarial collective investment contract, an investment manager, a custodian bank, compliance with portfolio composition rules, and OJK reporting and disclosure obligations.

For a PT, authorised capital is generally determined by the founders, unless a specific business sector requires otherwise. At least 25% of the authorised capital must be issued and fully paid up. For a PT with PMA status, the minimum issued and paid-up capital is generally IDR2,5 billion per PT, and the minimum investment value is generally more than IDR10 billion. For certain property business activities, the minimum investment value may include land and buildings.

A DIRE is not established as a company and therefore does not have share capital like a PT. It must instead comply with OJK requirements, including portfolio composition rules. If a DIRE invests through a special purpose company, that company’s capital requirements will depend on its investment status, business classification and sectoral requirements.

PT

A PT, including a PT with PMA status, is governed by its AoA, the Company Law and applicable licensing requirements. Its main organs are the shareholders, BoD and BoC. Certain corporate actions require general meeting of shareholders (GMS) approval, either through a meeting or circular resolutions. Changes to the AoA or registered corporate data are generally documented in notarial deed form and submitted through the General Legal Administration online system for approval or notification to the MoL.

A PT must convene an annual GMS, at which the annual report and financial statements are submitted. A PT conducting investment activities may also be required to submit investment activity reports (Laporan Kegiatan Penanaman Modal or LKPM) through OSS, with reporting frequency depending on business scale.

DIRE

DIRE is governed by its collective investment contract and OJK rules. The investment manager manages the portfolio, while the custodian bank administers and safeguards fund assets. Investor governance is exercised through participation unit holder rights, including approvals or meetings for certain material matters where required. DIRE is also subject to OJK supervision, reporting and disclosure obligations.

Annual maintenance and accounting compliance costs are not fixed by law and depend on the vehicle, asset size, licensing profile, reporting obligations, audit requirements and advisers used.

PT

A PT, including a PT PMA, generally incurs costs for corporate secretarial maintenance, annual GMS documentation, bookkeeping, financial statements, tax filings and audits where required. A PT PMA may also incur costs for business license administration through OSS and LKPM reporting. These costs are usually lower than those of a regulated capital markets vehicle.

DIRE

A DIRE generally involves higher annual maintenance costs as a regulated capital markets product supervised by OJK. Typical costs include investment manager, custodian, fund administration, valuation, audit, reporting, disclosure and tax compliance costs, depending on fund size, assets, offering structure and investor base.

Indonesian law recognises both contractual and land-right based arrangements for limited use of real estate. For ordinary occupation of land, buildings, office space, retail premises or other commercial areas, parties commonly use lease arrangements. Where the arrangement involves using another party’s land for building purposes, it may also be structured as HS, which is principally contractual.

For longer-term land control or development, investors commonly use limited-period land rights such as HGB or HP, depending on land use and holder eligibility. Unlike ordinary leases, HGB and HP are recognised land rights and may be registered, transferred and encumbered if the applicable requirements are met.

In Indonesia, commercial leases are generally contractual arrangements rather than separate registered land titles comparable to leasehold estates in common law jurisdictions. They are mainly governed by the lease agreement between the lessor and lessee, rather than land title registration with the Land Office.

Commercial leases are commonly structured as office, retail, warehouse or logistics, apartment or serviced residence, land lease or other premises-use arrangements. The main differences are usually commercial and operational, including term, rent, service charges, permitted use, fit-out, repair and maintenance, handover, building rules, licensing and termination rights.

Commercial rents and lease terms in Indonesia are generally freely negotiable between the lessor and lessee. There is no general statutory rent control or voluntary code that specifically regulates commercial lease pricing or standard commercial lease terms. However, lease arrangements must still comply with general contract law principles under the ICC and any mandatory rules relevant to the property or its intended use.

In practice, rent, service charges, deposits, fit-out, maintenance, renewal, termination, assignment, sublease, reinstatement and handover provisions are commercially negotiated. The outcome usually depends on property type, lease term, building rules, tenant use and bargaining position.

Lease terms depend on the property type and commercial arrangement. Office and retail leases commonly range from one to five years, while land, industrial and build-to-suit leases may be longer. Rent is usually paid monthly, quarterly or annually in advance.

Tenants usually maintain and repair the premises they occupy, including internal fixtures and fit-out works. Landlords or building managers usually maintain structural elements, building systems and common areas, with related costs often recovered through service charges, unless agreed otherwise.

Rent may remain fixed or be subject to adjustment, depending on the parties’ agreement. Indonesian law does not set a specific mandatory rent variation mechanism for commercial leases. Accordingly, any rent variation during the lease term is primarily governed by the lease agreement.

In practice, commercial leases may provide for fixed rent, annual increments, step-up rent, or rent review mechanisms. Shorter leases are more commonly fixed, while longer leases usually include escalation provisions.

The new rent is generally determined by the mechanism agreed in the lease. Common mechanisms include pre-agreed rent increases, percentage-based escalation, market rent review, or another formula agreed by the parties.

If the lease does not provide a rent adjustment mechanism, the new rent should be agreed between the landlord and tenant, typically through an addendum to the existing lease or a new lease agreement. In private commercial leases, the determination of new rent is generally a contractual matter.

VAT may be payable on rent where the landlord or building manager has been confirmed as a taxable entrepreneur and is required to collect VAT. Under the current mechanism, most non-luxury taxable services effectively bear 11% VAT, calculated by applying the statutory 12% rate to a tax base of 11/12 of the relevant payment. Leases usually specify whether rent and service charges are inclusive or exclusive of VAT.

Separately, rental income from land and/or buildings is generally subject to final income tax at 10% of the gross rental amount. This is separate from VAT and is usually addressed in the lease payment mechanics.

At the start of a lease, tenants commonly pay costs other than rent, depending on the property type and lease terms. These may include rent paid in advance, a security deposit, service charge deposit, utilities deposit, fit-out or renovation deposit, and stamp duty.

For retail or managed commercial premises, tenants may also pay signage fees, fit-out supervision fees, marketing charges, building management charges or other charges under the applicable building rules. These costs are generally contractual and should be set out in the lease or building management documents.

Maintenance and repair obligations are generally determined under the lease and building management rules. Tenants usually maintain the premises they exclusively occupy, including internal fixtures and fit-out works. Landlords or building managers usually maintain common areas and shared facilities, such as lobbies, lifts, parking areas, landscaping, security systems and other building facilities.

The cost of maintaining common areas is typically recovered from tenants through service charges or common area maintenance charges. These charges are usually allocated based on leased area, usage or the applicable building management policy.

Utilities and telecommunications in multi-tenant properties are usually paid by tenants, either directly to the service provider or through the landlord or building manager. Electricity, water, cooling, gas, internet and telecommunications charges may be separately metered, sub-metered or allocated based on usage, leased area or building policy. Shared utilities are usually recovered through service charges.

Land and Building Tax for rural and urban areas (PBB-P2) applies to land and/or buildings that are owned, controlled and/or utilised by an individual or entity. In practice, the landlord is commonly the assessed party for leased property, but the lease may allocate the economic burden differently, particularly in long-term land leases, single-tenant buildings or build-to-suit arrangements.

Insurance obligations are primarily contractual. In commercial leases, landlords commonly insure the building structure and common areas against risks such as fire, natural disasters and property damage, while tenants usually insure their fit-out, inventory, equipment, business interruption risk and third-party liability. Building insurance premiums may be recovered through service charges, depending on the lease and building policy.

Business interruption insurance claims from COVID-19-related closures were fact-specific and depended on policy wording. Recovery was generally difficult unless the policy expressly covered pandemic, infectious disease, government closure orders, non-physical damage business interruption or related clean-up costs.

Landlords may restrict the tenant’s use of the premises through the lease agreement, building rules and fit-out guidelines. Common restrictions cover permitted use, operating hours, signage, nuisance, hazardous materials, subleasing, alterations, and compliance with building management requirements.

There does not appear to be a single lease-specific statutory regime that comprehensively regulates commercial use restrictions in Indonesia. However, restrictions may arise from spatial planning, building, environmental, health and safety, and business licensing requirements. A tenant’s use must remain consistent with the property’s zoning designation, approved building function and applicable licences.

Tenants usually require the landlord’s prior written consent before making alterations, improvements or fit-out works. Landlords commonly require drawings, technical specifications, contractor details, insurance evidence and any required permits before works commence.

Conditions may cover structural safety, mechanical and electrical systems, building rules, working hours, nuisance control, damage repair and reinstatement. Fitted-out parts usually become part of the premises, unless the lease requires removal or reinstatement at expiry or termination.

Commercial leases in Indonesia are generally governed by contract. There is no lease-specific statutory regime for offices, retail premises, hotels, industrial properties or residential premises, although these assets may be affected by sector-specific rules on residential, condominium, industrial, tourism, hotel, zoning and building management requirements. COVID-19 restrictions previously affected certain asset classes, but these were public activity restrictions rather than lease-specific rules and are no longer generally in force.

Tenant insolvency does not automatically terminate a lease. If the tenant is declared bankrupt, the receiver or landlord may terminate the lease by notice, following the lease or local practice and subject to a minimum 90-day period. If rent has been paid in advance, the lease cannot be terminated before the prepaid period expires.

If the tenant enters bankruptcy or PKPU, the landlord or building manager will generally need to file its claim and co-ordinate with the receiver or administrator. Unless the landlord holds valid security, deposit or guarantee, unpaid rent and other outstanding amounts will generally be treated as unsecured claims, subject to statutory creditor ranking.

A tenant generally has no right to continue occupying the premises after the lease expires or is validly terminated, unless the landlord agrees to an extension or renewal. To manage handover, the lease usually requires prior notice, reinstatement, return of keys and access cards, settlement of outstanding amounts, and payment of holdover rent or late handover penalties.

If the tenant refuses to vacate, the landlord may pursue contractual and civil remedies, including claims for handover, compensation and agreed penalties. A criminal complaint may be considered only in limited circumstances, such as where the tenant unlawfully remains in the premises after being requested to leave by the entitled party.

Assignment or sublease of a lease interest is generally subject to the landlord’s consent and the terms of the lease agreement. In practice, commercial leases commonly prohibit assignment, transfer, sublease or sharing of possession without prior written consent. Where consent is granted, landlords or building managers may require the proposed assignee or subtenant to satisfy financial capability, licensing, permitted use and building compliance requirements.

A sublease is usually documented in a separate sublease agreement, while an assignment is usually documented through an assignment or novation arrangement. The original tenant generally remains liable under the main lease unless the landlord expressly releases it or agrees otherwise.

Termination rights are primarily contractual and depend on the terms agreed by the parties. Common termination events include non-payment of rent or service charges, material breach, misrepresentation, unauthorised assignment or sublease, illegal use, insolvency or PKPU, abandonment, prolonged force majeure, and expiry of the lease term.

Article 1266 of the ICC is commonly understood to require court involvement for termination of a reciprocal agreement due to breach, unless the parties validly agree otherwise. In practice, commercial leases commonly include an express waiver of this requirement, allowing the parties to terminate the lease based on the agreed contractual termination events and procedures.

Commercial leases are generally private contractual arrangements and are not required to be registered with the Land Office. Lease agreements or memorandums of lease are also not typically recorded in land records, as land registration generally applies to registered land rights, HPL, HMSRS, HT and state land.

There is generally no land registration fee for commercial leases. The main documentary cost is stamp duty, while notarial fees may apply if the lease is executed in notarial deed form. Where the agreement involves an Indonesian party, Indonesian language requirements should also be considered.

A tenant may be required to vacate before the agreed expiry date if it defaults and the lease is validly terminated. Landlords usually issue default notices, allow any contractual cure period, and serve a termination or vacate notice. If the tenant refuses to vacate voluntarily, the landlord should pursue contractual and civil remedies rather than self-help eviction.

Timing depends on tenant co-operation and whether the matter becomes contested. A voluntary handover may be completed relatively quickly, while contested proceedings and enforcement may take several months or longer. There are no current COVID-19 public activity restrictions that generally prevent enforcement of commercial lease termination or lawful handover.

A third party does not ordinarily terminate a commercial lease as a private contract between landlord and tenant. However, government or municipal action may affect continued use or occupation of the premises in limited cases, such as land procurement for public interest, closure orders, license revocation, zoning violations, building safety issues or environmental sanctions. Timing depends on the legal basis and whether the action is challenged.

Compensation depends on the cause. For land procurement for public interest, compensation follows the statutory mechanism and is paid to entitled parties. For regulatory enforcement due to non-compliance, compensation is generally not payable merely because the lease is affected, although the tenant may have contractual claims if the lease allocates that risk.

Remedies for tenant breach are primarily governed by the lease. They commonly include default interest, penalties, application or forfeiture of security deposit, termination, handover claims, damages, unpaid rent, service charges, repair costs and reinstatement costs. There does not appear to be a lease-specific statutory cap on damages recoverable by a landlord, although damages generally need to be supported by the lease, breach and proof of loss.

Landlords commonly hold security deposits, usually in cash, bank guarantee or standby letter of credit form. These may be applied against unpaid rent, service charges, damage, reinstatement costs or other tenant liabilities, depending on the lease.

In Indonesia, construction projects are commonly priced based on mechanisms agreed in the construction contract. Recognised pricing structures include lump-sum, unit-price, combined lump-sum and unit-price, percentage value, cost-reimbursable and target-cost structures.

These may be supported by payment mechanisms such as advance payments, progress payments, milestone payments and turnkey or completion-based payments. Private real estate developments commonly use lump-sum or combined lump-sum and unit-price structures for greater cost certainty. Cost-reimbursable or target-cost structures are more common where the design or scope is still developing, or early works must commence before the scope is fully finalised.

Responsibility for design and construction is allocated through the construction contract between the service user and service provider. The delivery method may vary depending on the project structure, and may include design-bid-build, design-build, engineering-procurement-construction, construction management or partnership arrangements.

In a design-bid-build structure, the service user usually retains the design consultant separately, while the contractor is responsible for construction based on the approved design. In design-build or engineering-procurement-construction structures, more design and construction responsibility is allocated to the contractor. In all cases, responsibility is typically detailed through the scope of work, design responsibility matrix, technical specifications, approvals, testing, warranties, defects liability and handover provisions.

Construction risk in Indonesia is primarily managed through contractual allocation, supported by security instruments and insurance. Common devices include:

• representations and warranties on licensing, capability, design, materials, workmanship and technical compliance;
• indemnities for third-party claims, property damage, personal injury, regulatory breach and contractor default;
• liability caps and exclusions of indirect or consequential losses;
• defects liability, warranty and maintenance obligations;
• retention money, performance bonds and advance payment bonds; and
• insurance, where relevant and contractually required, such as contractor all-risk, third-party liability and professional indemnity insurance.

These arrangements are generally recognised under freedom of contract principles, but cannot exclude mandatory construction, building, environmental and occupational safety obligations. Similar risk allocation may apply to subcontracting, although the main contractor usually remains responsible to the project owner for subcontracted works.

Schedule-related risk is typically managed through milestone dates, completion dates, extension-of-time mechanisms, delay notices, force majeure clauses and agreed delay damages. Parties may agree that the owner is entitled to monetary compensation if agreed milestones or completion dates are not achieved.

Under Law No 2 of 2017 on Construction Services, as amended by the Job Creation Law, the service provider and/or subcontractor must deliver the work result in accordance with the agreed cost, quality and time under the construction contract. Failure to meet these requirements may give rise to compensation in accordance with the construction contract. In practice, contractors typically seek relief for employer-caused delay, variation orders, late approvals, delayed site handover, force majeure and events outside the contractor’s control.

Owners commonly require additional security to support contractor performance, particularly for major developments or higher-value projects. Common forms include performance bonds, advance payment bonds, retention money, parent company or corporate guarantees, and warranty or maintenance bonds.

Letters of credit and escrow arrangements may also be used in larger, cross-border or more complex projects, but are less common in ordinary domestic real estate construction. Insurance may also be required where relevant, such as contractor all-risk, third-party liability or professional indemnity insurance, although these are generally treated as risk mitigation tools rather than performance security.

There does not appear to be a statutory mechanic’s lien regime in Indonesia allowing contractors or designers to unilaterally register a lien or encumbrance over the employer’s real estate solely due to non-payment. Their remedies are primarily contractual, including payment claims, agreed suspension rights, termination, damages, dispute resolution and enforcement of payment security.

Payment disputes are usually resolved through the dispute resolution mechanism agreed in the construction contract, such as dispute board, mediation, conciliation, arbitration or court proceedings. If a court-ordered attachment or similar measure is imposed, the owner would need to settle the claim, challenge the measure or seek its release through the relevant dispute resolution procedure.

Before a building may be used or occupied, the key requirement is the issuance of SLF, which confirms that the building is functionally fit for use. PBG is generally required before construction, alteration, expansion, reduction or maintenance works are carried out, while SLF is required before the completed building is utilised for its intended function.

PBG and SLF applications are generally processed through the Building Management Information System (Sistem Informasi Manajemen Bangunan Gedung). The process typically involves submission and review of technical documents and verification that the building complies with applicable technical standards.

VAT may be payable on the sale or purchase of corporate real estate where the seller has been confirmed as a taxable entrepreneur and the transaction constitutes a taxable supply. VAT is generally charged by the seller and economically borne by the buyer, unless agreed otherwise. As mentioned in 6.7 Payment of VAT, tariffs for most non-luxury goods, including real estate, are generally subject to 11% VAT treatment.

Luxury residential real estate, however, is subject to Sales Tax on Luxury Goods at 20% if it meets the applicable criteria, including the minimum selling price threshold. Government-borne VAT incentives may also be available for qualifying landed houses and condominium units under the residential property incentive programme.

For large real estate portfolio acquisitions, tax mitigation is usually achieved through transaction structuring rather than a general exemption. A common approach is acquiring shares in the property-owning company, as BPHTB and final income tax on land and/or building transfers are generally not triggered if legal title remains with the company. However, a share acquisition may still trigger tax on share gains, stamp duty and inherited tax exposures at target-company level.

Tax planning usually focuses on comparing asset deal and share deal outcomes, identifying available incentives, and allocating tax risks through warranties, indemnities, price adjustments or conditions precedent. Any structure should have commercial substance and be assessed against Indonesian anti-avoidance, transfer pricing and beneficial ownership principles.

Indonesia does not impose “business rates” in the same form as some common law jurisdictions. Instead, business premises may be subject to PBB-P2, which applies to land and/or buildings that are owned, controlled and/or utilised by an individual or entity. In lease arrangements, the landlord is commonly the assessed party, although the economic burden may be passed to the tenant if agreed in the lease.

PBB-P2 rates, reductions and exemptions are determined under the regional tax framework and relevant regional regulations. Exemptions are generally limited to certain public-interest uses or exempted categories, rather than ordinary commercial occupation.

Foreign investors may be subject to Indonesian withholding tax on Indonesian-sourced income. Payments to non-resident taxpayers are generally subject to Article 26 income tax at 20% of the gross amount, unless reduced under an applicable tax treaty. However, rental income from land and/or buildings is generally subject to final income tax at 10% of the gross rental value, which is withheld by the tenant if it is an Indonesian withholding agent.

Gains from a direct transfer of land and/or buildings are generally subject to final income tax at 2.5% of the gross transfer value. Limited exemptions may apply, including certain low-value transfers by individuals, grants, inheritance, transfers to government bodies or assigned entities, and transfers by persons or entities that are not Indonesian tax subjects.

There are limited tax benefits from merely owning real estate in Indonesia. Land is generally not depreciable for tax purposes, while buildings used in a business or to generate taxable income may generally be depreciated. Ordinary business expenses, such as repair, maintenance, management fees, financing costs and depreciation, may also be deductible where the property generates income subject to ordinary income tax.

This should be distinguished from income subject to final tax, such as certain land and/or building rental income, where ordinary deductions may not provide the same benefit. Specific tax incentives are generally project-based rather than ownership-based, and may be available for qualifying sectors, locations or government-priority investments.