Legal Framework of Property Ownership for Foreign Citizens in Indonesia

Abstract

Indonesia is rich with abundant natural resources. This wealth invites many foreign investors to come and develop their business in Indonesia. The presence of foreign nationals certainly requires a place to live in order to develop their business sustainably and requires a relatively long period of time. The purpose of this study is to analyze the regulations on property ownership in Indonesia for foreigners and to the best ways of property ownership for the foreigners in relation to increasing the investment in Indonesia. This study employs a normative juridical method to describe and analyze legal issues, facts, and other symptoms related to property ownership for foreigners in Indonesia, including the Job Creation Law and its implementing regulations to obtain a comprehensive understanding. The result of the research is that a notable issue arises from Agrarian Minister Regulation 18/2021, which allows for residential areas exceeding 2,000 m² for foreigners under "certain extraordinary circumstances." This provision is problematic due to its lack of a defined maximum limit, creating a legal vacuum ("empty norm"). This absence of clear restriction is seen as a violation of the principles of nationality and Article 33 of the 1945 Constitution, which prioritizes land for the welfare of Indonesian people. The study also identifies that foreigners often resort to "legal smuggling" practices, specifically nominee arrangements, to circumvent ownership restrictions and acquire Hak Milik (Freehold Title). In such arrangements, an Indonesian citizen registers the property title on behalf of a foreigner. However, Article 26 paragraph (2) of Law 5/1960 explicitly states that any direct or indirect transfer of property rights to foreigners is null and void by law. Consequently, if a nominee arrangement is discovered, the land title is cancelled and the land reverts to the State.