Investing in the property sector in Indonesia has become increasingly attractive, especially for foreign investors.
One common question is whether Foreign Investment Company or in Bahasa, PT PMA (Perusahaan Terbatas Penanaman Modal Asing) can become a property developer in Indonesia. To answer this, it’s essential to consider several legal provisions that apply in the country.
Open Business Fields
According to Law Number 25 of 2007 concerning Investment, all business fields in Indonesia are generally open to investment activities, except for those specifically declared closed or reserved for the Central Government.
This law provides a broad opportunity for PT PMA to engage in various sectors, including property development, as long as they comply with the regulations.
Negative Investment List
The Negative Investment List, regulated under Presidential Regulation Number 10 of 2021 concerning Investment Business Fields, specifies which business fields are closed to investment and which are open with conditions.
PT PMA must ensure that the property developer’s business field is not included in this list to operate legally in Indonesia.
Foreign Ownership Limits
For the real estate sector, there is a maximum foreign capital ownership limit of 67%, as stipulated in Presidential Regulation Number 10 of 2021. This means that a PT PMA can have significant foreign investment, but must also comply with these ownership limits to ensure legality and smooth operations.
Business Licenses
PT PMA wishing to become a property developer must obtain the necessary business licenses. This includes acquiring a Business Identification Number (in Bahasa it’s Nomor Induk Berusaha/NIB) through the Online Single Submission (OSS) system.
The NIB acts as a crucial requirement for businesses to operate legally in Indonesia, streamlining the licensing process.
Property Ownership
Under Law Number 5 of 1960 concerning Basic Agrarian Regulations (Undang-Undang Pokok Agraria/UUPA), PT PMA can hold several types of land rights, including Land Use Rights (HGU), Building Use Rights (HGB), Usage Rights, and Lease Rights on land. This allows PT PMA to effectively manage and develop property in Indonesia.
Compliance with Property Regulations
PT PMA must comply with all regulations related to property development in Indonesia, including Law Number 1 of 2011 concerning Housing and Residential Areas.
Adherence to these regulations ensures that the development process aligns with national standards and policies, promoting a sustainable and legal business environment.
Building Permits
When constructing property, PT PMA must obtain a Building Construction Approval (PBG) and a Certificate of Functional Worthiness (SLF).
These requirements are regulated under Law Number 11 of 2020 concerning Job Creation and Government Regulation Number 16 of 2021. The PBG must be issued before starting construction, while the SLF must be obtained after the building is completed and before it is used.Â
Building Construction Approval (PBG)
- Regulated by Law Number 11 of 2020 and Government Regulation Number 16 of 2021.
- Must be issued before beginning construction, except for special function buildings.
Certificate of Functional Worthiness (SLF)
- Must be obtained after construction is completed and before the building is used.
- Ensures the safety, security, and compliance of buildings with spatial plans and technical requirements.
Conclusion
In conclusion, a PT PMA can indeed become a property developer in Indonesia, provided they adhere to foreign ownership limits, obtain the necessary permits, and comply with all applicable regulations in the property sector.
It is crucial for PT PMA to stay updated with any regulatory changes that may impact their business activities to ensure continued compliance and success in the Indonesian property market.
By understanding and following these legal provisions, foreign investors can take advantage of Indonesia’s thriving property sector and contribute to its development while securing profitable returns on their investments.