In the past, obtaining a mortgage for a foreign property buyer was almost impossible. The main problem was the title deed to be in the name of an Indonesian, rather than in the name of the person applying for the mortgage.
Because a foreigner cannot obtain a Hak Milik (freehold title) for land property in Indonesia, the name of a local ‘nominee’ has to be 'borrowed' for the title document. This arrangement made Indonesian banks uncomfortable.
The introduction of Hak Pakai Atas Hak Milik (right of use above freehold land) is one way for foreigners to go ahead with owning land in Bali and elsewhere in Indonesia. Hak Pakai (right of use) is a certificate, which is valid for 25 years extendable up to 100 years. This is viewed by some people as the best option for foreign buyers. With this structure the foreigner’s name is on the title deed and hence eligible for a mortgage. Expats should have no trouble in
securing a mortgage in this manner.
One company involved in this matter is Asia Property Finance Management (APFM), which came to life in order to address the needs of expatriates in need on mortgage finance. APFM can arrange a Indonesian Property Loan (IPL) and by working with an Indonesian bank, can also offer a range of mortgage currencies and associated interest rates offerings a degree of choice.
Features of the IPL include:
• Available in US$, AU$, and IDR.
• Minimum loan is approximately $12,000 and maximum $450,000
• The maximum loan amount that can be borrowed is 60% of the property’s latest valuation: a 40% deposit is required.
• Maximum loan period is 10 years for principal and interest
• Interest rates are calculated at a variable rate, based on Cost of Funds for the currency of the loan, and a margin.
• IPL is available to non-Indonesian citizens (foreigners) residing in Indonesia, subject to Bank approval.
• Only existing residential dwellings in Indonesia such as house with land, apartment will be considered.
• Loan can only be granted if the property is registered in borrowers’ name “Hak Pakai” or Title to Use the Land, with a Building Permit (or Ijin Mendirikan Bangunan – IMB) attached to the certificate.
• Borrowers can only apply for one loan as foreigners are only allowed to own one Indonesian based property.
• You must be able to demonstrate your ability to meet all your financial commitments, such as rent, living expenses, and loan repayments. The ability to repay the loan will be determined for each borrower and is dependent on their individual financial circumstances and the value of the security.
Indonesian Property Loan (IPL)
The following include additional information about the Indonesian Property Loan (IPL) offered through Asia Property Finance Management (APFM) in Indonesia.
The Lending Bank will assign a valuation company to determine the value of the property. All costs of this valuation will be at the applicant’s expense. The report is for the lending bank use only. It is strongly recommended that you have a professional building inspection of the property before you make the purchase.
All charges generated by Notaries will be charged directly to you without any additional compensation.
Regular monthly payments are made as principal and interest during the life of the loan. Partial and full payments are able to be made prior to loan maturity.
Loans denominated in a currency other than IDR are at risk from currency market fluctuations. If there is an adverse movement in the exchange rate, the value of your outstanding loan when converted to IDR may exceed the agreed lending ratio (that is the ratio of the value of the loan to the value of the security expressed as a percentage). You have to maintain the LTV (Loan To Value) at a maximum of 80%. You may be required to provide additional collateral or
make additional payments to restore the ratio back to the agreed lending ratio.
Further Bank Requirements
The Applicant must read and acknowledge the following: Borrower has to sign “Upfront Surrender” for the Bank to process asset repossession settlement without borrower’s presence in the event of default. The land title will be assigned to the Lending Bank for the duration of the loan as security.
Borrower has to top up funds to maintain the approved LTV or the Bank may convert the loan into IDR currency without borrower’s consent to maintain the LTV within the acceptable range. IDR Loan will be subject to IDR interest rate. Borrower has to place 1 month installment to avoid insufficient funds or late payment due to borrower’s absence. Related to the inheritance law (refer to borrower’s country of origin law): borrower has to state certain state certain heir/heiress who will obtain the property if borrower passes away.
The risks described here may not include all risk considerations that may be relevant to you when entering into an IPL. Before transacting, you should be satisfied that this product is suitable for you. We recommend that you consult your investment and tax advisers or obtain other independent advice.
Your Mortgage Agreement
An APFM sales associate will be assigned to you and will oversee the day-to-day processing of your mortgage application. If you decide to apply for an IPL, you should keep this PIB and all other documentation relating to your application for future reference. Terms and Conditions will be supplied on loan offer by the relevant bank concerned.
- The IPL is a loan to assist foreigners to purchase residential property in Indonesia.
- The IPL is available in United States Dollar (USD), Australian Dollar (AUD), and Indonesian Rupiah (IDR).
- The minimum loan amount is IDR 100 million and maximum IDR 5 billion (for villa/resort max is IDR 3 billion), or its equivalent in USD or AUD.
- The maximum loan amount that can be borrowed is 60% of the latest valuation; a 40% deposit is required.
- Maximum loan period is 10 years for principal and interest.
- Interest rates are calculated at a variable rate, based on Cost of Funds for the currency of the loan, and a margin.
- IPL is available to non-Indonesian citizens (foreigners) residing in Indonesia, subject to Bank approval.
- Only existing residential dwellings in Indonesia such as house with land, apartment will be considered.
- Loan can only be granted if the property is registered in borrowers’ name “Hak Pakai” or Title to Use the Land, with a Building Permit (or Ijin Mendirikan Bangunan – IMB) attached to the certificate.
- Borrowers can only apply for one loan as foreigners are only allowed to own one Indonesian based property.
- You must be able to demonstrate your ability to meet all your financial commitments, such as rent, living expenses, and loan repayments. The ability to repay the loan will be determined for each borrower and is dependent on their individual financial circumstances and the value of the security.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
A FOREIGNER MUST BE PRESENT IN INDONESIA AT LEAST ONCE EVERY 12 MONTHS IN ORDER TO AVOID THE POSSIBILITY OF THE LAND TITLE CONVERTING FROM THE FOREIGNERS NAME TO GOVERNMENT OWNERSHIP.
More information can be found on the website of Asia Property Finance Management: http://www.apfm.biz.
Currently The Commonwealth bank in Indonesia provides mortgage loans for foreigners as well. More information can be found at http://www.commbank.co.id/upublic/mod_home/default_content_2.aspx?code=comm_ipl#!.