Indonesia – Property Letting

How does the property letting process work in Indonesia?

Indonesia has no dedicated landlord and tenant legislation. Land matters are broadly governed by the Basic Agrarian Law (Law No. 5 of 1960). In contrast to systems such as the UK’s Landlord and Tenant Act or Germany’s Civil Code — both of which establish detailed obligations for each party — the rental relationship in Indonesia is shaped almost entirely by the terms of the contract. This makes the quality and comprehensiveness of the lease agreement critically important.

A carefully drafted, legally sound lease is indispensable for any rental arrangement in Indonesia. A robust contract protects foreign property owners and sets out mutual expectations with clarity. Essential provisions to include are the tenancy duration, payment schedule, security deposit conditions, obligations around upkeep, and the terms for renewal.

Foreign landlords must pay particular attention to the language of the lease. Indonesian law requires that contracts be written in Bahasa Indonesia. Producing a bilingual document — in Bahasa Indonesia alongside another language — is a prudent approach that reduces the risk of misinterpretation and strengthens the legal enforceability of the agreement.

Indonesia’s foreign exchange regulations require that all financial transactions conducted within the country — including rental payments — be denominated in Indonesian Rupiah (IDR). Foreign property owners are therefore legally obliged to collect rent in IDR.

Landlords typically find tenants through online property portals such as Rumah.com, OLX, and 99.co, or via letting agents and personal referrals. Prospective tenants should be asked to supply identity documentation — a KTP for Indonesian nationals, or a KITAS/KITAP for foreign residents — as well as proof of employment or income and personal references. Tenant screening remains informal by nature; Indonesia has no national tenancy register or credit reference infrastructure of the kind familiar in many European countries.

Once a letter of intent has been signed, it is standard practice for tenants to pay a booking fee of at least one month’s rent. This amount may be credited toward advance rent or retained as a security deposit, which is fully refundable upon lease expiry provided all contractual obligations have been honoured.

Lease durations typically run between one and three years, reflecting what landlord and tenant agree through negotiation. Tenants generally retain an option to renew. Unlike many other markets where rolling monthly tenancies are the default, Indonesian residential leases are almost universally fixed-term, with the full rent commonly payable in advance.

The right of lease (Hak Sewa) is not formally recorded with the National Land Agency. That said, certain local land offices do permit a notation of the lease to be made in official land records or on the title certificate itself.

What types of rental arrangements are available in Indonesia?

Three broad rental models exist in Indonesia: long-term residential letting, medium-term letting (frequently used for expatriate work assignments), and short-term or holiday letting through platforms such as Airbnb and Booking.com. Each carries a distinct legal and tax profile, and the differences are particularly significant for foreign landlords.

Long-term residential letting generally covers tenancies of one year or more, with terms typically ranging between one and three years. These arrangements are governed by the lease contract and the Basic Agrarian Law, and rental income is subject to a final income tax rate of 10% for Indonesian tax residents, applied to the gross rental amount.

Short-term and holiday letting is heavily regulated and subject to a separate licensing framework. Under Indonesian law, short-term rentals are not treated as informal home-sharing — they are classified as commercial hospitality operations. Every host is required to register their business and obtain a Business Identification Number (NIB) through Indonesia’s OSS (Online Single Submission) system.

A TDUP (Tanda Daftar Usaha Pariwisata) is a general tourism business registration required for most villa operations. A Pondok Wisata is a simplified homestay licence intended for small accommodations of up to five bedrooms, available to Indonesian citizens or to PT PMA companies engaged in villa management. Foreign nationals cannot apply for a Pondok Wisata licence in their personal name — they must either establish a PT PMA or partner with an Indonesian citizen, though the latter option carries considerable legal risks.

From 31 March 2026, only accommodation properties that have obtained the government-confirmed status of “Terdaftar dan Berizin” (“Registered and Licensed”) will be permitted to remain listed on booking platforms. This requirement encompasses villas, hotels, aparthotels, and guesthouses — in effect, the entire short-term rental market.

Indonesia’s Ministry of Tourism has confirmed that online travel agencies are not banned in the country, but accommodation operators are urged to ensure that all licences, permits, and tax obligations are fully met. Enforcement activity has intensified markedly, with authorities conducting tax audits and sealing properties found to be operating without the necessary licences. Foreign landlords considering holiday letting should be fully aware of this heightened regulatory environment.

What rental income can landlords expect, and how are rates set?

Rental rates in Indonesia are negotiated freely between landlord and tenant. There is no rent control legislation, no designated rent pressure zones, and no government indexation mechanism comparable to systems found in Germany (Mietspiegel) or the Netherlands (huurprijscheck). Pricing is determined entirely by what the parties agree.

Any rent increases — including future adjustments — depend solely on what the landlord and tenant have agreed, reflecting prevailing market conditions. This makes it especially important for landlords to include clear escalation clauses in the original lease if they wish to raise the rent at renewal time.

It is common practice for rent to be paid upfront for the full duration of the lease. However, as an oversupply of rental units has given tenants greater bargaining power, some landlords now accept smaller advance payments or even monthly instalments. Paying rent one or two years ahead remains widespread in Indonesian practice, particularly outside the expatriate market segment.

Rental yields differ considerably depending on location and property type. Tourism destinations such as Bali and Lombok attract strong demand for both short- and long-term lettings, while Jakarta has seen some market softening due to excess supply. Investment across Indonesia’s real estate sector continues to encompass affordable housing, serviced apartments catering to expatriates, and industrial properties. Popular tourist destinations such as Bali and Lombok continue to draw significant interest from foreign investors.

For current rental rate benchmarks, consult property portals such as Rumah.com or the Badan Pusat Statistik (BPS), Indonesia’s national statistics office, which publishes periodic housing data. Always refer to official sources for up-to-date figures, as market conditions can shift rapidly.

Do landlords need to provide a furnished or unfurnished property in Indonesia?

No legal requirement exists in Indonesia compelling landlords to offer either furnished or unfurnished accommodation — this is entirely a matter for negotiation and should be spelt out clearly in the lease agreement. Market expectations, however, vary considerably depending on property type and the target tenant profile.

Properties marketed to expatriate tenants — including serviced apartments and villas in major cities and tourist centres — are expected as a matter of market convention to be furnished. Expat tenants typically consider air conditioning units, kitchen appliances, hot water systems, and basic furniture to be a minimum standard. Properties that fall short of these expectations will attract materially lower rents in this segment.

Within the local residential market, particularly for longer-term tenancies with Indonesian tenants, unfurnished or semi-furnished lets are far more common. In these arrangements, tenants are generally expected to provide their own furniture and household appliances.

No formal government classification distinguishes furnished from unfurnished accommodation for residential tax purposes. For short-term holiday rentals operating as commercial accommodation, however, furnishing standards, fire safety equipment, and building safety certificates (PBG and SLF) form part of the licensing compliance framework. Legal operation depends on the building’s status: a villa must hold a PBG (Persetujuan Bangunan Gedung) — confirming that the building was constructed in accordance with approved plans and regulations — and an SLF (Sertifikat Laik Fungsi), certifying that the building is safe and fit for use as accommodation.

Do you need a licence or registration to let a property in Indonesia?

The answer varies depending on the type of letting. For standard long-term residential rentals, there is no mandatory landlord licence as such — the lease agreement governs the arrangement. That said, all landlords are required to declare and pay income tax on rental receipts, which in practice creates a tax compliance obligation even for those letting property on a purely residential basis.

For short-term and holiday letting, a formal licence is a legal requirement. All commercial activities in Indonesia must be registered through the OSS (Online Single Submission) system, which issues a Business Identification Number (NIB). The NIB functions as a business’s official identity and is a prerequisite for tax registration, licensing applications, and reporting to government authorities. Even individual villa owners — not only companies — are required to hold an NIB when renting out property on a short-term basis.

Foreign individuals cannot rent out property on platforms such as Airbnb in Indonesia in a personal capacity. Legislation permits Indonesians to let property after obtaining the appropriate licence, and allows foreign nationals to do so under certain conditions, specifically by establishing a PT PMA (foreign-owned limited liability company).

Holding a PBG or SLF does not in itself confer permission to let commercially — landlords additionally require a TDUP or Pondok Wisata licence for commercial tourism activities. Requirements can differ from one regency (kabupaten) to another, so landlords should always verify current conditions with their local investment and integrated services office (Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu / DPMPTSP) or consult the OSS portal.

How do you obtain a landlord licence or register as a landlord in Indonesia?

The registration pathway differs between long-term residential letting — primarily a tax registration process — and short-term commercial letting, which demands a full business licence. The steps below outline the short-term letting route, which carries the heavier compliance burden. For long-term residential letting, the principal obligation is registering with the Directorate General of Taxes (DJP).

1. Establish the correct legal entity. Foreign individuals cannot operate short-term rentals in their own name in Indonesia. A PT PMA (foreign-owned limited liability company) must be set up before applying for the relevant commercial licences. This process involves engaging a notary, meeting minimum share capital requirements, and registering with the Ministry of Law and Human Rights.
2. Register through the OSS system and obtain an NIB. The NIB (Business Identification Number) is issued via Indonesia’s Online Single Submission (OSS) system and constitutes the formal registration of a business entity. Register at oss.go.id and select the appropriate KBLI (business activity code) for accommodation services.
3. Obtain building compliance certificates. A villa must hold a PBG (Persetujuan Bangunan Gedung) confirming construction in accordance with approved plans, and an SLF (Sertifikat Laik Fungsi) certifying that the building is safe and suitable for use as accommodation. Both are obtained from the local public works department (Dinas PUPR).
4. Apply for a tourism business registration (TDUP). A TDUP (Tanda Daftar Usaha Pariwisata) is the general tourism business registration required for most villa operations. Applications are submitted to the local DPMPTSP office or through the OSS portal following issuance of the NIB.
5. Register for local hotel tax (NPWPD). Operators must apply for an NPWPD and remit local hotel tax in the month following receipt of income. This is administered through the local revenue authority (Badan Pendapatan Daerah / Bapenda).
6. Register for national income tax (NPWP). All landlords — whether resident or non-resident — must fulfil their income tax obligations. Resident taxpayers register with the DJP at pajak.go.id to obtain a Taxpayer Identification Number (NPWP).

Costs for notarial services, PT PMA formation, and licence applications vary and may collectively amount to several million Rupiah. Obtain current fee schedules directly from a licensed notary (PPAT) and the relevant local government office, as amounts change regularly and differ between regencies. Consult the OSS portal and your local DPMPTSP for the most current requirements.

What are the rules around deposits in Indonesia?

Indonesia has no statutory deposit protection scheme equivalent to those in place in the UK or Ireland, where landlords must register deposits with a government-approved custodian and follow prescribed rules for any deductions. In Indonesia, deposit arrangements are governed exclusively by the lease contract, and there is no regulatory ceiling on the amount that may be charged.

After a letter of intent is signed, tenants are ordinarily asked to pay a booking fee equal to at least one month’s rent. This amount may be applied toward advance rent or retained as a security deposit that is fully refundable at the end of the tenancy, provided the tenant has complied with all conditions of the lease. In apartment rentals, supplementary deposits may be required in connection with utilities such as telephone line installation.

In practice, deposits equivalent to one to three months’ rent are typical for residential properties. For villas and upmarket properties in tourist areas, deposits may be considerably larger. Since no independent third-party protection arrangement exists, the deposit is ordinarily held by the landlord directly, placing greater responsibility on tenants to ensure the lease contains clear, enforceable provisions covering permissible deductions, the timeframe for return, and the mechanism for resolving any disputes.

Deposit disputes are resolved under civil law, whether through direct negotiation or, if needed, through the local district court (Pengadilan Negeri). Foreign landlords should ensure that the conditions justifying deductions — such as damage beyond fair wear and tear, outstanding utility bills, or lease breaches — are explicitly enumerated in the contract. Consulting a local property lawyer when drafting or reviewing deposit provisions is strongly recommended.

Who is responsible for maintenance and repairs in Indonesia?

Because Indonesia has no dedicated landlord–tenant legislation comparable to that found in countries such as Australia or France — where statute imposes minimum habitability standards and assigns structural repair obligations to landlords regardless of contract terms — the lease agreement plays an outsized role in allocating maintenance responsibilities. There is no equivalent statutory baseline for residential rentals in Indonesia, making precise contractual drafting essential.

In practice, the widely observed convention — which should ideally be reproduced explicitly in the contract — is that the landlord bears responsibility for structural work and significant maintenance items, including roofing, foundations, and major electrical systems, while the tenant is responsible for routine upkeep, cleanliness, and avoiding deliberate damage to the property.

Where a furnished let includes appliances and white goods, the lease should specify clearly which party is responsible for their repair or replacement. A property inventory (berita acara serah terima) signed by both parties at the start and end of the tenancy is strongly advisable as a record of the condition of all items included.

When disagreements arise, the primary avenue for resolution is through the lease’s dispute resolution clause. Many Indonesian leases specify that disputes should first be addressed through musyawarah (deliberation aimed at consensus), before escalating to the local district court or arbitration. Foreign landlords are advised to include an explicit dispute resolution mechanism, drafted with the assistance of a local lawyer.

How are letting agents used in Indonesia, and what do they charge?

Letting agents and property management companies are commonly engaged across Indonesia, particularly in major urban centres such as Jakarta and Surabaya and in tourist markets such as Bali and Lombok. For foreign landlords — particularly those managing assets from overseas — a reputable local agent or management firm is frequently indispensable, both for sourcing tenants and for overseeing day-to-day maintenance, tax compliance, and tenant communications.

Unlike the UK — where the Tenant Fees Act 2019 prohibited agents from charging tenants certain fees — or Germany, where the Bestellerprinzip assigns agent costs to whichever party instructs the agent, Indonesia imposes no statutory regulation on letting agent fees. There is equally no national licensing requirement for property agents, although the industry body REI (Real Estate Indonesia) maintains voluntary professional standards.

In the residential market, letting agents typically charge a one-off finder’s fee of approximately one month’s rent, though this varies. For holiday villa management, property management companies generally levy between 20% and 30% of rental revenue (as of 2025), covering marketing, guest relations, housekeeping, and maintenance coordination. Always confirm current fee structures directly with prospective agents, as market rates differ considerably by location and the scope of services provided.

For short-term rentals, a local management company can additionally handle licensing compliance, tax filings, and liaison with local authorities — a particularly valuable service for foreign nationals who are not resident in Indonesia. When engaging an agent or management company, verify that they have direct experience with PT PMA structures if you are running a holiday let business, and request references from other foreign property owners they currently represent.

What taxes apply to rental income in Indonesia?

The tax treatment of rental income in Indonesia depends on whether the landlord is an Indonesian tax resident or a non-resident, and on the nature of the letting activity. The rules are set by the Directorate General of Taxes (DJP) and should always be verified at pajak.go.id, particularly given how frequently the regulatory framework is updated.

Resident landlords (tax residents): Rental income from the lease of land and buildings received by an Indonesian resident taxpayer is subject to a final income tax of 10% and is not subject to the progressive income tax rates. This 10% rate is levied on gross rental receipts and operates as a final tax — no deductions for expenses such as mortgage interest or depreciation are permitted under this regime (as of 2025).

Non-resident landlords: Rental income earned by non-residents is subject to a final withholding rate of 20% of gross income unless a double taxation treaty (DTT) provides otherwise. This 20% rate is applied to the full gross rental amount without any deduction for depreciation or other income-generating costs. Where a DTT exists between Indonesia and the landlord’s country of tax residence, double taxation agreements between Indonesia and some countries may reduce this rate to 10%.

Corporate (PT PMA) ownership: Rental profits generated within a PT PMA are taxed at Indonesia’s standard corporate rate, currently 22% (as of 2025). Business expenses incurred in generating that income are deductible at the corporate level.

Short-term hotel-classified letting: Where a rental is registered as a hotel tax subject and income is treated as arising from the provision of hotel services, the taxable income is subject to the standard progressive income tax rate, with a maximum rate of 35% for income exceeding IDR 5 billion (as of 2025). A separate local hotel tax of 10% of the nightly rate also applies and must be collected from guests and remitted to the relevant local government authority.

Annual property tax (PBB): The annual Land and Building Tax (PBB) payable by property holders is capped at 0.5% of the property’s assessed value (as of 2025).

Landlords are obligated to pay and report the final income tax to their local tax office. Payment is due no later than the 10th of the following month for payments made through a withholding tax agent, or the 15th of the following month for payments made without a withholding agent. Always consult a qualified Indonesian tax adviser and verify current rules with the Directorate General of Taxes as they apply to your specific circumstances.

What are the rules around ending a tenancy or evicting a tenant in Indonesia?

Indonesian tenancy law does not strongly favour either party, but it does emphasise tenant protection in many circumstances, particularly in residential leases. As no dedicated landlord–tenant legislation exists, the lease agreement is the principal instrument defining the rights and obligations of both parties when a tenancy comes to an end.

Because tenancies are fixed-term and rent is typically paid upfront, the conclusion of a tenancy is generally uncomplicated — the tenant vacates when the agreed term expires, unless a renewal clause provides otherwise. Landlords who do not intend to renew should notify tenants in accordance with any notice period specified in the contract; where none is stated, a minimum of 30 days’ advance notice is the accepted convention.

Unless otherwise agreed between the parties, tenants are prohibited from selling or sub-leasing the property to any third party, given that actual ownership and control remain with the landlord. This restriction should be stated explicitly in the lease.

Since the majority of apartment units are let to foreign nationals, eviction disputes are relatively uncommon in practice. Expatriate tenants typically occupy properties for the duration of their work assignment and often depart before the lease term expires.

In cases where a tenant refuses to vacate or falls into rent arrears, Indonesia offers no specialist housing court or accelerated eviction procedure comparable to those available in some European jurisdictions. Landlords must pursue claims through the civil courts (Pengadilan Negeri), which can be time-consuming. For foreign property owners, it is strongly advisable to include clear eviction provisions in the lease and to engage a local legal professional if difficulties arise. Incorporating arbitration or mediation clauses can significantly speed up dispute resolution compared to pursuing the matter through litigation.

What should expat landlords know about managing property remotely in Indonesia?

Overseeing a rental property in Indonesia from abroad is achievable, but it demands careful structuring from the beginning. The combination of restricted foreign ownership rights, currency regulations, tax withholding obligations, and the requirement for physical presence in various licence applications means that having a trusted local representative in place is not simply a convenience — it is frequently a legal necessity.

Power of attorney (Surat Kuasa): A notarised power of attorney enables a trusted local representative — whether a lawyer, property manager, or trusted contact — to act on the landlord’s behalf for tasks such as executing lease agreements, engaging with local authorities, and managing bank transactions. This document must be prepared before a licensed notary (PPAT) and, if executed outside Indonesia, may also need to be apostilled before it can be relied upon locally.

Property management companies: For the majority of remote landlords, engaging a professional property management company offers the most practical solution. Such firms handle tenant sourcing, rent collection, maintenance coordination, reporting requirements, and — for short-term lets — licensing compliance and tax filings on the landlord’s behalf.

Currency and repatriation: Under Indonesia’s foreign exchange regulations, all rental payments must be collected in Indonesian Rupiah (IDR). This has implications for landlords who intend to transfer funds overseas, as it affects how rental income flows before repatriation. Converting IDR to a foreign currency and remitting it abroad is legally permitted, but substantial transfers may attract scrutiny from Bank Indonesia and will require documentation demonstrating the legitimacy of the funds, such as copies of the lease agreement and proof of tax payment.

Tax withholding for non-residents: Non-resident taxpayers are liable for income tax on income sourced from Indonesia. There is no requirement for non-resident taxpayers to obtain a tax identification number in Indonesia or to lodge an annual income tax return there. Tax is instead withheld at source by the paying party — typically the tenant, if the tenant is a business entity — or must be remitted directly by the landlord through a local representative.

Non-resident landlords should also be mindful of their tax obligations in their country of residence, as rental income derived from Indonesia may be taxable there as well. Advice from a tax professional with qualifications in both jurisdictions is essential, particularly where a double taxation agreement is in operation between Indonesia and the landlord’s home country.

Frequently asked questions

Can a non-resident own and let property in Indonesia?

Foreign ownership of property in Indonesia is governed by Government Regulation No. 103 of 2015, which sets out the rights and restrictions applicable to non-Indonesians seeking to invest in real estate. Foreigners are prohibited from holding indefinite ownership or Hak Milik (“Right of Ownership”). Non-residents may hold property under a leasehold arrangement (Hak Sewa) or a Right to Use (Hak Pakai) title and may let it out, but must comply with all applicable licensing and tax requirements, and may be required to operate through a PT PMA for commercial short-term letting.

Do I need a local agent to let my property in Indonesia?

No legal obligation requires the use of a local agent for long-term residential letting. Nonetheless, for foreign nationals — particularly those based outside Indonesia — engaging a local agent or property management company is strongly advisable to handle tenant screening, rent collection, maintenance, and tax compliance. For short-term holiday letting, a local management company is all but essential given the licensing and tax obligations that apply.

What is the typical deposit for a rental property in Indonesia?

Indonesia imposes no statutory cap on security deposits, and no government-backed deposit protection scheme exists. In practice, deposits equivalent to one to three months’ rent are the norm for residential properties. All deposit terms — including the conditions under which deductions may be made and the timeframe for return — must be clearly set out in the lease agreement. A written contract and a signed inventory record are essential safeguards.

Can I rent my property in Bali on Airbnb as a foreigner?

Foreign individuals cannot rent out property on Airbnb in Indonesia in a personal capacity. Legislation permits foreign nationals to engage in short-term letting only if they have established a PT PMA (foreign-owned limited liability company). From 31 March 2026, only properties holding the government-confirmed “Registered and Licensed” (Terdaftar dan Berizin) status will be permitted to remain listed on platforms such as Airbnb.

How is rental income taxed for non-resident landlords in Indonesia?

Rental income received by non-residents is subject to a final withholding tax rate of 20% of gross income, unless a double taxation treaty specifies a lower rate (as of 2025). This rate applies to the total gross rental amount with no expense deductions permitted. Where Indonesia has a DTT with the landlord’s country of tax residence, the applicable rate may be reduced — consult the Directorate General of Taxes and a local tax adviser for current treaty provisions.

Are there rent controls in Indonesia?

Rent levels and any future increases in Indonesia are determined solely by agreement between landlord and tenant. No statutory rent controls, designated rent pressure zones, or government indexation mechanisms exist. All pricing is negotiated freely. Landlords wishing to provide for future rent adjustments should include explicit escalation clauses in the original lease to avoid uncertainty at renewal.

What currency must rent be paid in, and can I transfer rental income abroad?

Indonesia’s foreign exchange regulations require that all rental payments made within the country be denominated in Indonesian Rupiah (IDR). Foreign property owners are legally required to accept rent in IDR. Transferring rental income to an overseas account is legally permitted once all tax obligations have been discharged, but large outward transfers may require supporting documentation. Consult Bank Indonesia’s regulations and a local financial adviser for the current requirements.

What licences does a short-term holiday rental need in Indonesia?

Short-term rentals in Indonesia require, at a minimum: an NIB (Business Identification Number) issued through the OSS system; a TDUP (tourism business registration) or Pondok Wisata licence; a PBG (building construction approval); and an SLF (building function certification). Foreign nationals cannot apply for a Pondok Wisata licence in their own name — they must establish a PT PMA. Requirements differ between regencies, so always confirm current conditions with your local DPMPTSP office and consult the OSS portal.