Real estate in Indonesia: denial, anger, bargaining, and court
In Indonesia’s real estate market, buyers—including foreign investors—often assume that once they have paid a deposit and signed a contract, they become the owners of the property. In practice, this is not always the case.
In many off-plan projects, the buyer does not receive ownership rights, but rather a contractual claim against the developer. This structure is implemented through a PPJB (Preliminary Sale and Purchase Agreement), which is permitted under Indonesian law, including regulations governing rumah susun (apartments) and PUPR provisions.
This means that at the moment of payment and signing, the buyer does not acquire the property itself, but the right to demand its transfer in the future.
Legal Nature of PPJB
A PPJB establishes the developer’s obligation to transfer the property at a later stage.
However, the agreement itself does not constitute a transfer of ownership to the buyer.
Until the final transfer of title is completed, the buyer is essentially financing the construction of the project and relying on the developer to fulfill its obligations.
In practice, this has direct consequences for the buyer.
In cases of construction delays, changes to project specifications, disputes over the land, or financial problems on the developer’s side, the buyer is treated by the court as a party to a contractual dispute—not as the owner of the property.
This means that the protection of the buyer’s rights will be based on the terms of the contract, rather than on property ownership rights.
Court Practice
A dispute involving PT Multi Artha Griya (West Point Apartment), reviewed by the Supreme Court (No. 1455 K/Pdt/2022), along with many other cases related to purchases through PPJB and surat pesanan (preliminary booking agreements), shows that such disputes occur regularly.
The court registry contains numerous cases involving breaches of contract (wanprestasi) by developers. This indicates that these situations are systemic: the property is promised, the funds are paid, and then disputes arise over deadlines, conditions, or even the feasibility of transfer.
For the buyer, this means that even with a signed contract and completed payment, the outcome depends on how the developer fulfills its obligations.
Limitations of Pressure Mechanisms
It is also important to consider the position of the Indonesian Supreme Court (Mahkamah Agung), as outlined in SEMA No. 3 Tahun 2023.
According to this guidance, bankruptcy petitions or PKPU (debt restructuring proceedings) against developers do not meet the threshold of “simple proof.”
In practice, this significantly limits the use of insolvency procedures as a pressure tool and does not always result in a quick recovery of funds.
In other words, in the event of a dispute, the buyer may not have a fast or straightforward mechanism to recover their investment.
Practical Takeaways for Investors
Foreign investors should carefully consider the legal nature of such transactions.
Before ownership is formally transferred, the property is not in the buyer’s possession, the relationship with the developer remains contractual, and the investment depends entirely on the developer’s performance.
This means that purchasing property at the construction stage is fundamentally different from acquiring a completed asset.
When evaluating a project, it is essential to consider the legal status of the land, the lease term, the availability of permits, the stage of construction, any ongoing legal disputes involving the developer, and the project’s financial model.
In practice, these factors determine whether the property will actually be delivered on time and under the agreed conditions.
Conclusion
From a practical standpoint, the key factor is not only the property itself, but the legal structure of the transaction.
The greater the time gap between payment and the transfer of ownership, the higher the risks for the investor.
Under current conditions, purchasing real estate at the construction stage requires not only assessing investment attractiveness, but also carefully evaluating the risks associated with the developer’s ability to fulfill its obligations.
Buyers should clearly understand in advance that they are acquiring not just a potential property, but also a certain level of legal and commercial risk.
Legal Department Expert, Legal Indonesia
I Gusti Ayu Bitari Karma Gita
