In Indonesia, there are two types of land: 1) Certificated Land, title to which is governed by the Basic Agrarian Law and which is registered, 2) Adat Land (customary land) where the land is not registered. The land belongs to a local community on a collective basis, and cannot be owned by a company.
Property Taxes:
A tax is payable annually on land, buildings and permanent structures. The effective rate is nominal, typically no more than one-tenth of one percent per annum (0.1%) of the value of property.
This tax applies to those who have "rights over land" or "possess or control buildings" or "obtain benefits from land and buildings". The law is not clear as to whether a landlord or tenant is liable, but the tenant may be taxed if the landlord cannot be found.
Land Use & Control:
1. Land speculation has been both more intensive an more unfettered in Indonesia than in the rest of Asia. The metropolitan area of the capital, Jakarta, has been the particular focus of speculation. One reason is that Indonesia does not have a progressive tax system, which some see as having been a source of significant encouragement to the private accumulation of land. In the 80's and 90's, land speculation became so intense in Jakarta that Indonesia banks competed to provide credit for it.
2. Culturally, land has been a traditional focus of investment for Indonesians. Land is not just an investment, but also a symbol of one's social position and economic success. It has been reported that one result of the corruption of the Suharto era was competition between private developers and government officials for land. An official's holdings of land grew with his rank of office, with each reinforcing the person's prestige and wealth.
3.- The development of Jakarta has been predicated on the eviction of the former tenants of many sites. Many middle and lower class Jakartans lost their homes through forcible eviction -often involving collusion between developers and the police or military. These evictions were carried out on many properties that were legally constructed and owned. In their place now are high-rise developments, skyscrapers and other large real estate complexes.
4.- In one five year period, between 1993 and 1998, the Indonesian Land Agency issued developers appropriation permits to some 250,000 hectares. The permits give the developers the right to negotiate with residents in a target area for the purchase of their properties. It is alleged, however, that in practice the residents are forced to sell to the developers under threats of personal danger. And these homeowners are comparatively lucky. The Center for Indonesian Property Studies has estimated that 4.5 million people were evacuated from their homes in this manner between 1968 and 1998. While the government provides some compensation to evicted homeowners, it was generally only worth 1/20th of the market value for the property lost.
5.- Land speculation was one of the driving factors behind the "Asian flu" that has beset all of the region's economies in recent years. However, Indonesia's economy and real estate market remain the hardest hit. The practices cited above have proved counter productive to successful development. According to the Indonesian government's own Ministry of Public Housing, by 1999 the amount of land brought into the market by appropriation development is sufficient to meet the country's need for the new homes for the next 100 years. And yet on the 5% of Jakarta's population of 10 million people has access to clean water.
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