Are you considering a land acquisition, property investment or maybe building the villa of your dreams in the magical island of Bali? You are a foreigner who is looking into the possibilities of having your own little piece of paradise?
Regardless of your goal, our team is pleased to consult you personally on any key aspects which are essential when dealing with property in Indonesia. What’s more, we are here to lead you through the necessary steps of buying and investing in property, as well as building or acquiring your dream home on the island. We are only one email away - find us at [email protected], or call/message us directly at +62-8199960-7477.
The key principles of foreign land ownership for Bali, Indonesia
It is important to notice that in comparison with most Western and developed countries, the law in Indonesia is quite different when it comes to land and property, and many times what may seem logical & unspoken to you does not apply here at all. Therefore, it is essential for foreigners to become familiar with these details when looking into land purchasing or property acquisition. To start with, we will introduce the most important legal property terms recognized in Bali and across all Indonesia.
Leasehold (Hak Sewa)
Similar to Leasehold, the “Hak Sewa”, or “Right of Lease” is applied to both types of residential and commercial premises. When the lease states the name of the foreigner acquiring it is quite straightforward. Typically, the leasehold duration can be from 30 to 50 years, and additional changes in the period of lease are possible when discussed ahead of time.
Freehold Title (HM or Hak Milik)
Freehold title is the strongest and fullest title that can be obtained. However, Freehold title may only be held by Indonesian citizens. It is therefore impossible for a foreign individual to have direct freehold ownership of land in Indonesia. All Indonesian companies, no matter if they are PMA (foreign investment companies) or not, cannot possess freehold title over land and are compelled to use other titles such as Hak Guna Bangunan.
Freehold Title for Foreigners: The RIght to Use (HP or Hak Pakai)
Approved by the state, this title is meant for foreigners who wish to acquire the exclusive use over a Hak Milik land. By registering as a “Hak Pakai” for 25 years to begin with (up to 70 years), the foreigner’s name is put in a separate certificate of title. It’s important to notice that firstly, you are entitled to only one Hak Pakai title at a time, and secondly, the title is transferable or renewable when selling it to a different foreign buyer. Please note that the Hak Pakai is not the same as the Hak Sewa leasehold title, but is instead a registered proprietary interest.
Building Rights Title: Hak Guna Bangunan (HGB)
This type of title grants the right to build and own properties on someone else’s land. The holder of the HGB title is entitled to “owning” the land temporarily for up to 80 years, meaning that he/she is allowed to build and develop properties during this timespan, as well as use it as collateral and pass the possession to another party.
The HGB title is granted to either Indonesian nationals or legal bodies, such as a PMA-certified organization. In the case of the PMA business being entirely foreign-owned, overseas investors could possess a direct juridical authority over the company’s activities.
How can I buy property in Indonesia following the legal requirements?
What you can and SHOULD do - Starting a PT PMA company in Indonesia!
Establishing a foreign company and obtaining the HGB license (the right to build) is a secure and lawful way to acquire a property in Indonesia. Having this license, it is possible to later apply for the “Hak Pakai” (the right to use) one. Important to notice: applying for the Hak Pakai license is ONLY available when the land has already been built-in.
Having set a PT PMA you don’t need to worry about your investment’s safety and legitimacy: enjoy your property for yourself or lease it to other people; resell it or leave it as a family inheritance without worries.
What to AVOID: The nominee agreement
An absolutely illegal and quite risky, the “nominee agreement” is a notorious scheme for purchasing land in Bali where an Indonesian citizen is allocated with buying that land or property on behalf of the foreigner. The problem here is that besides not being the owner of your investment, the so-called nominee could overtake your property with ease. In this case, there is practically nothing you can do, therefore we strongly recommend to avoid this practice.
What else concerns you?
Purchasing Property in Indonesia with the Help of a Bank Loan
Hak Pakai license owners are NOT eligible for a property loan from Indonesian banks. Instead, you must be a Hak Milik holder, which has been an obstacle to expats who want to receive a bank loan in order to buy property in Indonesia. This requirement applies to everyone equally.
Generally, the loan period for buying properties in Indonesia is 5 years, in contrast with the Western terms of 25-40 years.
Lastly, we recommend inspecting the area where the property is located beforehand, in order to avoid illegal buildings constructed on banned zones, such as green belts and agricultural land. In addition, if the property is meant for renting out, it should be situated in a tourism area, since doing so in a residential zone is not allowed.
If you require further information about foreign ownership of land and property in Indonesia, feel free to contact us and we will gladly guide through the process.