Anyone who has been to Bali knows that it takes a moment to fall in love with this island. The climate, culture, nature, hospitality and tolerance Bali of the people living on this tropical island in paradise are all very appealing. As soon the journey home begins, many people already start planning for next trip to Bali. Many times these so called “returners” are interested to buy property. For residential purposes like retirement or as an investment on the rental market to obtain a return, and for some, a permanent base in Bali. These dreams may quickly become plans and reality. But to realize these plans successfully you need to ask yourself if you have enough knowledge about the Indonesian property law and rules. How about the tax rules, visa rules, property laws concerning owning a property? There are many questions and finding the right answers is important to avoid that your tropical dream does not become your tropical nightmare.
On this page of our website we would like to introduce to you some of the laws that apply to foreigners who buy or rent property in Bali, Indonesia.
Foreigners are not allowed to own property in Indonesia. You can discuss forever but the fact is, that it is not allowed by law and there is you can change about that fact. However since 1996 it is allowed for foreigners to lease properties for periods of 25 or 30 years with extensions for another 25 or 30 years, (depending on the conditions are in the lease contract). And there are other legal ways to obtain property. You can use constructions in which a nominee is involved, this nominee has to be an Indonesian citizen.
So first you may have to choose in what way you want to purchase a property, lease or freehold. Many times however, this choice is already made for you by the way the seller is offering his property on the market. Sellers can offer their properties with a freehold title or with a lease contract. We shall give an explanation about these two options.
Until now it is prohibited for foreigners to own property in Indonesia, as all property, land or buildings, are to be registered in the name of an Indonesian citizen.
With a leasehold, you lease the land from the landlord for a certain period. In our leasehold listings, you will find the date/year mentioned when this lease is ending.
During this lease period, you are allowed to make use of the land. If there is already a villa on the land, then you may live in the villa and in case it is empty land, then it is possible to build a villa on it, following the construction regulations (IMB).
The moment, the lease has ended, the land will return to the landlord. However, often is in the lease agreement stated that there is an option to extend the lease again for another … years. In that case, you will have the first option to extend the lease. A question we often receive is how much such extension will cost. Unfortunately, we are not able to tell you this as the extension costs will be the market price valid, the moment you start negotiating with the landlord. In general, this will be in the last year of the current lease.
In most cases, you extend the lease for the land and you only pay for the land. Sometimes you have to pay for the land + villa. This will be stated in the lease agreement.
A leasehold you pay upfront. It is not possible to pay this per month or year. The full amount needs to be paid in advance.
Might you decide to sell your leasehold property after a couple of years, then this is possible. The next buyer will take over your current lease agreement. The conditions remain the same, only the name will be changed. The original lease agreement is the master lease and the new ones is an over contract.
With a freehold property, you buy the property. Contrary to leasehold, you don’t have to pay for the land again in the future. You buy the land and it is yours. However, foreigners are not allowed to have real estate on their own name. Therefore, you shall have to make use of a so-called nominee.
A nominee is someone with an Indonesian ID. The land certificate will be becoming on the name of this nominee so it looks for the Indonesian government that this land belongs to an Indonesian citizen.
It is important to maintain your relationship with your nominee. The moment you intend to resell your property, the nominee also needs to appear in front of the notary to have his/her name removed from the land certificate.
Please note, we don’t recommend this way of obtaining a property. In fact, it is illegal.
Buying freehold is interesting for Indonesian citizens or mixed couples of which one part is having an Indonesian ID.
Is it never possible to buy a freehold property for a foreigner? No, there are some exceptions. Below we will mention these exceptions.
It is possible to change your freehold ownership title into a Hak Pakai title. In this way, you are “leasing back” your own land. These lease terms are 30 + 20 + 30 years. As you already bought your land, you don’t need to pay for these lease extensions. You only will pay an administration fee.
There are some conditions to change your freehold title into a hak pakai title.
In case you meet these criteria, then it is possible to change your ownership title. A notary can assist in this.
The notary will make additional costs for this to arrange this and this will be charged on top of the notary fee.
Hak Pakai is only for residential properties but in case you wish to have a commercial property, then you can change your freehold ownership title into a HGB (Hak Guna Bangunan) title.
In this case you can establish a PT/PMA company. In this way you can run a commercial property.
Minimum investment to start a PMA is IDR 15.000.000.000.
The PMA can be foreign owned, having at least 2 foreign owners.
We recommend to contact a specialist to assist you to start up a PT/PMA company.
One of such a specialist is Saba Advisors in Sanur. They can help you further in the whole process by starting up a PMA. They have a legal team who can assist you in doing this and giving you the latest exact information.
We would like to add one more “freehold” title, the Strata title. This title you will not see often in Bali but mainly in the big cities where they have a lot of apartment buildings.
A simple definition of a strata title is the following:
Strata title is a system for owning units and townhouses, which generally have a combination of private residences as well as communal spaces. When you buy into a strata plan you buy a “lot”, which may include the main unit area and possibly a balcony, garage or even storage area.
A developer will buy the land freehold. The title will be changed into a HGB title. The developer build apartments on the land and split up these apartments in units with the strata title.
Foreigner can buy these units and can get in this way a “freehold” title.
If you buy land to build your own villa, again some matters have to be taken care of, in which you need the legal help of a notary.
If the objective is to build a villa on this plot of land the notary has to check at the land office (Kantor Pertanahan) if this is permissible. In other words if the land applies correctly to the zoning law. The land has to have the aspect of “residential” so an application for a building permit is possible. This is part of the Due Diligence is critical and you may need to make this clear to the notary. You are of course free to use the land as agriculture land in that case the land can stay with the zoning title “pertanian”.
If the land is zoned “greenbelt” ( jalur hijau) then you are not allowed to build on that land anyway. We do not recommend bribing officials to get a building permit, although it has been done many times.
If the land meets up to all the legal conditions for building, you can apply for a building permit, called an “IMB”. Do not be mistaken and think this can be done quickly. This is better to be done by a person/specialist who has done this many times before so it can go smoothly. Your building permit application goes with architectural building drawings and estimation of building costs to calculate the construction taxes.
We advise you to consult with acknowledged and legitimate building/construction companies who can assist you through the whole process of applying for a building permit and constructing your dream villa.
If you have more questions, please feel free to send us an email.