Is a foreigner allowed to buy a property in Indonesia? Not all foreigners are permitted to purchase domestic property. There are several conditions that must be met. These are stated in the Government Regulation (PP) No. 103 issued in December 2015 for foreign property ownership. In this article below we explain you the requirements that foreigners must fulfill.
These conditions are apply for Property Ownership by Foreigners
- Foreigner can only purchase properties with a Hak Pakai (The Right to Use), Leasehold or HGB (Right to Build) certificate titles.
- He/She need to have a valid KITAS visa (Temporary Residency Permit)
- Only the purchase of villas, land, houses or apartments is permitted
That doesn’t mean that a foreign investors can’t consider to purchase a land in Bali. Either the foreigner need to get a native Balinese to act as nominee freeholder they need to found a foreign investment company to hold the actual deeps to the property.
We list you some various ways how foreigners can purchase a property in Bali under their name.
Leasehold – HAK SEWA
Also referred as a Long Term Rent. The property can be rented for an initial period of around 25 years and can then be extended up to a total period of 70 years. Although the land title is not under the foreigner’s name and remains under the ownership of the original owner. The owner’s title of Hak Milik (Right to Own or Freehold) will be legally transferred to the foreigner under the Hak Sewa title (Right to Lease).
Under the initial Lease Contract, the property can be sub-leased (re-rented) to other people. One of the ways many foreigners turn their leasehold property into a lucrative investment or second income. The advantage of a lease is that the focus is immediate on the cash flow and a the passive income, free from the burden of watching market conditions as the actual value of the property has no huge concern. in a high market when everyone is purchasing, you can benefit of short-term holiday rentals and in a low market there will be an increased number of long-term renters.
In case the leasehold is will not be renewed once it the term expires, all the rights go back to the original owner and it the HAK SEWA becomes a freehold Hak Milik property again.
Foreign Owned Company (PT PMA)
A PT PMA )Foreign Owned Company) is a foreign owned limited liability company registered in Indonesia. With a PT PMA, foreigners have the possibility, legaly to acquire the Right To Build (Hak Guna Bangunan/ HGB) License and a Right To Use (Hak Pakai) Title under a Freehold Title.
Right to Build (HGB) may only be owned by Indonesian citizens and companies established under Indonesian law and registered in Indonesia. According to the regulations in Indonesia this makes PT PMA holder eligible to acquire Right to Build (HGB).
We have understand that technically foreign investment companies don’t actually own the land they’re investing in., but the license gives them the right to use the land in a certain way for a predefined amount of time (First period no longer than 25 years). after which the company will need to renew the license in order to maintain control over the building in question.
This way is technically not the same thing as actually buying a property in Bali, but it is the closest that a foreign investor can get to actually owning land or buying a villa in Bali. The renewal of the license should be easy as long as the land is being used for the purpose which the original license was granted (e.g. development of a Villa Complex to rent them out to tourists). In this case should be no issues to continuously extend the company’s right of use.
Buying a property using the “Nominee System”
Many foreign investors believe they have to use local nominees, since foreign nationals (or even local companies) cannot acquire HAK MILIK (land ownership). For foreign investors it common to acquire land using a local nominee which gives the foreigner essentially NO protection for their investment.
Some foreigners believe to have found a 100% trustworthy local person and it’s the easy and better to do it the nominee way. Even you have all the trust and the local person tells you their best intensions, this investment is built on shaky ground. The worst case scenario you lose your entire investment. Unless you are ready to accept this, don’t go for that option.
Buying a Property in Bali - Resume
Whichever way you might choose to purchase a property in Bali. Our Team from Bali Real Estate Consultants will guide you from day one through the obstacles and ensures that your transaction process will be as smooth as possible.
Our Team will help you understand and assist you thoroughly selecting the right choice of the property title you are purchasing into. Whether it is a Freehold, Leasehold or right to Use. Our professional team will guide investors through every detail, to ensure that your Bali dream home becomes reality.