There is only one way for foreigners to securely own property in Indonesia outright, instead of leasing real estate for a certain period of time:
By setting up an Indonesian legal entity- a PT PMA.
The ownership title of the property is called Hak Guna Bangunan (HGB). The Right to Build and Right to Use(Hak Pakai) titles provide you with clear legal grounding.
A non-Indonesian citizen cannot own land in Indonesia. However, a foreigner can acquire a leasehold title (Hak Sewa) to a land and building for a defined period of time. This title can be held in your own personal name and is 100% legal and protected by the Indonesian law.
Hak Sewa or the leasehold title gives the holder the right of use for an empty plot of land or the building(s) on someone else’s land for a fixed period of time. A Leasehold Right title can be granted over land currently held under a Freehold title (Hak Milik), Right to Build title (HGB) or Right to Use title (Hak Pakai). Indonesian individuals, Indonesian legal entities and foreign individuals and legal entities may acquire Leasehold (Hak Sewa) properties. The period of lease is generally between 1 to 25 years and usually there is an option to extend the lease, which is specified in the agreement between the land owner (Lessor) and the who rents the property (Lessee)
Hak Sewa cannot be used in the form of a mortgage, nor can it be registered with the National Land Agency. Subject to the conditions of a lease contract (lease deed), a foreigner may lease an empty plot of land, build permanent buildings on the land and resell the remaining balance of the lease term to any third party by way of a sub-lease or transfer of Leasehold Right.
Commercial leases of office space, factory buildings, restaurants, hotels, shops and the lease of residential premises are all examples of Hak Sewa titles. Residential properties can include apartments, condominiums, villas and houses.
Hak Milik or Freehold is the strongest form of land title ownership in Indonesia. Only individuals of Indonesian Nationality can own land under the Hak Milik title. Consequently, neither limited liability companies (PT/Perusahaan Terbatas) nor foreign individuals may obtain land with a Hak Milik title. Subject to zoning restrictions, the Hak Milik title owner can use the land for any purpose, although it does not entitle the owner to exploit the natural resources found on or under the land. The title has no limit and may be sold, gifted, exchanged, handed down by a will and may also be used in the form of a mortgage.
Foreigners may, however, acquire land under a Hak Milik title in another form of entitlement called Hak Pakai or Right of use.
Hak Guna Bangunan (The right to build) or HGB title allows the holder to construct and own buildings or other structures on state-owned land (Tanah Milik Negara), freehold land (Hak Milik) and HPL (Hak Pengelolaan) land. This is the most common title for residential, commercial and industrial properties. An HGB title can be owned by individuals of Indonesian Nationality, Indonesian legal entities, including Foreign Capital Investment Companies (Penanaman Modal Asing/PMA), or Domestic Capital Investment Companies (Penanaman Modal Dalam Negeri/PMDN). Thus, any legal entity such as limited liability companies (Perusahaan Terbatas/PT) which are established under Indonesian Law, with domicile in Indonesia, may obtain a property with HGB title. However, the HGB title is not available for foreign individuals.
The title is granted for an initial period of up to 30 years and can generally be extended for an additional period of 20 years. Subsequent extensions are at the discretion of the state and may be renewed for another 30 years. An approved capital investment company (i.e., PMA or PMDN company), may obtain HGB rights for a period of 80 years (i.e., 30-year initial term, plus 20 year extension term, plus 30 year renewal term).
HGB title over Freehold (Hak Milik) land is valid for a period of 30 years only. Any extensions beyond 30 years would be subject to a new agreement with the landowner and registration of a new HGB/Right to Build title over the privately-owned land.
An HGB/Right to Build title can be sold, gifted, exchanged or handed down and/or encumbered by a mortgage.
Hak Pakai or the Right of Use is a title over Freehold land that allows the holder to use the land, including (subject to permitting requirements) the right to construct buildings. A Hak Pakai title may be held by foreign individuals and foreign representative offices as well as Indonesian citizens and legal entities established under Indonesian law. For foreigners to acquire a Hak Pakai title, they must be a resident or domiciled in Indonesia and therefore must hold a limited stay permit (KITAS) or a permanent stay permit (KITAP).
According to the Government Regulation (PP) no. 103 Year 2015, the term of granting rights to foreigners is specified to having one single property with a maximum land size of 3000 m2. Foreigners can acquire usage rights for 30 years. If the period has expired, it can be extended for another 20 years, then after a span of 50 years, the foreign national may renew his usage rights for a period of 30 years. In total, the given Right of Use period can reach 80 years.
Under current laws, a Hak Pakai title is the only registered form of entitlement over land that can be granted to a foreign individual which can be evidenced by a land certificate reflecting the name of the foreigner and the term on the certificate which serves as formal evidence of this form of ownership right. In accordance with Indonesian law, this title can be sold, gifted, exchanged and/or passed down, unless the deed of conveyance specifies otherwise, but under a Hak Milik title, it cannot be used in the form of a mortgage.
For a Freehold property transaction (Hak Milik)
The buyer: Land and building acquisition duty (BPHTB)
= 5% of NJOP value (government assessment)
The seller: PPh income tax = 2.5% of NJOP (government assessment)
For a Leasehold property transaction (Hak Sewa)
The buyer: no Tax implications
The seller: final income tax of 10% (Indonesian nationals or KITAS / KITAP holders) and
20% (foreigners without KITAS / KITAP)
Yes, the safest way for a foreign national to invest in property in Bali is to do it through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) certificate. A PT PMA is a foreign limited liability company in Indonesia.
A foreign company is recognized by the Indonesian government as a legal entity, the foreign investors can purchase either of the two types of land titles, Right to Build (Hak Guna Bangunan), that is valid for 30 years and can be extended for 20 years and another 30 years, and/or Right to Use (Hak Guna Usaha), which is valid for 25 years and can be extended for 25 years and a further extension of 35 years can be granted.
A Pondok Wisata is commercial license to legally rent out a villa or homestay in the allocated tourism zoning. It is the operational license that consists or several other licenses required to process. The purpose of the building permit has to be classified as “Peruntukan Pondok Wisata” (for Pondok Wisata) to operate villas as vacation rentals commercially. This license covers up to 5 bedrooms. For anything bigger than that, it would require more than one Pondok Wisata license of a hotel melati or hotel bintang license for large scale hotel operations.
This License can only be issued in the name of an Indonesian individual, or managed by a PT Company with scope for the business field in villa management.
The Pondok Wisata licence is issued with a validity duration of 5 years which can be extended. It is required to file taxes with the local villa tax number (NPWPD) of the property. Even if the property does not generate any income, you still need to file the appropriate taxation declaration.
Indonesian nationals can apply for the license without setting up a business entity.
Foreigners are required to set up a business (PT PMA) in order to apply for a Pondok Wisata under the company name or set up a management agreement with a local PT or a local individual.
Foreigners in Indonesia are required to set up a business (PT PMA) in order to obtain a Pondok Wisata license.
To process the Pondok Wisata license there are 5 documents which need to be submitted by the Owner of the Villa:
1. Document of UKL – UPL: (Environmental Management and Environmental Monitoring Effort / Management System and Monitoring for Environment)
2. IMB with purpose for Pondok Wisata
3. SITU / HO: (Disruption Dispensation Permit)
4. Tanda Daftar Perusahaan (Business License)
5. NPWPD Number (Local Tax Number)
As a rule of thumb, the value of a leasehold land is approximately one percent per year per square meter or per are (100 m2).
If the freehold (Hak Milik) value of a plot of land measuring 100 m2 is IDR 1 billion, then the value to lease that land is approximately IDR 10 million per year (1% per year) of the lease duration.
As a result of the property boom in Bali and other Indonesian islands, the land and building department has implemented some regional regulations.
The times when one could build on any available land are over and things are properly regulated now, in most of the regions in Bali.
Regional and Spatial Planning (RTRW) regulations have a legal duration of 20 years. The recent RTRW regulations of Badung have been ratified to replace the older version ratified back in 1995. Its effective period is from 2013 until 2033. As a result of the new regulations, it is important to consider the following points:
– Check the zoning / ITR (Ijin Tata Ruang) before buying land for any project
– Check if the zoning will allow different types of building permits & licenses (IMB – Izin Mendirikan Bangunan) for either commercial or residential purposes
Of the various zoning types, there are 4 primary types of zoning that will pertain to most purchases:
1) Government owned land
2) Residential zoning
3) Commercial & tourism zoning
4) Agricultural zoning (green zone)
5) Government owned land
There is government owned land everywhere and it is restricted to individual investors only. They include beaches, natural reserves, forests, and so on.
6) Residential zoning
The residential zoning, as the name implies, is granted for residential properties such as houses or villas as a residence only. It is possible to apply for different building licenses suitable for a house, villa, apartment (or rumah kost), and even some commercial licenses that are permitted within residentially zoned areas.
7) Commercial & tourism zoning
This zoning is granted for any commercial purpose, which includes hotels, resorts, condotels, apartments, entertainment parks, as well as any residential properties. It is possible to apply for a commercial license and for a Pondok Wisata, which allows for holiday rental.
8) Agricultural zoning (green zone)
Agricultural is only for farming. Residential or commercial buildings are strictly prohibited. No building permits will be issued for houses, villas, and so on.
Green School in Mengwi: https://www.greenschool.org
Montessori School in Canggu: http://www.montessoribali.com
Canggu Community School in Canggu: http://www.ccsbali.com/
Bali Island School in Sanur: http://baliinternationalschool.com
Australian Independent School in Denpasar: http://www.ais-indonesia.com/
Sunrise School in Kerobokan: http://www.sunriseschoolbali.com/index.html
LFB – Lycée Français Bali in Umalas – Kerobokan: http://www.lfbali.com
Sanur Independent School in Sanur: http://www.sisbali.sch.id
Pelangi School in Ubud: http://www.pelangischoolbali.com
Here you find a short description of the most common areas to live on the island:
Canggu has grown wildly in popularity over the past years. From a sleepy local village it has developed to Bali’s most sought after hot spot, known for one of the best surf breaks, breath-taking sunsets, classy boutiques and a vast array of healthy and hip cafes, bars and restaurants.
Canggu-Berawa has become a favourite location for Expats with children, due to the Canggu International School and the recreation club being close by. Pererenan, Seseh and Cemagi are northern suburbs, favoured by “Green School families” because of their vicinity to Ubud (30-40 minutes drive) and the ocean.
Set inland, Umalas is home to a laid back European and Australian creative, entrepreneurial crowd. It is conveniently and quietly located between Canggu and Seminyak, and though rather residential it boosts some hidden gem eateries with gorgeous rice field views. There is a large French community in Umalas due to it’s French International School.
Seminyak is one of Bali’s all-time favourite tourist spots. With a wide selection of private villas and resorts, boutiques, shopping, luxury beach clubs, a vibrant night life and trendy bars, it is home to Bali’s best restaurants and funky cafes. Seminyak has it all – and therefore attracts a sophisticated upmarket crowd who loves living the good life. With hundreds of luxury villas, Seminyak has the highest occupancy rate on the island and therefor is the perfect place to invest in a holiday home that can generate above average returns.
Also know as the “Beverly Hills” of Bali, or the “Bukit” (hill), Uluwatu is home to many exclusive event style, cliff top villas that are used for weddings and events or high-end residencies, guaranteeing absolute privacy. This area has gorgeous white sand beaches, turquoise blue water and stunning sunsets. Uluwatu is known for its world class surf spots such as Bingin, Padang Padang, Balangan and Suluban. The Bukit features stunning 5 star beach and cliff top clubs, perfect to sip Champagne with the best views on the island.
The cultural and spiritual heart of Bali, known for its lush greenery and UNESCO world heritage rice terraces, as seen in the movie Eat Pray and Love. Ubud has many luxurious villas and a range of hotels with the most unique swimming pools and surroundings. It is home to the famous Sacred Monkey Forest, many art and craft markets, offers cultural performances and close by waterfalls. It is a paradise all of its own. The variety of restaurants and cafes in Ubud is second to none! Many families move to Ubud, to have their children experience the famous Green School for its different approach to education.
Starting just north of Canggu, Tabanan Regency covers a large portion of the inland and southwest coast. The majority of the area consists of rice fields and plantations, making this region particularly beautiful. It is also home to picturesque black sand beaches, mountains, waterfalls and flowing lakes. Some of the largest villas and ocean front properties can be found here. If you are looking for land banking and capital gain or a peaceful residence surrounded by nature, Tabanan is one of the best areas to invest in.
Home to many 5 star hotels and villas, Nusa Dua features gorgeous white sand beaches. You can feast at the many options of restaurants most of which are housed within resorts. The area features some very exclusive cliff front properties and villas with stunning ocean views.
With safe, sheltered beaches for swimming and a much slower pace than the Kuta-Seminyak area, Sanur offers a more village feel, making it one of the preferred areas of Bali for families and a more mature crowd. Bali International School (BIS) is a great option for expatriates with children, living in Sanur. The beaches are lined by colourful wooden fishing boats and the long path way along the beach is popular for cycling and relaxed walks.
So you have been searching for your dream home on the island and simply can’t find the perfect match?
With the increasing amount of families relocating to Bali, the demand for family homes is bigger than ever and there are simply not enough Villas that can cater to family needs, especially with young children.
The process of building in Bali can be very challenging, quite intense and frustrating when dealing with local architects and contractors. It’s a Jungle out there!
The Bali Real Estate Consultants would love to take you by the hand and guide you through the entire process.
From finding the most suitable plot of land until the handover of the keys to your new home in Bali, we’ve got you covered!
We work with the most reputable partners in various fields such as:
• Interior Design
• Building services / Contractors
• Legal Advisory / Creation of legal entities
• Villa Management
Please contact us for a free consultation: info(at)balirec.com or call: +62(0)81930505055
1. Get your property documents sorted – to safe you time and guarantee a smooth and hassle-free sale in the future, make sure that all property related documents are complete. You can contact your trusted real estate agent in Bali, a public notary and take a look at our property documents checklist. You may also inquire for a property pre-due diligence.
Scan and upload – Once you have made sure that all is complete, you can scan all documents and upload them on a cloud storage space together with the photographs of your property.
2. Chose your trusted property agent/s in Bali
– Be careful, there are many uncertified agents on the island with little to no knowledge and experience. Pick not more than a handful of trustworthy agencies to enlist your property with or go with an exclusive listing agreement for a certain period of time. Always ask the agency about added value services for exclusivity.
The Bali Real Estate Consultants offer a variety of VIP marketing services, for exclusive property listings, free of charge:
• Professional property appraisal
• Special tailored marketing strategies
• Social media advertising
• Professional property photography
• Matterport 3D virtual property tour
• aerial video and photography
• commercial video production
3. Get an appraisal – Ask your agent to view the property and make an appraisal to determine the market value of your property. Pricing your property correctly will speed up the selling process.
4. Submit scanned property documents – Now simply send the link to your cloud storage folder to your agent/s to download the document scans and professional real estate photographs.
5. Sign a listing agreement with your trusted real estate agency
6. Viewings: Set a point of contact for viewings – When you are not in Bali or unavailable to provide access to your property, inform your agent about the person in charge to organize inspections with i.e. a staff member or a villa manager.
Make sure the property is available and representable for viewings with potential buyers –
Inform your tenants if your villa is rented out and reconfirm the viewing time with them again on the day of the appointment. Ask your staff to clean the villa and set everything up nicely i.e. sunchairs with mattresses and pillows, flowers, cold water or a welcome drink. The first impression counts!
7. Offers and negotiations – reply in a timely manner to submitted offers and inform your agent should you like to make a counter offer. Keep in mind, the first offer from a potential buyer is usually not the final one.
8. Sign a binding “Sale and Purchase” agreement to clarify the terms and conditions of the sale
9. Submit your original property documents to the notary, only when you have seen a proof of transfer, from the buyer, to the notary escrow account and a receipt of the deposit, issued by the Notary PPAT.
10. Sign the final “Sale and Purchase” Deed (Lease transfer deed) in front of the notary. Check with your bank and make sure you receive the balance transfer. Once the final amount is credited to your bank account, you can inform your agent and make an appointment for the handover of the property. Make sure all bills and staff salaries are paid up to date. If you consider relocating within Bali and would like to rent or buy a different property, please inform your agent in advance.
1. Contact your trusted real estate agency in Bali and submit your property requirements
2. Select your favorite properties and make an appointment for viewings
3. Submit a Signed ‘Offer to Purchase’ Document for your dream property to initiate the negotiation
4. Choose a Notary/ PPAT – after acceptance of your offer or ask your agent to make a recommendation
5. Sign a binding “Sale and Purchase” agreement to clarify the terms and conditions
6. Transfer a deposit to the notary escrow account (usually 10% of the purchase price) to secure your investment. With the receipt of the the deposit, the property will be taken off the market and restricted from selling to any third party.
7. Due Diligence – After your deposit has been received, the notary will start the process of due diligence which takes in average 14-30 days, depending on the property ownership title and the location of the property.
8. Completion of Legal Due Diligence – Once the due diligence is satisfactory, you can make an appointment at the notary to sign the final sale and purchase deed (Lease transfer deed). In case of a non-satisfactory due diligence, the notary will refund 100% of your deposit.
9. Sign and process balance payment – Once you have signed the final “Sale and Purchase” deed (lease transfer deed), with the seller, in front of the notary, you can transfer the balance payment to the nominated bank account of the seller.
10. Take Possession of the Property – once the final payment has been received by the seller, you will meet at the property for a handover.
Now make yourself feel at home!
Please contact one of our Bali Real Estate Consultants, should you require any services in regards to: Property management, renovation, contractual works, interior design and architecture by email info(at)balirec.com or call +6281930505055
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