Buying Property in Bali as a Foreigner
Can foreigners buy property in Indonesia? As stated in the regulation of foreign property ownership, Government Regulation (PP) No. 103 issued late December 2015, not all foreigners are permitted to purchase domestic property. There are several conditions that must be met, and listed below are some requirements that foreigners must fulfill to be able to buy property in Indonesia:
The following are the conditions required for Property Ownership by Foreigners
- Only purchase property with Hak Pakai (The Right to Use), Leasehold and HGB (Right to Build) certificate titles.
- Have a valid KITAS visa (Temporary Residency Permit)
- Only villas, land, houses and apartments can be purchased
That isn’t to say that a foreign investor can’t think about buying land in Bali. To do so they will either need to get a native Balinese to act as a nominee freeholder, or they will need to form a foreign investment company which will hold the actual deeds to the land in question.
Below are some various ways for foreigners to purchase a property in Bali under their name.
Long Term Rental (Leasehold)
This is a long-term lease contract. Although the land title is not under the foreigner’s name and remains under the ownership of the original owner, the land can be rented for an initial period of around 25 years and can then be extended up to a period of 70 years. After the lease begins, the owner’s title of Hak Milik (Right to Own) will be legally transferred to the foreigner under the Hak Sewa title (Right to Lease).
Under the lease contract the property is able to be sub-leased (rented out to other people). This is how many foreigners turn a leasehold property into a lucrative investment and source of passive income. For most investors, the beauty of a lease is that their focus is immediate cash flow and a passive income, allowing freedom from the burden of watching market conditions as the actual value of the property is of no huge concern. In a low market there will be an increased number of long-term renters, and in a high market when everyone is purchasing, there is still the benefit of short-term holiday rentals.
If the leasehold is not renewed once it expires, all rights go back to the original owner and it becomes a freehold Hak Milik property again.
By setting up a Foreign Owned Company (PT PMA)
PT PMA is a foreign owned limited liability company registered in Indonesia. With the PT PMA, foreigners have the right to acquire the Right To Build (Hak Guna Bangunan/ HGB) License and a Right To Use (Hak Pakai) Title under a Freehold Title.
Based on the regulations in Indonesia, Right to Build (HGB) may only be owned by Indonesian citizens and companies established under Indonesian law and domiciled in Indonesia, thus making a PT PMA holder eligible to acquire Right to Build (HGB)
Technically foreign investment companies don’t actually own the land they’re investing in. Instead the license gives them the right to use the land in a certain way for a predefined amount of time (normally no longer than 25 years), after which the company will need to buy another license in order to maintain control over the building in question.
Whilst this is clearly not the same thing as actually buying land in Bali, it is the closest that a foreign investor can get to actually owning land or buying a villa in Bali. Renewing the license should be easy as long as the land is being used for the purpose which the original license was granted (e.g. building a set of villas with the intention of renting them out to tourists), therefore there shouldn’t be a problem to continuously extend the company’s right of use.
What about buying property in Bali using a nominee system?
Since foreign nationals (or even local companies) cannot acquire hak milik (land ownership) many foreign investors believe they have to use local nominees. It’s common for foreign investors to acquire land using a local nominee which gives the foreigner essentially no protection for their investment.
Sometimes foreign nationals believe that they have found a local person that they can 100% trust and think it’s better or easier to buy land under that person’s name. While you might have all the trust and the local person can have the best intentions, it’s still an investment on shaky ground. Unless you are ready to accept, that in the worst case scenario you lose your entire investment, don’t go for that option.
Buying property in Bali: Summary
Whichever method you choose for buying a property in Bali, Paradise Property can guide you through the process from beginning to end to help make the transaction as easy as possible for you.
Foreigners should also thoroughly understand and carefully select the choice of property title they are buying into. Is it a Freehold, Right of Use or Leasehold? Our professional, acknowledgeable team of agents can help guide investors through every detail, making their dream of owning a property in Bali become a reality.[fbcomments]