When it comes to acquiring property in Bali, foreigners often explore various options, including leasing land in Indonesia. This guide will walk you through the nuances of land ownership and investment in Bali. We’ll discuss the right-to-use land titles (Hak Pakai), Hak Guna Bangunan, and Hak Sewa untuk Bangunan, shedding light on the legal and secure avenues available for investors.
Leasing Land in Bali: An Overview
Foreigners keen on owning a piece of paradise in Bali need to be aware that the Indonesian government does not allow them to own freehold titles (Hak Milik) of land. To acquire property, they have two primary options: either marry an Indonesian citizen with a property separation or prenuptial agreement or opt for a leasehold arrangement. In this guide, we will delve into the legislation and regulations that govern leasehold land in Indonesia.
This is based on Part 3 Article 21 Paragraph 1 of the Agrarian Law No 5 of 1960 which says “Only Indonesian citizens can have property rights (Hak Milik)”
The Right-To-Use Land Titles: Hak Pakai
Foreign investors can legally hold leasehold titles under Hak Pakai, a government land title. This arrangement allows individuals to lease land owned by the Indonesia for a predetermined period, typically 30 years, with options for renewal. Hak Pakai provides full property rights, including the ability to buy, sell, make capital gains, and pass on the property to heirs. However, it’s crucial to note that Hak Pakai must be registered with the land office, and private landowners cannot grant Hak Pakai titles unless they surrender control to the owner for the duration of the title.
Investor-Friendly Hak Guna Bangunan (HGB)
Hak Guna Bangunan, similar to Hak Pakai, is also a land title that permits land use for up to 30 years, extendable to a maximum of 90 years. It’s primarily used by companies for business operations. To obtain land under HGB, foreigners need to create an investment company known as a PMA (Penanaman Modal Asing). However, this path can introduce complications in terms of financial deposits, legal company ownership, and taxation. As such, many investors find Hak Pakai a more straightforward option for land ownership.
This is based on Part 5 Article 36 Paragraph 1b of the Agrarian Law No 5 of 1960 “Those who can have building use rights are a. Indonesian citizens; b. legal entities established according to Indonesian law and domiciled in Indonesia”. Following 1b regulation, foreginers need to establish a PT PMA.
Exploring Hak Sewa untuk Bangunan: Lease for Building Title
Hak Sewa untuk Bangunan, a secondary right, allows individuals or legal entities to lease land from someone with primary rights, such as Hak Milik. This title is established under Indonesian law and is a viable option when leasing land from private landowners. It is essential to conduct thorough due diligence, including verifying land ownership, right to lease, existing debts, zoning regulations, and legal access. When preparing the necessary documents, agreements on price, tax responsibilities, and lease security should be addressed. Secure legal representation to safeguard your interests and ensure a smooth transaction.
Regulations and Periods for Leasehold Land Titles
The Agrarian Law sets the foundation for land ownership, while regulations define the specific conditions and limitations of land titles. These regulations may vary by location and may change over time. The maximum period for a Hak Pakai title is generally 25 years, with potential extensions and renewals, which can result in a total duration of 90 years. It’s essential to seek real estate agency in Bali or professional advice and maintain a comprehensive understanding of the terms and conditions associated with your leasehold title.
Investing in land in Bali can be a rewarding endeavor, but it’s crucial to navigate the legal landscape with care and diligence. By choosing the right land title and following the necessary legal procedures, you can secure your dream property in this tropical paradise while protecting your investment.
Indonesian Law
The Indonesian Agrarian Law is a comprehensive legal framework that governs land ownership and land-related issues in Indonesia. The law covers various land titles, including Hak Milik (freehold), Hak Pakai, Hak Guna Bangunan, and Hak Sewa. Key chapters and articles of this law are essential for understanding land ownership and land titles in Indonesia.
This regulation provides specific guidelines and procedures for foreigners seeking to acquire land titles such as Hak Pakai and Hak Guna Bangunan for residential purposes. It outlines the conditions and restrictions related to foreign ownership of land in Indonesia, emphasizing compliance with the Indonesian Agrarian Law. Detailed information can be found in the relevant articles and chapters of this presidential regulation.
Can foreigners buy properties in Bali?
Understanding the legal laws about properties in Bali is crucial for anyone looking to buy or invest in real estate on the island. Especially for foreigners that are always asking “Can foreigners buy properties in Bali?”. Well here are some key legal aspects to answer that question:
As per information above, foreigners cannot buy owned-right property (Hak Milik) either it is for land or villa in Indonesia, including Bali. Well you may have seen some website or agent saying foreigner can buy properties in Bali. While that may be true, that is more like an alternative. The alternative for a foreigner to buy a property in Bali is through a leasehold agreement which coming in a period of time. The other way is by setting up a foreign-owned company (Penanaman Modal Asing) and you can “buy” the land or villas or property in Bali under The Right to Use (HGB) or Hak Pakai title which is protected by the Law.
Leasehold agreements typically grant a leasehold right for a specified period, usually 25 to 30 years, with an option to extend. While PMA allows foreigners to establish a company in Indonesia and acquire property under the company’s name, subject to certain regulations and restrictions. One thing to note is buying property in Bali via a local nominee is illegal and completely unsafe for foreigners.
Summary
There are two primary types of titles in Bali: Hak Milik (Right of Ownership) and Hak Pakai (Right of Use). But when you’re buying property for commercial use, you will acquire a special title – HGB, Hak Guna Bangunan that lasts, as well, for up to 80 years.
We will provide some general information on local law about owning property in Bali, but please keep in mind that local laws and regulations can change over time. So it’s always a better idea to consult to your real estate agent or lawyer.
- Foreign Ownership: Foreign individuals cannot directly own freehold land in Indonesia, including Bali, except in certain circumstances. However, there are alternatives available, such as long-term leases and forming a foreign-owned company (PMA).
- Leasehold: Foreigners can enter into lease agreements for land and buildings in Bali. Leasehold arrangements typically last for an initial period of 25 to 30 years, with an option to extend for an additional 25 years.
- Foreign-Owned Company (PMA): Foreigners can establish a foreign-owned company (PMA) in Indonesia, which can acquire freehold land. This option involves specific requirements and procedures and usually requires a local nominee structure.
- Nominee Arrangements: While foreign ownership of land is restricted, some foreigners have utilized nominee arrangements, where local individuals hold the property title on behalf of the foreign buyer. However, it is important to note that nominee arrangements are generally considered illegal and can involve significant risks.
- Hak Pakai: The Indonesian government allows foreigners to obtain a “Right to Use” (Hak Pakai) certificate for residential properties. This right grants usage and control over the property for a period of 30 years, extendable for another 20 years.
- Building Ownership: Foreigners can have full ownership of buildings (not the land) on land that is leased or held through a Hak Pakai certificate.
- Zoning and Restrictions: Bali has specific zoning regulations and restrictions that determine the type of property that can be built in different areas. These regulations vary depending on the specific location and intended use of the property.
It’s important to note that laws and regulations can change, so it’s crucial to stay updated with the latest legal requirements and consult with professionals well-versed in Bali’s property laws and regulations.
