Buying property in Bali as a foreigner is possible. Here's how to protect your investment.
Bali is not only a comprehensive travel and holiday destination, but an increasing number of foreigners are also investing in the island by buying property in Bali.
However, foreigners often acquire property in a risky way. It’s common practice for foreign investors to acquire property using a local individual nominee which gives the foreigner essentially no protection over their investment.
In this article, we will show you how to buy property in Bali the safe way – by setting up a foreign-owned company (PT PMA).
Bali property ownership by foreigners
Law 5 of 1960 regulates property and real estate ownership in Indonesia, with three types of rights relevant to this article:
Right to Own (Hak Milik)
Right to Build (Hak Guna Bangunan)
Right to Use (Hak Pakai)
Many foreign investors in Bali think the way to purchase property in Bali is by using an Indonesian citizen (a nominee) to act on their behalf to acquire the Hak Milik certificate.
However, it is a tremendously risky practice as the local nominee can overtake the property and there is not much a foreign buyer can do to protect their investment.
Later in this article, we will share some stories of foreigners who have lost either their money or their right to use land with such a scheme.
How to buy property in Bali safely?
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. With a PT PMA, you will have the right to acquire the Right to Build (Hak Guna Bangunan/ HGB) and Right to Use (Hak Pakai/HP) certificates.
Certificates | Hak Guna Bangunan | Hak Pakai |
Purpose | The right to build | The right to use property |
Certificate validity | Initial valid 30 years + 20 extension + 30 renewal thus the total ownership is 80 years | Initial valid 30 years + 20 extension + 30 renewal thus the total ownership is 80 years |
Essentially both licenses make you the owner of the property. Your family members can inherit them and you can sell the property. If the buyer is an Indonesian citizen they are also able to convert the certificate to a Hak Milik (right to own).
If you wish to hold the property after the 80 years (which would potentially be in the 22nd century by then), you can acquire a new certificate once the old one expires.
Note that you can hold Hak Pakai only if the land already has a building on it and there are limitations for operating a property with a Right to Use (Hak Pakai) certificate as a business. There is also minimum value to the property and it must be located in a touristic, residential, or trading area as you cannot acquire land in Bali in agricultural or greenbelt zones.
Since the purpose of Hak Pakai is acquiring property for personal use, a person can hold only one Hak Pakai (i.e only one property). However, it is possible to acquire several properties with the Right to Build.
If you wish to learn more about PT PMA companies, read our previous article about setting up a foreign company in Indonesia. The process usually takes 2-10 weeks in Bali and our consultants will handle the process completely.
The process of buying property in Bali
To acquire the Right to Build or Right to Use, you will need to:
Submit completed forms to the Indonesian National Land Office (BPN) requesting a certificate over the property, including relevant supporting documents. This is usually done by your representative such as VIVO ASIA.
Provide proof of land payment and the conditions for Hak Guna Bagunan or Hak Pakai are met
Acquire the right to build with the correct building permit (PBG).
The BPN will issue the certificate under your company’s name.
As with setting up a PT PMA, VIVO ASIA’s consultants are here to assist you throughout the entire process. Also, make sure to follow the land due diligence checklist when buying a property in Bali.