Indonesia is a dreamland for foreigners. Thanks to its tropical climate, its paradise beaches, its聽unique fauna and flora, and its thousands of islands to visit, the country attracts many聽expatriates. Estimates suggest that there are about 350,000 expatriates throughout the聽country, but most of them are located around Jakarta. Bali, the island of the Gods, is another聽Indonesian haven that is very popular with expatriates. It must be said that the lifestyle in Bali is聽quite pleasant, even without taking into account the breathtaking beauty of the island.聽
In short, there are many reasons for an expatriate to buy a small piece of land, a house, or an聽apartment in Bali. However, the vast majority of them prefer to rent a residence rather than聽buy a property there. The reason behind this lies in the Indonesian legislation regarding land聽ownership. If it is possible today for a foreigner to enjoy a property in Bali or elsewhere in聽Indonesia, it remains, in most cases, a very complicated process.
For many years, local legislation prohibited foreigners from buying land or buildings in聽Indonesia. But by the end of the 90s, the situation somehow changed with the enactment of聽new laws that allowed expatriates to buy a house or an apartment. However, this is only limited聽to properties where the land on which the purchased building is located is not part of the sale聽contract.
New laws came into force in 2010 and 2015, this time allowing expatriates to lease land for a聽period not exceeding 80 years. However, these laws remain unclear and are subject to many聽interpretations. Moreover, the conditions attached to the granting of a lease to a foreigner are聽rather strict, not to mention that the administrative procedures are also long and complex.
Bear in mind that the law governing property in Indonesia is Law Number 5 of 1960. This law聽clearly states that only Indonesian citizens can acquire a Hak Milik, the local term for freehold聽land title. The severity of this prohibition is such that paragraph 5 of this law states that even聽Indonesian citizens who hold another citizenship are treated the same as foreigners and must聽renounce their other citizenship in order to become property owners in their own country.
What are the options and conditions for buying real estate in聽Bali?
Even if, as we explained before, buying property in Bali can be complicated for foreigners, you聽can still enjoy property on the island of the Gods without owning it.
First, be aware that Indonesia has two types of property rights, namely the "right to own" (Hak聽Milik), which we have already mentioned, and the "right to build" (Hak Guna Bangunan). Like聽the Hak Milik, the Hak Guna Bangunan is prohibited to foreigners.
As of 2015, expatriates residing in Indonesia are allowed to rent land or a residence on a long-term basis but subject to certain conditions. The government has changed the legislation in this聽regard in order to further encourage foreign investment and promote national growth.
Therefore, while the Hak Milik remains inaccessible to those who do not have Balinese聽citizenship, two other legal terms have been added to the existing legislation, the Hak Guna聽Bangunan and the Hak Pakai. Here are the meanings of these two terms:
- Hak Guna Bangunan allows you to build and enjoy your property for up to 80 years.
- Hak Pakai gives you the right to buy and use your property for 25 years, with an option to renewup to 70 years, to live in it, or to turn it into a rental property, either through leasing or subleasing. As the lease is long-term, you can use it as an office, transfer it to a family member聽or sell it to an Indonesian citizen. However, this type of lease requires an initial investment聽which includes all the rents, payable in advance.
Under the new law, expatriates can purchase land or a house under the Right of Use category聽for a period not exceeding 30 years. After the expiration of the initial period, it is possible to聽renew the right of use contract twice, the first time for the same period of 30 years and the聽second time for 20 years. If you opt for this solution, you will be renting a property in Bali for a聽maximum of 80 years.
There are also other options for those who wish to acquire land in Indonesia. For example, you聽can choose to appoint a local representative to act as your partner in your land transactions.聽This can be an interesting solution, as only Indonesian citizens can legally own property in聽Indonesia. However, such partnerships can quickly turn against the expatriate. There are many聽cases where the Indonesian partner incurred debts leading to the seizure of the respective聽asset. There have also been reports of outright extortion.
Another way for an expatriate to become a property owner in Bali is to set up a company in聽Indonesia. As a foreigner, you will need to set up a company called PT PMA. This is, simply put,聽a limited liability company founded by foreign capital. The requirements for establishing a PT聽PMA in Bali are as follows:
- The company must have a minimum capital of IDR 10 billion, with paid-up capital of at least 25%
- of this amount.
- The company's shares must be owned by a minimum of two persons or legal entities.
- Founders must first sign a deed of establishment before a notary. The deed of establishment聽must contain all the required identity information about the founders, but also about the聽members of the board of directors and the shareholders, whether they are individuals or聽companies.
Such a procedure may seem cumbersome at first glance, but it is a safer solution than聽partnering with a local citizen. In this particular case, the property in question will be placed聽under the company's ownership.
The types of land available to foreigners through the acquisition by a PT PMA company are,聽however, limited to certain categories. It is therefore recommended that you find out what聽type of classification the local legislation places the land you are interested in before you聽proceed.
Foreigners married in Indonesia to Indonesian citizens may also be eligible to own property in聽Indonesia. It is important for you to know that, in any case, there are strict conditions attached to the purchase of real estate by a foreigner in this country. For example, you will need to be a聽holder of a KITAS (a limited residence permit in Indonesia), and that you can only purchase聽individual houses or apartments.
Moreover, the Indonesian government has established a minimum amount of local property聽value that can be purchased by expatriates. This minimum amount will vary depending on the聽region and different geographical areas. In the Jakarta area, for instance, the value of your聽property cannot be less than IDR 10 billion (673,000 USD), while in Bali, the minimum is 3 billion聽(202,000 USD).
Real estate prices in Bali
As far as real estate costs in Bali are concerned, be financially savvy, as price variations can be聽extreme. For a high-end beachfront villa in a tourist area, be prepared to pay almost the same聽price as in western countries.聽Before the COVID-19 pandemic, a 2-bedroom villa on a 250 m 2 plot in Seminyak or Canggu聽would cost around 600,000 USD, compared to 350,000 USD in Jimbaran or Nusa Dua and a little聽less in Denpasar, around 300,000 USD.
Following the COVID-19 crisis in Indonesia, real estate prices in Bali have dropped slightly, and聽several companies have made efforts to attract potential investors. Some real estate聽developers, such as Realtek Bali, are now offering villas at USD 95,000 across the island.
Who should you turn to when buying property in Bali?
To navigate the complex and ever-changing real estate laws, it is advisable to hire a reliable real聽estate agent.
Some of the most reputable ones include:
- Kibarer
- Emerhub
- Ray White
- Elite Havens
These agents have extensive listings of properties for sale or rent in Bali and will assist you with聽the legal aspects. They will make sure that the property is legally fit to be sold or rented. This聽last point is extremely important, as, in Bali, real estate is often family property, being inherited聽and shared between different family members. You also need to make sure that the person聽who is negotiating the transaction has the legal right to do so to avoid any problems in the聽future.
Although a real estate agency is a paid option, you are assured of being protected during all聽stages of the transaction.
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
