How to (legally) buy a house / villa in Bali?

Alexis
Modified on February 1, 2024

Buying a house or a villa in Bali as a foreigner isn't as straightforward as it seems. Here is how you can legally and safely do it.

Can foreigners buy a house/villa in Bali?

The question seems simple, yet the answer is quite complex. 

On paper, it's not possible for a foreigner to acquire real estate in Indonesian territory. The issue mainly revolves around land, as foreigners cannot own land in Indonesia, including Bali. 

In practice, the situation is different, and many foreign owners of houses or villas in Bali with their own land are quite numerous.

Sometimes, they resort to borderline and often dangerous methods to circumvent the law, and sometimes they use legal techniques to purchase their house or villa in Bali. We will discuss both here.

What are the different types of property titles possible in Indonesia?

Before delving into the legal ways of buying real estate in Bali, it's crucial to understand the different types of properties possible in Indonesia, as this determines the acquisition of real estate in Bali for a foreigner.

Full ownership or freehold (Hak Milik)

The property of type "freehold" or Hak Milik is a type of full ownership similar to what is most common in our regions. 

In the case of a house, for example, you own both the land and the house on it indefinitely. You can sell your property to anyone at any time. All property titles are in your name. Upon your death, the real estate goes to your heirs.

Freehold or Hak Milik properties can be acquired ONLY by Indonesian citizens

There are no exceptions.

So, it's a bit like the Holy Grail of property titles, but inaccessible to foreigners in the current state. 

Construction right (Hak Guna Bangunan or HGB)

The Hak Guna Bangunan, often abbreviated as HGB, is perhaps the closest to the classic freehold without being a freehold.

In reality, this type of property title is not designed for individuals but for businesses. As the name suggests, it allows an Indonesian company to own land and build on it for a total of 80 years (30 initial years + 20 years + 30 years).

During this period, the company is the owner of the land and can use it as it wishes, which may include building a villa or selling the land to another company.

The significant advantage of HGB is that it can be acquired by an Indonesian company even if it is owned by foreigners. So, as long as you have a PT/PMA type company, you can own your property.

The disadvantage is that you need to create a PT/PMA, which involves some paperwork and accounting each year. This type of property is mainly used by investors and those who want to commercially exploit their real estate.

Usage right (Hak Pakai)

The Hak Pakai is not the type of property you hear about the most because few people are genuinely concerned.

It is primarily intended for foreigners officially residing in Indonesia (thus holding KITAS/KITAP) who want to acquire their main residence. If you know nothing about Indonesian visas, read this article on the types of visas in Indonesia.

Hak Pakai allows you to "rent the property" for a period of 25 years, extendable up to a total of 70 years.

Throughout the Hak Pakai period, you are the owner of the land/property, and your name is on the property titles. Few properties can be acquired with Hak Pakai, and they are often very expensive, located in tourist/expat areas with a minimum selling price set by the state with not always very clear criteria.

Moreover, you cannot commercially use a property purchased with Hak Pakai, and you can own only one property of this type per married couple. One of the main advantages of Hak Pakai, aside from having your name on the papers, is that the property's value does not decrease as the contract approaches expiration. So you can sell it at the end of its term, whether it's to a local under a Hak Milik or a company under a Hak Guna.

In short, a rather special property title with many limitations. I don't think many people are rushing to Hak Pakai because more often than not, the purchase price isn't very interesting. 

Long-term lease or leasehold (Hak Sewa)

As the name suggests, the long-term lease or leasehold is an agreement between you and the owner over a long period. This option allows you to enjoy real estate in Bali for many years but does not make you an owner.

The significant advantage of leasehold is that you don't need an Indonesian citizen to manipulate property titles, create a company in Indonesia, or even have a KITAS/KITAP. A passport, a bank transfer with Wise, and a few signatures, and you're done.

The contract is between you and the owner only, usually with a notary (or your real estate agent) to legalize everything.

The owner rents you the land/property for up to 25 years, and the lease can be extended up to a total of 80 years.

When you lease real estate in leasehold, the owner remains the owner, but the property title is "marked as leased" during the period. At the end of the lease, if not renewed, the owner regains full property rights.

The main drawback of leasehold is that, of course, you are never the owner of the land. The owner can, for example, refuse to renew a lease when it expires. Another disadvantage of the lease is that its value decreases over time as the end of the lease approaches. Selling a lease that expires in 2 years, for example, is quite challenging.

How to buy a house/villa or land in full ownership type Freehold as a foreigner?

Now that the different types of properties have been discussed, here's how to access the most coveted properties in freehold when you are a foreigner in Indonesia.

Use an Indonesian nominee who will be the official owner of the real estate

Many foreigners have nominees who are Indonesian citizens (nominees) and are on paper the owners of their land, villa, and sometimes even the company.

The technique is, of course, not really legal and is especially very dangerous for you, much more than for your nominee.

Since your nominee is the owner on all property titles, they can quite easily take everything from you overnight if they have malicious intentions. I've heard dozens of horrible stories of foreigners who lost everything in Bali because of dishonest nominees. 

The case of Susi Johnston is one of the most emblematic for the wrong reasons. Her nominee was laden with debts to local criminals. These criminals decided to repay themselves by taking back the house that, on paper, belonged to this lady, to the detriment of the real owner Susi Johnston and her $3 million investment. So yes, you are a bit dependant of your nominee whether you like it or not.

It doesn't matter if you know a very friendly Indonesian citizen, pay them, or have absolute trust in them; investing in real estate with a local nominee is almost never worth it.

For me, there is only one exception to the rule: if you are married to an Indonesian citizen and/or your children have Indonesian citizenship. Family conflicts are, of course, never to be excluded, but the risk is already much more reasonable. It's like nuclear power: when you have the risk of mutual destruction, you can discuss more peacefully.

Create a local company (PT PMA) that buys the real estate on your behalf

If you want to buy land or a house/villa in freehold but do not have Indonesian nationality, there is really no other option than to create a PT PMA company and purchase the HGB titles of your real estate with your company. This is still NOT a true full ownership title, but it is probably the closest.

This option is especially suitable for those who want to create a business/source of income with their real estate acquisition, rather than for those who just want to live in it.

Feel free to request a consultation from specialized agents in PT PMA creation if you want to create a company to acquire real estate in Bali.

buy villa foreigner bali

Acquire Indonesian nationality

Some foreigners who have lived for several years on a KITAP can claim Indonesian nationality if they decide to renounce their original nationality.

While very few people do this in practice, it, however, gives them the right to own land or real estate in Indonesia like any Indonesian citizen and thus benefit from the famous "hak milik" or freehold.

This might seem amusing to you, but it's undoubtedly one of the safest options for buying a house, villa, or land in Bali as a foreigner. Because, precisely, you are not a foreigner anymore. And you can't deport a citizen anywhere.

Long-term house/villa rental: a very practical option for those who cannot buy freehold

If you don't have an Indonesian spouse, don't want to engage in commercial exploitation of your accommodation, don't want to create a PT PMA, or acquire Indonesian nationality, you still have the options of leasehold and hak pakai.

Long-term leases or leaseholds are suitable for many profiles. After all, no one can be truly sure where they will be in 20 years. Moreover, some renewals can be negotiated in advance, providing security for those afraid of being disadvantaged.

Leaseholds also have the advantage of being much cheaper than other methods of acquiring real estate in Bali. Even if you're not the owner, paying a significant amount for the next 20 years can protect you from rent inflation. Those who paid for long-term leases 10 years ago in Canggu or 20 years ago in Seminyak clearly didn't lose out when these areas developed.

Hak Pakai, on the other hand, is a niche property title. The advantage over leasehold is that your property does not lose its value. However, many Hak Pakai properties are at exorbitant prices rarely justified, making them unsuitable for most unless you find a rare gem. It's up to you to do the calculations concerning a leasehold, taking resale prices into account...

Conclusion

Legally buying a house or villa as a foreigner in Bali is quite complex.

Depending on your situation, you can acquire your real estate in freehold (Hak Milik) if you're Indonesian, in construction rights with the help of a PT PMA (Hak Guna Bangunan or HGB), in usage rights (Hak Pakai) if you have a KITAS/KITAP, or you can simply rent a house or villa for a long duration.

There isn't really a better way to do it, as long as you stay within the framework of the law and don't transfer the property titles to individuals who could turn against you.

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