Buying land in Bali : A Foreigner’s Dilemma

Buying Land in Bali – What you need to know

With its friendly people, beautiful landscape and great weather, Bali is the place dreams are made of. That dream can just as easily escalate into a nightmare when you are ill prepared.  The key is in understanding Indonesian and local district-level land ownership rules and securing your investment. Land ownership regulations in Indonesia, may differ from your home country, as One important difference is that land rights are different for foreigners, Indonesian entities and Indonesian citizens.

Freehold Titles

Only an Indonesian citizen can own a freehold title, which is the highest right of ownership. A freehold title may be passed on from one Indonesian citizen to another.

As a foreigner, you are unable to acquire a Freehold title. Therefore the most common method used by dreamy ‘pendatangs’ wanting to acquire Freehold titles was to use a local person, or a nominee The title deed would be purchased under the name of the nominee, and through a series of back-up agreements, the nominee would then give the foreigner full right to utilize the land, and waive his own rights through a power of attorney.

However this construction has many loopholes and insecure aspects, not to mention negative effects which strains the relationship between the foreigner and nominee.  For example, if the nominee dies and his heirs decide they want to use the land themselves or ask for money from the foreigner, they can ultimately do so.

Hak Guna Bangunan – or Right to Build

The most secure way in acquiring land as a foreigner is by establishing an Indonesian company (foreign equity PMA). This company can acquire the land and become the legal owner. However a freehold is not possible with this method. The highest possible right is the HGB (right to build), which has a similar strength as the freehold as long as the company continues to exist.

Hak Pakai or Right to Use

Foreigners with Indonesian residency permits, and Indonesian Legal entities can acquire a “Hak Pakai” title. This right allows the foreigner to use the land as a building site. This right is valid for an initial 30 years, and can be extended for a further 20 years in case the land is state land, or 30 years in case the land is private land.
Deciding which land title is best according to you situation might be the first complexity, in acquiring your dream house. There are a number of rules regulating the Hak Pakai ownership title.

In Bali for example, a Foreigner is only able to acquire 1 plot of land, and the total land size should not exceed 20 are. There are also a number of other limitations based on area, value and the type of building.

If you have any questions, feel free to drop us a comment in the field below.