The Indonesian government has relaxed foreign ownership regulations and allows foreigners to buy property in Bali. However, there are some limits to this ownership. To learn how to safely and legally buy property in Bali, read this property ownership 101 created by real estate experts at Harcourts Purba Bali.
Is buying property in Bali a good investment?
The short answer is yes, buying property in Bali is a very good and long-term profitable investment. The island has beautiful beaches, a tropical climate, and an intriguing culture that attracts tourists from all over the world. Owning a piece of Bali real estate gives you the opportunity to generate rental income from vacationers who want to experience all that the island has to offer.
On average 8-10% returns are guaranteed, and in some locations even up to 30%. The top locations to buy property in Bali are Canggu, Seminyak, Ubud, Uluwatu, and Jimbaran, especially beachfront land plots and villas.
Additionally, the investment and business climate in Indonesia, in general, is very stable and fast-growing due to the strong domestic market, massive foreign investments, abundant natural resources, and ease of doing business here. The government has supported and facilitated the process of buying properties in Bali a lot over the past years and is focused on gaining even more trust from foreign investors.
Can foreigners buy property in Bali?
According to Indonesian law No. 5 from 1960, only an Indonesian citizen can buy property in Bali freehold and fully own it indefinitely. However, foreign investors are invited to lease property in Bali under a special ownership title for a few years or decades.
You can buy property even while abroad, you don’t have to live and work full-time in Indonesia to purchase rights to use the land or rent a villa.
To fully understand the legal aspect of buying a property in Bali, we need to guide you through property ownership titles, needed permits, and zoning limitations applicable to any property in Bali.
Buying a property in Bali be prepared for how they calculate prices: the land prices are listed per are (100 sq m) per year for leasehold. Some listings, especially villas and apartments, have a price for the whole period of the lease, ex USD 1 000 000 for owning a penthouse in the center of Canggu for 39 years. It normally happens when you’re buying a freehold property.
Property in Bali: 5 Main Ownership Titles
Foreign property ownership in Bali is limited in time and governed by the appropriate titles.
There are 5 ownership titles in Indonesia:
- Right to Own (Hak milik, freehold) title is available for Indonesian citizens and companies and allows them to own the property indefinitely. Not for foreigners.
- Right to Use (Hak pakai) title allows buyers to use the land or building on it. The right to use the land acquired by an individual is provided for up to 30 years with possible extension for another 20 years. Afterward, there will still be a chance to extend it for another 30 years. For residential purposes. A foreigner can own only one property under this title at any time.
- Right of Lease (Hak Sewa, leasehold) allows foreigners to lease the land or property. Can be for both residential and commercial purposes. Duration can be from a few years to 25 years. The extension works the same as for Right to Use – up to 80 years.
- Right to Build (HGB, Hak Guna Bangunan) title can only be granted to the PMA company and allows you to build on the land or use the building, this title doesn’t transfer to you the ownership of the land. This title is a must for developers and commercial purposes. Same as the Right to use, this title can be purchased for up to 80 years.
- Right of Strata Title (Hak Milik Atas Satuan Rumah Susun, HMSRS) is created for those foreigners who buy a unit or an apartment in a large development complex. This foreign ownership title applies only to some special economic zones.
When we talk about foreigners “owning” or buying land in Bali we are mostly talking about property that belongs to a local owner, but we are buying a time period of using it for residential or business purposes.
What exactly is PT PMA and why do I need it?
It is only legal and safe for foreigners to buy property in Bali individually or through a foreign-owned company PT PMA – Penanaman Modal Asing in Indonesian. PT PMA – is the legal entity a foreigner or a foreign company can set up to do business and buy property in Bali. However, such a real estate company needs a minimum capital of roughly USD 170,000 (2.5 billion IDR) and has to acquire assets equal to approximately USD 700,000 (10 billion IDR).
Once you’ve started a PT PMA you are officially allowed to get a renewable visa status – ITAS – for 2 years. Be aware that this is an investors-only visa and does not allow you to work.
This may be not suitable for those who are thinking of buying a house not for business but for the family or as a vacation property. In such a case, you can always lease land under your name yet this time, you won’t be able to secure the strongest and longest ownership title.
Purchasing property via a nominee is no longer legal and is absolutely unsafe no matter what people will tell you.
Legal permits to buy property in Bali
There are 2 more legal permits you need to keep in mind if you want your business to be legal:
- Building Permit (IMB) allows you to build a villa based on your submitted architectural plans. It takes about 3 to 6 months to process this permit and you cannot start building without it. Same way, if you’re buying a villa in Bali, you should never purchase a built property without IMB. The government can not only apply a huge fine but demolish the property.
- Pondok Wisata (guest house license) allows you to start a rental business. Without it, you cannot legally rent your property daily. It is important to know that this permit will coincide with land zoning. Some land zoning will not allow you to rent your property only to live in it.
- Land zoning is the document that determines how the land and property can be used. There are 3 main zonings for foreign investors to consider (yet more zones are determined by the law):
- Green zone – only can be used for agriculture. And this is why many rice fields cannot be used for building. They are considered a green zone to balance the environment. If you’re hunting for land, ask for zoning before you drive 30 minutes to see the plot.
- Yellow zone – residential. You can buy this land, build a villa and live in it. You cannot rent it daily or build a shop.
- Commercial zoning. You can purchase this land and build a gym, a café, a coworking space, or a shop.
Land zoning can be revised by the government. The most recent revision was made around 2019. Each regency has its own document, for example, Regulation No. 26 the Year 2013 of Badung Regency on Regional and Spatial Planning sets the zoning in Canggu and central Bali, but a different document will be applicable for Tabanan regency, etc.
All properties listed by Harcourts Bali have proper zoning certificates and permits.
Who can help you to buy property in Bali?
1. Very reliable Property Agent
Not a friend, not a local nominee, not your neighbor. Purchasing property is a very unique and expensive process that you cannot trust anyone who has no appropriate license or knowledge. In Bali real estate, experience is everything.
Harcourts Purba Bali has amounted to millions of dollars in sales over 20 years of experience and has access to a hand-picked selection of properties for any taste and budget, from land to penthouses.
2. Legal team
Old Bali was known for some sad stories of buying and losing property. After the government stepped in and organized the legal process of foreign investments, it became much easier and safer to purchase property in this heaven. However, there are still some limitations: from understanding the ownership titles to a simple language barrier. At the same time, not all landowners and former farmers selling their land right now even have detailed descriptions of their plots or are familiar themselves with the selling process.
A legal team makes this process stress-free but also safer. If in western countries you can buy an apartment directly from the former owner and be sure you can register your contract yourself and make a transaction, in Bali having a trustworthy lawyer is an absolute must if you don’t want to lose your money.
The process your lawyer or legal team should guide you through and do for you is an in-depth due diligence check, including investigating the hierarchy of property ownership, owner’s identity, taxes paid and due, zoning, permits, and anything else the owner or you may miss.
The final report after this full check-up will determine whether you’re buying this property or not and if yes, how the negotiation will go. Each legal team will have its own price list for due diligence starting from USD 200 to USD 10 000 and more.
If you are buying land with a view, the chances are high that you’re paying a higher price. Make sure you check the surrounding land parcels too. If they are in the green zone, you will have your view probably indefinitely. But if the neighboring lots are in yellow or commercial zones, it is very likely someone will buy it very soon and build a villa or shop there, blocking a nice view you were paying for.
At Harcourts Purba Bali we are only working with legally built properties and land with appropriate zoning. We keep our clients safe from any unpleasant surprises and there are no extra costs for our investors-to-be.
Not only a lawyer is a necessity but also a notary. You cannot sign anything and make it legal unless the notary will prepare the draft, will be present to witness your signature, and later on register your contract.
At the same time, a notary cannot help you with any legal matters. They are appointed by the Ministry only to impartially witness the signing of the document and to make sure the document is legal and registered properly within the right land office.
Drafting your contract, make sure you input the renewal conditions and all necessary elements in it. Never use standard contracts or vague clauses, as even just in 5 years property value can go up, and once you decide to renew your once profitable contract you may face a price jump you were not ready for.
6 Safe Steps to Buy Property in Bali as a Foreigner
To summarize, let’s have a simple actionable step-by-step plan to buy your dream property in Bali:
- Do your research: locations, property types, taxes, ownership, prices.
- Find a competent Bali property agent who has worked in this market for at least 5 or 10 years. It is better when the property agent is recognized by the Indonesian Real estate agency association and has its own legal team.
- Make a shortlist of properties to buy and make the legal team go through the due diligence process. If you can visit the plot before purchasing it.
- Draft the contract with the legal team and invite the owner to sign it.
- Complete the purchase, and pay all required taxes and fees.
- Enjoy your life in paradise!
Ready to live and work from Bali? Check out the best property to buy in Bali and the hotspots we recommend investing in. If you have any questions or need legal help, feel free to contact Harcourts Purba Bali legal department or sales manager today.