FAQs | Harcourts Purba Bali

In Indonesia, complete property ownership for foreigners is achievable through the establishment of a local legal entity known as a PT PMA. This entity is eligible for the Hak Guna Bangunan (HGB) ownership title, ensuring secure property rights. Additionally, foreigners may acquire the Right to Build and Right to Use (Hak Pakai) titles, offering clear legal recognition for property ownership within the country. These titles authorize the foreign owner to utilize and develop the property over a certain period.

Direct land ownership by non-Indonesian citizens is not permitted. However, foreigners have the option to secure a leasehold title (Hak Sewa) for a predetermined period. This leasehold title allows the foreign individual the right to use and occupy the property for the duration agreed upon, with legal protection afforded by Indonesian law and the title being registrable in the name of the foreigner.

Indonesia offers several property ownership forms, each with distinct characteristics and regulations to cater to different needs and eligibility criteria.

Freehold Ownership (Hak Milik): This is the most complete property ownership form in Indonesia, exclusively available to Indonesian citizens. It allows the owner comprehensive rights over the land, including selling, gifting, exchanging, inheriting, or mortgaging the property, albeit with restrictions on exploiting natural resources. Despite its broad privileges, foreign individuals and companies cannot hold land under Hak Milik. Instead, foreigners are eligible for a different entitlement known as Hak Pakai, or the Right of Use, permitting them to use land under specific conditions.

Leasehold Ownership (Hak Sewa): This type grants rights to use a vacant land plot or existing building on another’s property for a predefined period, typically ranging from 1 to 25 years, with possibilities for extension. Both Indonesian and foreign individuals and entities can hold a Leasehold title, which applies to properties under Freehold, Right to Build (HGB), or Right to Use (Hak Pakai) titles. Although it offers the flexibility to lease, construct on, and even sublease the property, a Hak Sewa cannot be mortgaged or registered with the National Land Agency. At the lease’s conclusion, the property reverts to the owner.

Right to Build (HGB) Title: The HGB title allows individuals and Indonesian legal entities, including those with foreign or domestic capital investment, to construct and own buildings on state, freehold, or HPL land. However, this right excludes foreign individuals. Initially granted for up to 30 years, the HGB title can be extended and renewed, offering a maximum duration of 80 years under certain conditions. This title is crucial for developing residential, commercial, and industrial facilities, with provisions for selling, gifting, exchanging, or mortgaging the constructed buildings. Nonetheless, HGB titles over freehold land are capped at 30 years, requiring new agreements for any extension.

Each ownership type in Indonesia is designed to meet various investment and utilization needs while adhering to regulatory and legal frameworks. These diverse options facilitate property transactions and developments, accommodating both local and international stakeholders within the country’s real estate market.

When engaging in a property transaction in Bali, it’s crucial to understand the tax implications for both buyers and sellers. For Freehold property transactions, identified locally as Hak Milik, the buyer is obliged to cover the Land and Building Acquisition Duty (BPHTB). This tax amounts to 5% of the property’s government-assessed value, referred to as the NJOP. On the other side of the transaction, the seller is required to pay a PPh income tax, calculated at 2.5% of the NJOP value.

In the case of Leasehold property transactions, known in Indonesia as Hak Sewa, the tax structure differs. Buyers of leasehold properties are exempt from tax responsibilities. Sellers, however, must pay a final income tax. The rate for this tax is set at 10% for Indonesian citizens or those holding KITAS/KITAP permits. Foreigners who do not possess KITAS/KITAP documentation face a higher rate of 20%.

For foreigners looking to invest in Bali’s real estate, the most secure method is through the creation of a foreign-owned entity, known as a PT PMA (foreign limited liability company), which is recognized by the Indonesian authorities. This legal entity enables foreign investors to acquire property in Bali under two main land title options: the Right to Build (Hak Guna Bangunan) and the Right to Use (Hak Guna Usaha).

The Right to Build certificate grants ownership for a period of 30 years, with the possibility of renewal for an additional 20 years, and a further extension of 30 years thereafter. On the other hand, the Right to Use title offers a 25-year ownership period, with an option to renew for another 25 years, and the potential for an additional 35-year extension. This framework provides a pathway for foreign nationals to participate in the Bali property market while adhering to Indonesian regulations.

Understanding the worth of leasehold land is essential, and a basic rule of thumb is to estimate it at approximately 1% annually for each square meter or per Are (100 m²).

Consider the following example for clarity:

Imagine a parcel of land spanning 100 m² with a freehold (Hak Milik) value of IDR 1 billion. In this scenario, leasing this land would typically cost about IDR 10 million annually, representing 1% of the total value, throughout the duration of the lease agreement.

In Indonesia, Regional and Spatial Planning (RTRW) rules serve as the foundation for land use and development, with a legal validity of 20 years. The most recent RTRW guidelines for Badung were approved in 2013, setting their expiration in 2033. For those looking to acquire land for development projects, it’s essential to review the land’s zoning classification or Ijin Tata Ruang (ITR) to ensure the intended use aligns with permitted activities, whether for commercial or residential developments.

Indonesia recognizes four key zoning categories relevant to most land transactions:

  1. Government-owned Land: This category includes areas like beaches, natural reserves, and forests, which are exclusively available to individual investors.
  2. Yellow Zone: This designation is for residential use, allowing the construction of houses or villas only, with no commercial activities permitted.
  3. Red Zone: Designated for commercial and tourism activities, this zone accommodates a wide range of uses, including hotels, resorts, condotels, apartments, entertainment facilities, and even residential buildings. Obtaining a commercial license and a Pondok Wisata for holiday rentals is possible within this zone.
  4. Green Zone: Reserved for agricultural purposes, this zone restricts any residential or commercial construction. No building permits for houses, villas, or similar structures will be granted in these areas.

To secure a Pondok Wisata permit, villa owners must prepare and submit the following five essential documents:

  1. UKL-UPL Document: This stands for Environmental Management and Environmental Monitoring Effort. It is a necessary management system and monitoring protocol for environmental conservation.
  2. IMB (Building Permit) designated for Pondok Wisata use: This document certifies the building’s compliance with local regulations and its suitability for functioning as a Pondok Wisata.
  3. SITU/HO (Nuisance Permit): This is required to ensure that the business does not disrupt the local community and complies with zoning regulations.
  4. Business Registration Certificate (Tanda Daftar Perusahaan): A fundamental document that officially recognizes the villa as a legitimate business entity.
  5. Local Tax Number (NPWPD): This is crucial for tax identification and compliance within the local jurisdiction.


Each document plays a vital role in the legal and regulatory acknowledgment of the villa as a Pondok Wisata, aligning it with environmental, building, business, and tax regulations.

  1. Reach out to a reputable real estate agency in Bali and discuss what you’re looking for in a property.
  2. Explore a selection of properties that catch your eye and arrange to visit them.
  3. To begin negotiations, complete and submit an ‘Offer to Purchase’ form for your chosen property.
  4. After your offer is accepted, choose a Notary/PPAT or ask your agent for suggestions.
  5. Enter into a formal “Sale and Purchase” agreement, outlining all terms and conditions.
  6. Make a deposit payment (typically 10% of the property’s price) into the notary’s escrow account, which removes the property from the market and secures your interest against third-party sales.
  7. The due diligence process starts once the deposit is received. This procedure, evaluating the property’s legal standing and other essential details, generally takes between 14 to 30 days, varying with the property’s location and type of ownership.
  8. If the due diligence results are positive, arrange to meet with the notary to sign the definitive sale and purchase agreement (or lease transfer deed). If the findings are negative, you’ll receive a refund for your deposit.
  9. After signing the final documents, process the payment of the remaining balance to the seller’s specified bank account.
  10. Finalize the transaction by meeting at the property for the official handover after the seller confirms receipt of the final payment.

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