Bali Property Ownership by Foreigners- What You Need to Know Before Investing in Your Island Dream

Whether you want to find yourself the perfect ‘Bali home’ to retire to or you want to buy Bali property for commercial purposes, either way, properties in Bali can be a great investment! Bali is exotic and beautiful, attracting people from all over the world to come over for holiday. Plenty of people find themselves coming back to the island again and again and the number of expats is increasing every year. Daily costs of living are cheap, the temperature is warm and tropical all year long, the local food is absolutely delicious and the list of good things goes on and on.

Bali Property Indonesia

No, you are not the first who came back from your Bali holiday dreaming of buying a private villa on the island of Bali or starting a business at the mercy of the spirits and demons that dwell around here on ‘the island of the Gods’. Bali property ownership is a complicated matter and it does not come without risk. It is important to keep your feet on the ground and dive into the world of Bali Real Estate before you can start living the dream. Here are a couple of things to understand before you make the great plunge:

Owning property in Bali as a foreigner

Let me get straight to the point, foreigners are not allowed to own property in Indonesia. I’ve got two words for you ‘Hak Milik’. Two very important words that stand for ‘right of ownership’ (freehold) and it is something only Indonesian citizens can obtain. Even foreigners married to locals do not share ownership in Bali property of their Indonesian spouse. They have to make a special prenuptial agreement to state they will not make claims for freehold properties owned by their spouse. So, does your dream end here? Hang on, there are other options to live in Bali or start your business.

Buying property in Bali as a foreigner

Foreigners may not be allowed to own property in Indonesia but here is what you can do to realize your island dream. There are several options:

What is Hak Pakai?

Hak Pakai gives foreigners ‘the right to use’. It may not be as strong as ‘right of ownership’ but Hak Pakai gives you the ‘right to use’ and it is the closest foreigners can get to owning property in Bali and Indonesia. Hak Pakai comes with some restrictions and conditions: a) The foreigner needs to obtain a resident stay permit (KITAS) b) The Bali property cannot be used for the purpose of business such as a hotel or restaurant. b) Foreigners can only hold one property. Hak Pakai is the best choice for those foreigners wanting to purchase property to live in such as a Bali Villa. The title allows you to purchase Bali Property to provide you with housing – the property is not intended to be subleased. This would be illegal.

Hak Guna Bangunan – gives foreigners ‘the right to build’

Hak Guna Bangunan stands for ‘the right to build’ and it is meant for foreigners who want to start a business in Indonesia. You will also need to have a PT PMA (foreign investment company). Usually, this title gives foreigners a fixed period of time (can be up to 35 years) and it is extendible for another 25 years.

Hak Sewa – gives foreigners ‘the right to lease’

Hak Sewa is the best option for those island visitors wanting to own a Bali villa. This title gives foreigners the right to lease. What’s great about Hak Sewa is that you could live at this property for 2 months a year or so and rent it out for the rest of the year, gradually earning your investment back. The Owner’s Hak Milik will be legally transferred to Hak Sewa and the leasehold usually has an initial period of up to 25 years, extendable up to 70 years. As mentioned above, under Hak Sewa, foreigners have the right to sub-lease the property to other foreigners, turning it into a possible lucrative business and regular passive income. You will need to attain a rental license called Pondok Wisata if you intend to sub-lease your Bali Property.

The controversial ‘Nominee Agreement’

The Nominee Agreement involves risk. It means buying Bali Freehold Property under the name of an Indonesian citizen purely based on trust. It can and has worked out in some cases but more often, it has turned out ugly. Since buying property in Bali as a foreigner is not possible, a Nominee Agreement is an easy way to avoid the hassle and get things started anyway but one must realize that there is no protection for your investment in this matter whatsoever. It is a risky business and not very advisable. And it is in direct violation of the Indonesian Constitution.

Conclusion

Foreign ownership of property in Indonesia is a complicated matter! You need to understand what is the best option for you and start working towards it with a trustable agent. Don’t hesitate to contact us if you want to gain more information and insights about buying property in Bali as a foreigner. We are ready to answer all of your questions!