Is There a New Freehold Title on the Way for Foreigners in Bali?

It seems to me that every couple of years – usually just ahead of election time in Indonesia – the conversation about foreign property ownership resurfaces for a round of quotes, press releases and optimistic expectations. Over the last 20 years, the outcomes of these talks has run the gamut. Sometimes there is no real noticeable difference, other times sea changes are announced. On the heels of the SEAsia capital market crash in the late 1990’s, in 1997 the talks led to the creation of the Hak Pakai title and in subsequent years, a range of adjustments to the Hak Pakai dynamic with respect to length of term and use. Foreign investors have been offered several ways to legally acquire properties in their own names, however, we have never enjoyed ALL of the same rights as our hosts. Until now. Or is “Until now?”

Last Thursday July 23, Agrarian and Spatial Planning Minister Sofyan Djalil told property tycoons in a webinar that the new property rules set to be ratified into law by the end of next month (August), will allow foreigners to have the same rights as Indonesian property buyers.

“On this foreign ownership matter, God willing… we will have (the Bill that covers the matter) ratified into law by end-August,” Mr Sofyan said in the Web seminar attended by the country’s top property tycoons, which was organised by the Indonesian Real Estate Developers Association (REI).

Indonesian Property Law (Agrarian Law) speaks in terms of rights (Hak) to own, to lease, to rent, to use, to build and to cultivate. And this is the crux of the biscuit. Will foreigners be granted Hak Milik (Right to Own) title, the very same title protected in the Indonesian Constitution as the sole right of Indonesian citizens? Or will we get a new title? Or will the current Hak Pakai structure be modified to mimic Hak Milik? At this point, we simply do not know. What we do know is that Minister Sofiyan’s directive comes from the President and that his intention seems to be the creation of equal ownership rights between citizens and foreign investors. Under the current structures available to the foreign investor, while the investor is entitled to some – and in some cases, many – of the same rights as the holders of Hak Milik title, the foreign investor has not yet had ALL of the same rights as the Indonesian citizen. This may change, it may not.

Wahyudi Soeriaatmadja of the Straits Time in Singapore wrote on Friday that, “The property sector has huge multiplier effects. The government’s plan to loosen the property rules comes amid the coronavirus pandemic that has shrunk the economy and caused massive job losses. The Indonesian property sector supports at least 170 other industries from cement, steel and the creative industries such as interior decor. The sector employs more than 30 million people or about 11 per cent of the country’s population.”

So change is coming and it appears that it will favor the foreign investor in unprecedented ways. Whether or not these sea changes will cause a ripple or a wave remains to be seen. Stay tuned.

To schedule an inspection of any of our fine properties or to have a phone call to discuss your Bali real estate strategy, please reach out to Patrick on +62 817 973 3031/[email protected]