What is your opinion about buying property in Bali that’s still being built? That’s called “off-plan,” and there are lots of great villas, townhouses, and apartments to choose from. Imagine you’ve found the perfect off-plan project and are excited to take the next step toward ownership.
Since this is a significant, long-term investment requiring your time, effort, and financial commitment, ensuring all legal aspects are thoroughly in order is just as crucial as choosing the right property itself. To guide you, let’s explore the essential legal documents you should review before signing any deal.
Understanding Ownership Types for Foreigners
Indonesia’s agrarian law restricts direct freehold (Hak Milik) land ownership to Indonesian citizens. This means foreigners must navigate alternative legal titles to secure their property rights.
• Hak Pakai (Right to Use): This is the most common individual ownership for foreigners holding a KITAS or KITAP, allowing land use for an initial 25 years with possible extensions up to 70 years in total. It grants you the right to construct and occupy a building on the designated land.
• Leasehold (Hak Sewa): Widely used and straightforward, this involves leasing land from an Indonesian owner for 25-30 years, often with options for significant extensions. The original Hak Milik (Freehold) title remains with the Indonesian landowner.
• PT PMA (Foreign-Owned Company) with Hak Guna Bangunan (Right to Build – HGB): For larger or commercial ventures, establishing a PT PMA allows the company to hold an HGB title for up to 80 years (30+20+30). This offers a higher level of security for substantial foreign investments.
Friendly warning: Be careful with nominee agreements. Sometimes, people suggest an Indonesian person buys and holds the property in their name for you, acting as a ‘nominee’ owner. This practice, often done to bypass Indonesia’s foreign ownership limits, is illegal and very risky under Indonesian law. If anything goes wrong, you could lose all your money and have no legal protection at all. It’s best to avoid them completely.
Important Papers to Check Before You Sign Anything
Before committing to an off-plan purchase, ensure you scrutinize the following documents from the developer and for the specific property:
• Developer’s Legitimacy: Verify the developer’s legal existence through their Deed of Establishment, Business Identification Number, and Company Taxpayer Identification Number. These documents confirm they are a registered and legitimate entity in Indonesia.
• Land Certificates: It’s vital to check the land certificates that prove the developer legally owns or has the right to use the project land. For a developer (especially a PT PMA), this is typically a clear Hak Guna Bangunan (HGB) title for the development area. This confirms the developer has the proper legal basis to build your property..
• Land Zoning and Environmental Compliance: Ensure the land’s zoning permits the intended development, confirming its legal permissibility. Additionally, confirm the developer has secured all necessary environmental permits, vital for project legality and sustainability.
• Building Permits (PBG & SLF): In Indonesia, a legally compliant building must have a PBG (Persetujuan Bangunan Gedung). This permit ensures the building plan adheres to regulations. Upon completion, the property must also secure an SLF (Sertifikat Laik Fungsi), verifying its safety and operational standards. Make sure the developer has these.
Payment System and Tax Implications
Off-plan payments are typically staged and linked to construction progress, often with a final retention. Be aware of key taxes like the 5% Buyer’s Tax (Land and Building Rights Acquisition Duty or in Bahasa, BPHTB), 11% Value-Added Tax on new developments, and ongoing annual Land and Building Tax. Also, consider income tax on potential rental earnings and notary fees.
Your Partner for a Secure Investment
Buying off-plan property in Bali can be a truly great investment, but it’s super important to do your homework and get the legal stuff right. To make sure your investment is safe and sound, having a trusted local expert help with a thorough legal review and due diligence before you sign is key.Â
Seven Stones Indonesia is a reliable local partner for foreign property investors, ready to offer you a comprehensive legal review of your agreements and full due diligence services before you buy off-plan. With our help, you can avoid risks and enjoy your Bali investment with confidence.