Everything You Need To Know Before Buying a Property in Bali

Can foreigners own property in Bali?

Yes, foreigners can own property in Bali, Indonesia. However, the ownership rights for foreign individuals are limited and there are some restrictions in place. Foreigners are only able to purchase a property in their own name as a “right of use” or “right to build” title, which is similar to a leasehold title. This means they have the right to use and occupy the property for a specified period of time, typically up to 25 years. It is also possible for foreigners to set up a foreign-owned limited liability company (PT PMA) in Indonesia and purchase property through the company.

Hak Milik (the right to own) freehold

Hak Milik, also known as “freehold,” is the highest form of land ownership in Indonesia. It grants the owner absolute and permanent ownership rights over a piece of land, including the right to sell, transfer, mortgage, or inherit the property. In Indonesia, Hak Milik is restricted to Indonesian citizens and is not available to foreign individuals or companies. Instead, foreign buyers can only purchase property in Indonesia with a “right of use” or “right to build” title, which grants the right to use and occupy the property for a specified period of time, typically up to 25 years.

Hak Pakai (right to use) leasehold property

Hak Pakai is a type of land title in Indonesia that grants the right to use a piece of property. It is similar to a leasehold title and is often used by foreign individuals and companies who wish to purchase property in Indonesia. Hak Pakai grants the right to occupy and use a property for a specified period of time, typically up to 25 years, after which the property must be returned to the original owner or extended through a new agreement. Hak Pakai titles can be renewed multiple times, but they cannot be sold or transferred to another party. Foreigners who purchase a property in Indonesia with a Hak Pakai title have the right to use the property for the specified period of time, but they do not have full ownership rights like they would with a freehold title.

Hak Sewa (right to lease)

Hak Sewa, also known as the right to lease, is a property right in Indonesian law that gives the holder the right to lease or rent a piece of land or property for a specific period of time. The holder of the Hak Sewa has the exclusive right to use and occupy the property for the duration of the lease agreement and is responsible for paying rent to the owner of the property. This right can be granted for a specific period of time and can be renewed or transferred to another party.

Bali property ownership by foreigners

Foreigners are not allowed to own property in Indonesia (a freehold), but they are allowed to lease property for a period of up to 30 years, which can be extended for an additional 20 years. This is done through a process called a “Hak Pakai” lease, which gives the foreign lessee the right to use and occupy the property. Additionally, foreigners are also allowed to own condominium units in Indonesia, as long as the building in which the unit is located is at least 51% owned by Indonesian citizens or legal entities.

In Indonesia, there are several ways for foreigners to own or have rights to property. The main ways are:

  • Hak Pakai: This is a leasehold ownership, where a foreigner can lease land or property for a period of up to 30 years, which can be extended for an additional 20 years. This type of ownership grants the right to use and occupy the property, but not to transfer or sell it.
  • Hak Sewa: This is also a leasehold ownership, but for a shorter period of time, usually 5-10 years. This type of ownership is typically used for commercial properties, such as offices or factories.
  • Right to Build (Hak Guna Bangunan): This type of ownership grants the right to build and use a property, but not to own the land it is built on. This is commonly used for building a house on land that is owned by another party.
  • Condominium Ownership: Foreigners are allowed to own condominium units in Indonesia, as long as the building in which the unit is located is at least 51% owned by Indonesian citizens or legal entities.
  • Nominee Arrangements: Foreigners can also own property in Indonesia through nominee arrangements, where an Indonesian citizen is listed as the official owner of the property, but the foreigner holds the right to use, occupy and manage the property. However, this is illegal and not recommended.

It is important to note that the regulations and laws regarding foreign ownership of property in Indonesia are subject to change and may vary depending on the location and type of property. It is always recommended to seek legal advice before making any property transactions in Indonesia.

How to buy property in Bali safely?

To buy property in Bali safely, it is important to do your research and due diligence. Some steps you can take include:

  • Research the area you are interested in: Look into the local market conditions, zoning laws, and any potential issues that could affect your investment.
  • Hire a reputable local agent: A good agent will have experience in the Bali property market and can guide you through the buying process.
  • Hire a reputable lawyer: It is important to have a lawyer who is familiar with the legal process of buying property in Bali and can advise you on any potential risks.
  • Verify ownership: Make sure to verify the ownership of the property you are interested in and ensure that the seller has the legal right to sell it.
  • Get a property survey: It is important to have a professional survey of the property to ensure that it is structurally sound and to identify any potential issues.
  • Get the right insurance: Make sure you have adequate insurance coverage to protect your investment.
  • By following these steps and being vigilant, you can increase your chances of buying property in Bali safely.

The process of buying property in Bali

The process of buying property in Bali can vary depending on the type of property and the laws in the specific area. However, generally, the process can be broken down into the following steps:

  • Research: Research the area you are interested in, the local market conditions, zoning laws, and any potential issues that could affect your investment.
  • Hire a local agent: Find a reputable local agent who can guide you through the buying process and help you find properties that meet your criteria.
  • Hire a lawyer: Hire a reputable lawyer who is familiar with the legal process of buying property in Bali and can advise you on any potential risks.
  • Property viewing: View properties and select the one that you want to purchase.
  • Reservation agreement: Sign a reservation agreement to reserve the property and pay a reservation fee.
  • Due diligence: Your lawyer will conduct a due diligence process to verify the ownership of the property and ensure that the seller has the legal right to sell it.
  • Signing the purchase agreement: Once the due diligence process is complete, you will sign a purchase agreement with the seller.
  • Transfer of ownership: The transfer of ownership will be completed at the land office and the property registration will be updated to reflect your name as the new owner.
  • Payment: You will pay the balance of the purchase price and any other fees or taxes that are required.
  • Obtain the property’s certificate of ownership (IMB) and other documents, such as Tax Payer Identification Number (NPWP) and Domicile Letter (Surat Keterangan Tempat Tinggal)

Keep in mind that the process can take several weeks or months to complete, depending on the complexity of the transaction and the availability of required documents.

Why you should not buy property in Bali using a local nominee

Using a local nominee to buy property in Bali can be risky because it may not be legal and could lead to problems with ownership and legal disputes. Additionally, it may also be difficult to obtain financing for a property that is owned by a nominee. Property Transactions and Paperwork, including the handling of Original Documents, are critical aspects to consider in this process. It is generally advisable to consult with a lawyer and/or real estate professional who is familiar with the laws and regulations in Bali before making a property purchase to ensure that the transaction is conducted in a legal and above-board manner.

The Outlook of Property Investment in Bali

The outlook for property investment in Bali is generally positive, as the island continues to be a popular tourist destination and has seen steady economic growth in recent years. Some of the factors that are driving property investment in Bali include:

  • Growing tourism: Bali is a major tourist destination, attracting millions of visitors each year. This has led to strong demand for both commercial and residential properties, particularly in areas that are popular with tourists.
  • Economic growth: Bali’s economy has been growing at a steady rate, which has led to increased demand for property from both locals and foreigners.
  • Government support: The Indonesian government has been supportive of property development in Bali, with a number of policies in place to encourage investment.
  • Lifestyle appeal: Bali is also a very appealing place to live and work, with a relaxed tropical lifestyle, beautiful beaches, vibrant culture, and friendly people.

However, It’s important to keep in mind that property investment can be risky and it’s important to do your due diligence before making a purchase. It’s always recommended to consult with a lawyer and/or real estate professional who is familiar with the laws and regulations in Bali, as well as the local market, before making a property purchase.

It’s also important to keep in mind that the Bali property market can be affected by several factors such as the global economy, the tourism industry, and government policies. Signs of Recovery in Bali and Indonesia’s Job Creation Law Impacts on Property Investment are key indicators to monitor in this context. Investors should be aware of these risks and make sure they do proper research before investing.

Things to Avoid When Buying Property in Bali

When buying property in Bali, there are several things to avoid to minimize potential risks and ensure a smooth transaction:

  • Not doing proper research: Make sure to research the local market and the property you are interested in before making a purchase. This includes checking the property’s legal status and obtaining a survey or structural report.
  • Not using a reputable lawyer or real estate agent: It’s important to work with a reputable lawyer or real estate agent who is familiar with the laws and regulations in Bali and can help ensure that the transaction is conducted in a legal and above-board manner.
  • Not understanding the ownership structure: Make sure you understand the different types of property ownership structures available in Bali, such as freehold, leasehold, and hak pakai, and which one is suitable for you.
  • Not checking for building code violations: Before purchasing a property, make sure to check that the building is up to code and that all necessary permits have been obtained.
  • Not budgeting for additional costs: When buying property in Bali, it’s important to budget for additional costs such as taxes, closing costs, and maintenance.
  • Not considering the location: Make sure to consider the location of the property and whether it is suitable for your needs. This includes checking for things such as proximity to beaches, schools, and public transportation.
  • Not being aware of any restrictions: Make sure to know about any restrictions that may affect the property, such as zoning laws and building codes.
  • Not having clear and legal contract: Make sure to have a clear and legal contract that covers all the terms of the sale, including the purchase price, payment schedule, and any contingencies.

By avoiding these common mistakes, you can minimize potential risks and ensure a smooth property-buying experience in Bali.

There are several things to consider when preparing a property lease agreement in Bali:

  • Length of the lease: Determine the length of the lease and include it in the agreement.
  • Rent and payment terms: Establish the rent amount and payment frequency, and specify whether the rent will increase over time.
  • Security deposit: Consider requiring a security deposit to cover any damages or unpaid rent.
  • Responsibilities of the landlord and tenant: Clearly outline the responsibilities of both the landlord and tenant, including maintenance and repairs, utilities, and any restrictions on the use of the property.
  • Termination of the lease: Include provisions for terminating the lease early, such as for non-payment of rent or breach of the agreement.
  • Governing law: Specify which laws will govern the lease agreement.
  • Dispute resolution: Include provisions for resolving disputes that may arise during the tenancy.

It is also a good idea to have the lease agreement reviewed by a lawyer to ensure that it is legally enforceable and protects the rights of both parties

Examples of foreigners getting in trouble with their property investment in Bali

There are several examples of foreigners getting in trouble with their property investments in Bali, including:

  • Illegal property ownership: Some foreigners have been found to be illegally owning property in Bali, often through the use of local nominees. This can lead to disputes over ownership and potential eviction from the property.
  • Building code violations: Some foreigners have been fined or had their property seized for building code violations, such as building structures without the proper permits or in protected areas.
  • Unpaid taxes: Some foreigners have been slapped with large tax bills for failing to pay taxes on their property investment in Bali, including taxes on rental income and capital gains.
  • Unclear title: Some foreigners have been caught in disputes over property ownership due to unclear or fraudulent land titles, which can lead to legal battles and even loss of property.

It’s important to note that these examples are all avoidable with the help of proper legal and real estate professionals. They can help ensure that your property investment in Bali is conducted in a legal and above-board manner, to minimize any potential risks.

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