Getting to Know Bali Property Laws
Understanding Foreign Ownership in Bali
Foreign ownership of land in Bali is complicated because Indonesian law has strict rules for non-citizens. Currently, foreigners cannot own freehold land titles (Hak Milik) directly. However, there are legal ways for foreigners to obtain land property rights for long-term use.
- Leasehold (Hak Sewa): Foreigners can lease land for up to 25 years, with the possibility to extend it to 80 years. This is a simple and popular choice.
- Right to Use (Hak Pakai): This allows foreigners to use land for residential or business purposes under certain conditions. It needs government approval and is usually granted for 30 years, extendable to 80 years.
- Indonesian-Owned Company (PT PMA): By setting up a foreign-owned company in Indonesia, you can legally obtain rights to commercial property. This is suitable for large-scale projects or long-term investments.
Step-by-Step Land Investment Legal Guide for Bali
Investing in Bali’s real estate market can be rewarding, but needs careful attention to local laws and regulations. If you’re thinking about a land purchase in Bali or looking into property options, it is important to grasp the details of foreign ownership rules in Bali. This detailed legal guide on land investment will help you understand the key steps, legal options, and expert advice to make sure your investment is safe and follows Indonesian laws. From checking property titles to learning about leasehold agreements, this guide serves as your path to successfully acquiring land in one of the most desirable places in the world. This guide explains the process of land purchase in Bali for foreigners.
Step 1: Establish Your Goals and Set Your Budget
Before buying the land, define your investment goals. Do you want to create a vacation home, a rental property, or a business? Your goal will affect the kind of land title and legal steps you need to take. Establish a practical budget that includes the land cost, legal fees, taxes, and other expenses like surveys or permits. Land prices in Bali can differ greatly based on location, size, and zoning.
Land Price Range based on location (2024):
| Location | Price Range per square meter |
|---|---|
|
Popular locations like Canggu, Seminyak, Uluwatu, and Ubud
|
$200-$1,000
|
|
North Bali, East Bali, and inland areas
|
$50-$150
|
|
Rural/Suburban Areas
|
Below $50 |
Step 2: Select the Right Location
Understanding the land zoning in Bali is important for both commercial and residential land investments. It helps you avoid regulatory issues and also allows you to appreciate the island’s special cultural and natural heritage.
Types of Land Zoning:
- Agricultural Land: It is one of the most important types of land zoning in Bali. It is suitable for growing crops and farming.
- Residential Land: It is meant for houses, apartments, or other residential properties and is mainly located in the urban and suburban regions of Bali.
- Commercial Land: It is designated for business activities like shops, restaurants, hotels, and offices.
- Tourism Land: This includes places where hotels, resorts, and villas are built, usually in popular tourist areas like Kuta, Seminyak, and Nusa Dua.
You should collect the information and collaborate with agents or other experts to address the following:
- Confirm the land status to ensure it is legally available and that the seller is the legitimate owner.
- Review the zoning regulations for the area you want.
- Verifying if there are any unpaid taxes.
- Check the precise boundaries to ensure they align with those outlined in the land certificate.
- Look into potential concerns.
- Assess the availability and quality of infrastructure in the area.
Bali has various areas that cater to diverse lifestyles and investment preferences:
- Seminyak and Canggu: Trendy spots for high-end resorts, dining, and nightlife. Perfect for rental properties.
- Ubud: Famous for its peaceful setting and cultural history. Excellent for wellness retreats or personal homes.
- South Bali (Nusa Dua, Jimbaran): Features luxury properties and easy access to international airports.
- North and East Bali: Developing markets with more affordable prices, ideal for long-term investments.
Step 3: Seek Expert Help
Step 4: Check the Land Title and Ownership
Verifying property ownership involves reviewing of legal documents to confirm ownership and identify potential disputes.
Begin by obtaining copies of property titles, deeds, and other relevant documents from the appropriate authorities to verify ownership and address potential disputes.
Review the chain of title
Look at the chain of title, which is a timeline of property ownership changes. This helps to clarify ownership and check for any gaps or issues in the transfer history.
- Conduct a title search
Have a qualified professional or your real estate attorney conduct a thorough title search, including public records for liens, mortgages, and legal claims on the property. - Check for restrictions
Investigate any restrictions that might affect how the property can be used or developed. This includes zoning laws, easements, and other legal limitations that may influence your plans for the property. - Review surveys
Look over survey reports and plats to confirm that the property boundaries match the legal descriptions and that there are no boundary disputes.
Step 5: Secure a Land Lease or Ownership Title
To secure land in Bali, whether through a lease or purchase, you must finalize legal documents involving an Indonesian nominee. There are several methods to achieve this.
- Leasehold (Hak Sewa)
If you decide to buy land in Bali through a lease, create a lease agreement specifying the lease duration, renewal terms, and permitted land uses. Register the lease with the BPN to make it legally valid.
- Right to Use (Hak Pakai)
Request a usage title from the BPN, usually with the help of your lawyer or notary.
- PT PMA Ownership
Register a PT PMA (Foreign-Owned Limited Liability Company) with the Indonesian Investment Coordinating Board (BKPM) to purchase land under commercial titles such as Right to Build (Hak Guna Bangunan).
Step 6: Pay Taxes and Fees
- BPHTB (Bea Perolehan Hak Atas Tanah dan Bangunan “BPHTB):
This tax is imposed on the acquisition of land rights. The rate is 5% of the transaction value or the assessed value, whichever is higher, minus on taxable threshold determined by the local government. - Notary (PPAT) Fees:
The transaction is conducted by a licensed Public Notary to ensure that conveyance complies with Indonesian law. The rate is usually 1-2.5% of the transaction value. - Annual Land and Building Tax (PBB):
The rate depends on the area and value of the land. Usually small for land-only purchases. - Land Title Conversion:
If applicable, the conversion from traditional title to registered title involves an extra fee. - Due Diligence Fees:
Conduct due diligence on land tenure and zoning. - Permit Processing Fees:
Permit processing fees apply for securing the Right to Use (Hak Pakai) or the Right to Build (Hakk Guna Bangunan).
Step 7: Register the Transaction
The last step in buying land in Bali is registration with the BPN. After registering, you would be issued with some documentation proving the existence of a lease or ownership right.
The final step in buying land in Bali is registration at the National Land Agency, or Badan Pertanahan Nasional (BPN). Once you have made a registration, you will be issued with an updated certificate proving the legal rights to own or lease. This certificate serves as legal proof of ownership and safeguards your property rights.
Keep all land-related documents, including surveys and tax receipts, organized and accessible for future transactions or legal matters. Organizing property documents protects your investment and simplifies future transactions.
Key Considerations for Foreign Buyers
- Submit the completed property application forms to the Indonesian National Land Office (BPN) to obtain a property certificate and provide the required supporting documents. An agent assists with this process.
- Provide proof of payment and documentation required for the Right to Build (Hak Guna Bangunan) or the Right to Use (Hak Pakai).
- If building on your land, make sure to obtain the Right to Build with the proper building permit (PBG).
- The BPN will issue the certificate in your company’s name.
With a PTA PMA, you can secure the Right to Build (Hak Guna Bangunan) and Right to Use (Hak Pakai) certificates.
Protect Your Investment
Foreign ownership Bali laws restrict direct property purchases but allow alternative legal frameworks.
Given the complexities of foreign ownership in Bali, it’s vital to safeguard your investment:
- Avoid undocumented agreements or transactions to ensure legal protection.
- Regularly renew your lease or usage title to maintain your legal rights.
Ensure you have the following documents ready for your application:
- Valid passport
- Indonesian tax number (NPWP)
- Proof of residence
- Bank statements
- Business licenses (if applicable)
Stay Updated on Laws
Indonesian property regulations are subject to change. Monitor changes in property laws that may impact your rights as a foreign investor.
Common Challenges When You Invest in Bali’s Property Market
1. Common Property Scams When Buying Land in Bali
If you are considering purchasing property in a location such as Bali, one of the things that may worry you is being scammed. Here are some of the most common scams:
- Fake or Fraudulent Ownership
Scammers may provide false or altered land titles to create the illusion of property ownership. They might forge documents or impersonate a property owner who is supposedly unavailable.How to avoid it: Always check at the local land office (BPN) and get a trusted lawyer to verify the authenticity of the land title.
- Overpriced Land or “Too Good to Be True” Offers
Scammers may try to sell you land that is sold way too cheaply. After you decide to buy it, they may increase the price or disappear entirely.How to avoid it: Research the local market and consult with a reputable real estate agent to ensure the price aligns with the area’s average.
- Nominee Ownership Scams
Some fraudulent organizations offer foreign investors a way to purchase land through a “nominee” system, where a local Indonesian citizen is listed as the owner. However, the foreign buyer has no legal rights to the property.How to avoid it: Avoid deals that seem too risky or require signing agreements that don’t offer full legal control over the property. Always work with a trustworthy lawyer to ensure the legality of the arrangement.
- Land With Disputes or Liens
Land scams could sell property with outstanding problems that have unsettled legal disputes or unresolved debts. Although the buyer may not realize this in the short run, there could be impending court battles. - Misrepresentation or Deception of the Property Listing
Scammers post very attractive listings with pictures of properties they do not own or do not exist. They will try to attract buyers into paying a deposit for a property that does not exist.
How to avoid it: Visit the property personally and use only established and reputable real estate agencies to avoid fake listings. - Hidden Fees or Unclear Payment Terms
Scammers might insert hidden fees or ambiguous payment terms that only come to light after payment is made. Recovering these funds is often extremely difficult.How to avoid it: Make sure that all costs are fully delineated in the contract and never pay anything on your own without a fully, legally binding agreement about it.
2. Cultural Barrier
- Traditional Customs and Practices
Bali’s culture is deeply rooted in Hindu traditions. Land transactions often involve rituals or ceremonies that foreign investors may not fully understand but are essential for gaining community approval.Consult with local experts or advisors knowledgeable about Balinese traditions to approach these practices with respect.
- Ownership by the Community
In Bali, communal land is owned by local villages (desa adat), requiring agreements to often conform to community rules.Involve local leaders or community representatives in the negotiation process to ensure alignment with community standards.
- Local Partnerships and Trust
The Balinese culture places significant emphasis on relationships and trust. Investors unfamiliar with this aspect may encounter slower or more complex negotiations.Foster relationships with local stakeholders and approach negotiations with patience and respect.
3. Language Barriers
- Limited English Skills Among Locals
Many Balinese can speak English, especially in tourist spots, but legal and administrative matters are primarily conducted in Bahasa Indonesia.Use a professional translator or interpreter for legal and business talks.
- Misunderstanding Legal Terms
Legal papers and contracts are typically in Bahasa Indonesia, and important details can be misinterpreted without accurate translation. Get certified translations and have a bilingual legal expert check all documents. - Local Dialects
Balinese people also use a local dialect that can be different from standard Bahasa, which adds to the challenge.Work with local facilitators who are fluent in both the dialect and Bahasa.
4. Maintenance Concern
- Property Management and Staff
Managing properties in Bali often needs local workers like security, gardeners, housekeepers, and maintenance staff. Finding and keeping trustworthy employees can be challenging, especially for foreign investors who may need to learn the local job market better.Hire a professional property management company to take care of staffing, or find a reliable local manager to handle daily operations.
- Land Maintenance
Bali’s tropical climate can quickly lead to property damage, such as overgrown vegetation and erosion. Regular upkeep is necessary to maintain the property’s condition.Set up regular landscaping services, use erosion control methods, and keep an eye on the property to ensure it remains in good shape. It’s important to hire a local service provider experienced in managing tropical properties.
- Environmental Concerns
Water Management: Bali struggles with water supply, especially in rural areas, making it challenging to manage water for irrigation or construction. Poor drainage can also lead to flooding during the rainy season.Make sure the land has a dependable water source and effective drainage systems. Look into rainwater harvesting options and collaborate with local experts to create sustainable solutions.
5. Due Diligence Challenges in Acquiring Land in Bali
When acquiring land in Bali, it is essential to perform comprehensive due diligence to mitigate potential risks. Below are specific challenges that buyers may face, organized by key considerations:
- Verifying Ownership and Title Validity
Identifying legitimate ownership is challenging because there can be counterfeit land titles. Some land could have more than one claim of ownership due to some inheritance disputes or unclear boundaries.Work with a trusted legal advisor or notary (PPAT) to verify the title at the National Land Agency (BPN).
- Understanding Zoning and Land Use Regulations
Zoning laws in Bali differ from every region; the land is often zoned for either agricultural use, residential development, or tourism. So, buyers may unknowingly purchase land that’s restricted for non-commercial use or lands that are placed in a protected area.Obtain a detailed zoning map from the local government to confirm permissible land use. Consult with local authorities or legal professionals to ensure compliance with zoning laws.
FAQ
Foreigners can own land in Indonesia, but only through lease agreements or the Right to Build (Hak Pakai). It is important to note that following the rules and adhering to professional guidance will be crucial throughout this process.
The latter allows foreign ownership for a certain period on some land or property in Bali. The terms may be otherwise 25-30 years with renewal options, therefore. It’s not either risk-free that these kinds will be commonly or properly prepared by the service of a good notary or lawyer to conform them to Indonesian law.
The timing will depend on the property and the legal work. Of course, this will take some weeks or even some months considering how quickly the paperwork gets done and approved.
Yes, because a notary reviews legal documents, verifies land title information, and even helps with contract drafting to make certain everything is by the book.
Yes, there are taxes on purchases and rentals of property, as well as on ownership. A lawyer or agent can explain these costs.
Navigating Land Purchase in Bali with Confidence
Owning a piece of heaven- this is a great opportunity while the real estate market booms on the island. Good planning and advice, combined with an understanding of the Bali property laws and exploring alternatives for foreign ownership in Bali, will allow one to convert the dream investment in Bali into reality. Whether you’re interested in a long-term lease, forming a local partnership, or leveraging legal frameworks, this land investment legal guide provides the foundational knowledge needed to make informed decisions.
Rasmus Holst is a serial entrepreneur and Co-Founder of COCO Development Group, where he helps drive innovation and growth through strategic business development. He is also the Co-Founder of Estate of Bali and Regnskabshelten.dk, Denmark’s fastest-growing accounting firm, which grew to 35 employees and generated $2.5M in turnover in 2023. Rasmus is passionate about building businesses that create long-term value and impact.
