Bali’s breathtaking landscapes, rich culture, and thriving tourism industry make it a prime destination—not just for vacations, but also for real estate investments. However, buying property in Bali as a foreigner is not as straightforward as in many other countries. Indonesia has strict property ownership laws designed to protect local landowners, and failing to comply with these regulations can lead to legal disputes, financial losses, or even the invalidation of your purchase.
To make a safe and legally compliant investment, it’s crucial to understand the rules governing property ownership, the available legal pathways for foreign buyers, and the potential pitfalls to avoid. This guide will walk you through everything you need to know, including ownership structures, investment options, zoning laws, and due diligence processes—ensuring that your property purchase in Bali is both secure and legally sound.
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Understanding Bali’s Real Estate Laws
Before diving into property ownership, it’s essential to grasp the legal framework governing real estate in Bali. Unlike many Western countries, where foreign ownership is relatively straightforward, Indonesia has strict regulations designed to protect local landowners.
One of the biggest misconceptions among investors is the belief that foreigners can own freehold land in Bali. The reality? Only Indonesian citizens can hold Hak Milik (freehold ownership). But that’s not all—there are many other myths surrounding property investment in Bali that could make or break your real estate dreams. Before making any commitments, it’s vital to separate fact from fiction.
Common Misconceptions About Buying Property in Bali
Let’s debunk some of the most misleading beliefs about property ownership in Bali:
| Misconception | Truth | Explanation |
|---|---|---|
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Foreigners can own freehold property.
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False |
Only Indonesian citizens can hold land under Hak Milik (freehold title).
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Nominee arrangements are safe and legal.
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False |
Some buyers use an Indonesian citizen as a “nominee” to hold land on their behalf. However, this is legally risky and could result in asset loss, as the nominee retains full ownership rights under Indonesian law.
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All properties in Bali are open to investment.
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False |
Bali has strict zoning regulations, and some areas are classified as protected, agricultural, or green zones, where foreign-owned developments are not permitted.
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Buying land in cash ensures a secure purchase.
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False |
Even if you pay in full, you must verify land titles, ownership history, and zoning compliance to avoid future disputes.
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A leasehold agreement means full ownership.
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False |
Leasehold (Hak Sewa) allows foreigners to control property for a fixed period but does not grant permanent ownership.
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Using a local spouse’s name for property ownership is safe.
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False |
Even if you purchase land in your Indonesian spouse’s name, it remains their legal property. In case of divorce, you may lose all rights unless the ownership is properly structured.
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Foreigners can buy any property if they have an Indonesian visa.
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False |
Residency status does not grant automatic property ownership rights. Foreigners must follow legal property acquisition methods, such as Hak Pakai (Right to Use) or PT PMA (Foreign-Owned Company Structure).
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So, are you now ready to work your way around Bali’s real estate property ownership rules and regulations?
Property Ownership Rules in Bali: Can Foreigners Buy Properties in Bali?
Bali is an attractive destination for expats seeking to invest in property. And yes, foreigners can definitely buy a property in Bali. However, the process for foreigners to own or rent property in Indonesia is governed by strict regulations to safeguard the interests of the country and its citizens. Understanding these rules is essential for anyone considering such an investment.
Legal Framework for Foreign Property Ownership
Indonesia’s property laws are nuanced, especially concerning foreign ownership. By the “Prohibition of Land Alienation” principle, foreign nationals are prohibited from owning freehold land in the country. Instead, they are granted usufructuary rights, specifically through the Hak Pakai (Right to Use) title, which is the only property title available to foreigners. Alternatively, foreigners can form a foreign investment company PT PMA and buy property under the Hak Guna Bangunana (Right to Build) title.
This legal structure is laid out in Act No. 5 in 1960, known as the “Basic Agrarian Law,” which has been further shaped by additional government regulations and decrees, such as Government Regulation No. 41 in 1996, which was later replaced by Government Regulation No. 103 in 2015.
Property Type and Location
Although granted ownership rights under specific conditions, foreign ownership in Bali is still limited to high-end residential properties and apartments, with minimum price thresholds set by the government to ensure substantial investments. These thresholds vary by region, aiming to align foreign investment with Indonesia’s economic goals.
Most of the time, to purchase a property, foreigners must invest at least IDR 30 billion (around USD 1,835,000) and have paid-up capital of IDR 2.5 billion (about USD 167,000) on the property they want to own or rent. They must also establish a PT PMA (a foreign-owned company) with a minimum capital of USD 170,000, and have an Indonesian shareholder.
Government Regulation No. 103 of 2015 further mandates the acquisition of a property through a Right to Use Certificate, granting usage rights for an initial 30 years, extendable by 20 years and renewable for another 30 years, totaling up to 80 years. However, with this consent there are few limitations on the property location so as to preserve Bali’s cultural heritage and local community integrity, with certain areas reserved for local populations only. Not just that, rental income from properties owned through PT PMA is also subject to a 10% tax for tax residents and 20% for non-tax residents. These regulations ensure that foreign investments contribute to the economy while safeguarding Bali’s cultural and strategic interests.
Eligibility Criteria
Foreigners seeking to own property in Bali must meet specific eligibility criteria set by the Indonesian government.
- Nationality and Income: Foreign buyers must demonstrate financial capability, providing proof of sufficient income or assets to maintain the property. This ensures their investment benefits the local economy.
- Visa Status: A long-term visa, such as the KITAS (Temporary Stay Permit) or KITAP (Permanent Stay Permit), is generally required. These visas permit foreigners to reside in Indonesia for extended periods, qualifying them for property transactions.
- Stay Duration: Property ownership is often tied to the validity of the foreigner’s stay permit. Lease or ownership rights are typically valid only as long as the foreigner holds a valid stay permit.
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Land Zoning Categories and Regulations in Bali
Before purchasing property in Bali, it’s essential to check land zoning classifications to ensure the land can be legally used for your intended purpose. Buying land in the wrong zone could result in legal disputes, hefty fines, or even the demolition of unauthorized buildings.
What is a Zoning and Land Use Permit?
A Zoning and Land Use Permit verifies that a property aligns with Bali’s spatial planning regulations. Issued by the local planning office, this permit dictates the types of structures allowed in specific areas, ensuring compliance with the region’s development plans.
Currently, zoning categories in Bali are color-coded, with each color representing a specific type of permissible land use as established by the Badan Pertanahan Nasional (BPN) in 2007. Below are the main zoning classifications:
1. Green Zones (Agricultural and Conservation Areas)
Green zones are designated for agriculture, conservation, and environmental preservation. Construction is strictly limited to prevent ecological damage, though some projects—such as eco-tourism resorts or large-scale farming—may be allowed under special permits. Violations can result in heavy fines, legal action, or forced demolition.
Green Zone Bali Regions: Ubud, Nusa Dua, Sanur, Mount Batur, Amed, Lovina
2. Yellow Zones (Residential Areas)
Yellow zones are designated for private residences, including homes, villas, and apartments. Small-scale community facilities like schools and parks are also permitted. While residential projects are allowed, commercial development in these areas requires specific approvals. Unauthorized commercial structures may be subject to penalties or removal.
Yellow Zone Bali Regions: Ubud, Jimbaran
3. Red Zones (Commercial and Industrial Areas)
Red zones are designated for business activities, including retail centers, office buildings, and industrial parks. Residential or agricultural developments are generally prohibited unless special exemptions or rezoning approvals are obtained.
Red Zone Bali Regions: Denpasar, Seminyak
4. Pink Zones (Tourism Areas)
Pink zones are reserved for tourism-related developments such as hotels, resorts, and short-term rentals or any property that support the island’s hospitality and cultural industries. Unauthorized residential or private commercial structures may face permit revocation or land restoration orders.
Pink Zone Bali Regions: Kuta, Seminyak, Nusa Dua, Mount Batur, Amed, Lovina, Uluwatu, Jimbaran, Canggu
5. Orange Zones (Mixed-Use Areas)
Orange zones accommodate a mix of residential, commercial, and tourism-related projects, making them ideal for investors. These zones are categorized into:
- Vertical Orange Zones: Multi-level developments where commercial establishments occupy lower floors while residential units are above.
- Horizontal Orange Zones: Neighborhoods where shops, cafés, and essential services are integrated with residential spaces, fostering a convenient and community-oriented environment.
Orange Zone Bali Regions: Denpasar, Kerobokan, Pererenan
Understanding these zoning regulations is crucial to making a legally sound and profitable investment in Bali’s real estate market.
Legal Due Diligence and Property Verification
One of the most common mistakes investors make in Bali is failing to conduct proper due diligence before purchasing property. Land ownership disputes and fraudulent property documents are significant risks, making verification essential. Before signing any agreement, ensure the following:
- Identity Verification and Tax Compliance: First and most importantly, request the seller’s KTP/KITAS (Identity Card) and NPWP (Tax Registration Number) to confirm their identity and ensure tax obligations are met.
- Proof of Ownership or Lease Agreement: Verify that the property has a Sertifikat Hak Milik (SHM) for ownership or a notarized lease agreement for leased land. These documents are essential for securing permits and ensuring legal ownership.
- IMB/PBG (Building Permit): Check for a Persetujuan Bangunan Gedung (PBG) to confirm that construction complies with structural and environmental regulations. Also, request the SLF (Certificate of Worthiness) to ensure the building is legally constructed and safe for use.
- Ownership History: Check with the owner for past disputes, outstanding debts, or encumbrances to avoid future legal claims against the property.
- Zoning Compliance: Confirm that the property is in the correct zoning category for its intended use. Building in the wrong zone can result in fines, demolition, or legal action.
Environmental Assessment Papers: Large projects require AMDAL (Environmental Impact Analysis), while smaller ones need UKL-UPL (Environmental Management Plans). Non-compliance can lead to project rejection and legal consequences.
One of the most common mistakes investors make in Bali is failing to conduct proper due diligence before purchasing property. Land ownership disputes and fraudulent property documents are significant risks, making verification essential. Before signing any agreement, ensure the following:
- Identity Verification and Tax Compliance: First and most importantly, request the seller’s KTP/KITAS (Identity Card) and NPWP (Tax Registration Number) to confirm their identity and ensure tax obligations are met.
- Proof of Ownership or Lease Agreement: Verify that the property has a Sertifikat Hak Milik (SHM) for ownership or a notarized lease agreement for leased land. These documents are essential for securing permits and ensuring legal ownership.
- IMB/PBG (Building Permit): Check for a Persetujuan Bangunan Gedung (PBG) to confirm that construction complies with structural and environmental regulations. Also, request the SLF (Certificate of Worthiness) to ensure the building is legally constructed and safe for use.
- Ownership History: Check with the owner for past disputes, outstanding debts, or encumbrances to avoid future legal claims against the property.
- Zoning Compliance: Confirm that the property is in the correct zoning category for its intended use. Building in the wrong zone can result in fines, demolition, or legal action.
Environmental Assessment Papers: Large projects require AMDAL (Environmental Impact Analysis), while smaller ones need UKL-UPL (Environmental Management Plans). Non-compliance can lead to project rejection and legal consequences.
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Drafting a Secure Lease Agreement
Once all due diligence is complete, no issues arise with the seller, and both parties agree on the terms, the next step is to draft a secure lease agreement. A well-structured contract safeguards your investment while ensuring the seller’s rights and conditions are upheld. It serves as the legal backbone of your leasehold, minimizing risks and preventing disputes.
Key Clauses to Include in a Lease Agreement:
- Lease Duration and Renewal Terms: Clearly define the length of the lease, renewal options, and any conditions for extension to prevent unexpected termination or unfavorable renegotiation.
- Payment Structure and Conditions: Outline the total lease amount, payment schedule, deposit requirements, and penalties for late payments to avoid financial disputes.
Rights and Responsibilities of Both Parties: Specify maintenance responsibilities, usage restrictions, and any obligations related to taxes, utilities, or insurance to ensure smooth property management. - Early Termination and Dispute Resolution Terms: Establish the conditions under which either party can terminate the lease, along with procedures for mediation or legal action in case of conflicts.
For this, working with a trusted lawyer ensures that your lease agreement is legally binding, adheres to Indonesian property laws, and is free of loopholes that could be exploited.
You must also work with a notary or PPAT (Pejabat Pembuat Akta Tanah) to authenticate and legalize the lease agreement. The PPAT ensures that the contract is officially registered and that the landlord has the legal right to lease the property.
In a nutshell, the PPAT plays a crucial role in securing the transaction by:
- Authenticating the lease agreement and registering it with the authorities
- Verifying ownership and checking the legal status of the property
- Ensuring the transaction complies with Indonesian property regulations
Property Taxes and Fees in Bali
Aside from due diligence and other paperwork, foreign buyers should be aware of the various taxes and fees involved in property transactions. Below are the key costs to consider before finalizing a purchase:
- Acquisition Tax (BPHTB) – 5% of Property Value
This tax applies to property transfers such as sales, inheritance, and gifts, and is based on the Tax Object Acquisition Value (NPOP) set by local authorities. Payment is due within two months of the transaction to avoid a 2% monthly penalty. Exemptions may apply, such as transfers due to marriage, so consulting a tax expert is recommended. - Annual Land and Building Tax (PBB) – 0.5% of Assessed Value
Paid annually, this tax is based on the Tax Object Selling Value (NJOP) determined by the local government. Rates typically range from 0.1%–0.2% for land and 0.3%–1% for buildings, depending on location and property type. Properties in prime locations or with higher NJOP values may face significantly higher costs. - Notary and Legal Fees – Varies by Service
Legal fees are essential to ensuring compliance with Indonesian property laws and preventing disputes. Costs include:- Title Search Fees (0.5%–2% of property value): Verifies clear ownership and absence of disputes.
- Contract Drafting (0.5%–1% of property value): Covers leasehold or purchase agreements.
- Due Diligence ($1,000–$5,000): Confirms zoning and land use permissions, with processing times ranging from a few weeks to months.
- Rental Income Tax – 10%–20% of Lease Value
Foreign buyers earning rental income from their property in Indonesia are subject to taxation. Indonesian tax residents, including foreigners who stay in Indonesia for more than 183 days within a 12-month period, are taxed at 10% of their rental income. Non-tax residents, on the other hand, are subject to a higher 20% tax rate. Failure to comply with tax obligations can result in legal penalties and financial repercussions.
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How to Buy Property in Bali Safely
After understanding Bali’s real estate laws and legal requirements, the next step is to ensure a secure and legally sound transaction. Below is a step-by-step guide to protecting your investment:
Hire a Professional Legal Advisor
Work with a qualified lawyer and PPAT (Pejabat Pembuat Akta Tanah) experienced in Indonesian property law. They will guide you through due diligence, contract drafting, and tax compliance, ensuring that all legal requirements are met and that your transaction is legally binding.
Verify Land Zoning, Ownership Status, and Other Documents
Before making an offer, confirm the property’s zoning classification to ensure it aligns with your intended use (residential, commercial, or tourism). Additionally, conduct a thorough title search to verify that the seller has clear ownership rights and that the land is free from disputes, encumbrances, or unpaid debts.
Avoid Nominee Agreements
Some foreign buyers attempt to purchase property using local nominees, but these agreements are risky, legally unenforceable, and could lead to asset loss. Instead, opt for legal ownership structures such as leasehold agreements, foreign-owned companies (PT PMA), or Right to Use (Hak Pakai) titles.
Ensure a Clear and Complete Contract
Review all agreements carefully before signing. The contract should include lease duration, renewal terms, payment structures, tax obligations, and dispute resolution clauses. Missing or vague terms could lead to legal disputes or financial losses down the line.
Pay All Applicable Taxes and Fees
Stay compliant by paying acquisition taxes, annual property taxes, and rental income tax if applicable. Late or missed tax payments can result in penalties, legal issues, and potential property seizure. Consulting a tax expert ensures you meet all financial obligations.
Taking these precautionary steps will minimize risks, prevent costly mistakes, and safeguard your investment in Bali’s real estate market.
FAQ
Most Indonesian banks do not offer mortgages to foreign buyers. However, some international financial institutions and private lenders provide financing options, though they often require higher interest rates and stricter conditions.
No. While some foreigners attempt to acquire property in Bali using nominee agreements, this method is highly risky and legally questionable. Since these agreements are designed to bypass land ownership restrictions, they offer no legal protection and can be challenged or nullified by authorities, putting your investment at serious risk.
When a leasehold agreement expires, the property reverts to the landowner unless the lease is renewed. It’s crucial to include clear renewal terms in your lease contract to avoid losing the property at the end of the lease period.
The safest options are leasehold agreements, which grant long-term property rights without ownership, and establishing a PT PMA (foreign-owned company), which allows legal property ownership under Indonesian law. Each option has its own benefits and requirements, so consulting a legal expert is essential to determine the best fit for your investment.
Yes, these taxes include acquisition tax (BPHTB), annual land tax (PBB), and rental income tax.
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Make Your Bali Property Dream Into Reality!
Owning property in Bali is an exciting opportunity, but success lies in doing it right. Understanding ownership laws, zoning regulations, and due diligence requirements ensures that your investment is both legally secure and financially sound. Taking shortcuts or overlooking legalities can lead to costly mistakes, making professional guidance essential.
To navigate Bali’s real estate market with confidence, always consult experienced legal professionals who can help you structure a secure deal, verify property legitimacy, and ensure compliance with Indonesian property laws. By taking the right precautions and making informed decisions, you can turn your vision of owning property in Bali into a stress-free reality—one that offers long-term value and peace of mind.
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.
