F.A.Q. (Frequently Asked Questions): 8 Things Foreigners Need to Keep in mind before Buying a Villa in Indonesia, Bali
Indonesian property law for foreigners is structured to restrict direct ownership of land while providing alternative legal mechanisms to allow foreign nationals to invest in or use property. Here’s a detailed list of 8 Things Foreigners Need to Keep in mind before Buying a Villa in Indonesia, Bali:
1. Ownership Restrictions
Indonesia prohibits foreign individuals from owning land with a Hak Milik (Freehold Title), which is the highest and most secure form of land ownership. This law is intended to protect national assets and prioritize Indonesian citizens.
2. Legal Options for Foreigners
Although direct ownership is restricted, there are several legal pathways available for foreigners to invest in property in Indonesia:
a. Hak Pakai (Right to Use)
- What It Is: Hak Pakai grants foreigners the right to use and occupy land or property for residential purposes.
- Duration: Valid for 30 years, renewable for an additional 20 years, and extendable for another 30 years (total 80 years).
- Eligibility: You must hold a valid Indonesian stay permit (KITAS or KITAP).
- Property Types: Only properties designated as Hak Milik can be converted to Hak Pakai, but this requires agreement from the owner and reclassification of the land title.
b. Hak Sewa (Leasehold)
- What It Is: A leasing agreement where you rent the property for a fixed period, typically ranging from 25 to 99 years.
- Ownership: The property remains owned by the original owner, but you have exclusive rights to use it during the lease term.
- Key Advantage: No residency permit is required, making it simpler for foreign investors.
c. Hak Guna Bangunan (Right to Build)
- What It Is: This right allows the holder to construct and own buildings on land they don’t own.
- Duration: Initially valid for 30 years, renewable for 20 years, and extendable for another 30 years (total 80 years).
- Who Can Use It: Foreign-owned companies (PT PMA), not individuals. This is common for foreigners who establish a business in Indonesia.
d. PT PMA (Foreign-Owned Company)
- What It Is: A PT PMA is a legal entity that allows foreigners to operate businesses in Indonesia and acquire land rights (such as Hak Guna Bangunan or Hak Pakai).
- Benefits: A PT PMA can purchase larger properties for commercial purposes, such as building and renting out villas.
- Challenges: Setting up a PT PMA requires compliance with Indonesian business laws, including minimum investment requirements.
3. Eligible Property Types for Foreigners
Foreigners can only purchase property under specific conditions:
- Residential Use: The property must be for personal use, not speculative purposes.
- Price Limits: The Indonesian government sets minimum purchase prices for foreigners based on location (e.g., Bali has different thresholds than Jakarta). For villas in Bali, the minimum price is typically IDR 3 billion (~USD 200,000), but it varies by province.
- Property Zoning: The land must be located in an area designated for residential or commercial use.
4. Legal Framework and Regulations
- Basic Agrarian Law (UUPA): Indonesian Law No. 5 of 1960 regulates land ownership, including restrictions for foreigners.
- Government Regulation No. 103 of 2015: This allows foreigners to own property under Hak Pakai, provided they meet the requirements.
- Government Regulation No. 18 of 2021: Part of Indonesia’s Omnibus Law reforms, this regulation further clarifies foreign ownership rights, including leaseholds and Hak Pakai.
5. Risks to Avoid
- Nominee Arrangements: Some foreigners use an Indonesian citizen as a “nominee” to hold Hak Milik property on their behalf. This arrangement is risky because it is not legally recognized and could lead to loss of property.
- Unclear Land Titles: Ensure the property has proper documentation and that the seller has legal ownership rights.
- Zoning and Permits: Verify that the property complies with zoning regulations and has the required permits for construction or business use.
6. Key Documents to Check
When acquiring property under Hak Pakai, Hak Sewa, or through a PT PMA, ensure the following documents are verified by a notary:
- Land Certificate (Sertifikat Tanah): Verify the type of land title (e.g., Hak Milik or HGB).
- Building Permit (IMB): Confirms that the property was constructed legally.
- Tax Payments (SPPT PBB): Ensure property taxes have been paid up to date.
- Zoning Certificate (Surat Keterangan Rencana Kota or SKRK): Confirms the property’s zoning status.
7. Tax Implications
- Foreigners must pay property acquisition tax (5-10% of the transaction value, depending on the agreement).
- Annual property taxes (PBB) are applicable.
8. Practical Steps for Foreigners
1. Engage Professionals: Work with a reputable real estate agent, property lawyer, and notary.
2. Understand the Region: Different provinces may have varying regulations and price thresholds for foreign ownership.
3. Focus on Legal Compliance: Avoid unofficial shortcuts like nominee arrangements. Stick to options recognized under Indonesian law.
Would you like more information about specific property acquisition methods, such as setting up a PT PMA or the leasehold process?
