Can A Foreigner Buy Property In Bali?
Bali is a popular holiday and travel destination. However, a growing number of foreigners are investing in Bali by purchasing property.
Foreigners can acquire property in risky ways. Foreign investors often use a nominee to purchase a property, which provides little protection for their investment.
This article will help you to purchase property in Bali safely by setting up a foreign-owned business (PT PMA).
Bali property ownership for foreigners
Law 5 of 1960 regulates property ownership and real estate in Indonesia. It includes three types of rights that are relevant to this article:
- Right to Own (Hak Milik).
- Right to Build (Hak Guna Bangunan)
- Right to use (Hak Pakai).
Many foreign investors in Bali believe that the best way to buy property in Bali is to use an Indonesian citizen (a nominee), to act for them to obtain the Hak Milik Certificate.
It is however a very risky business as the local nominee could take over the property. Foreign buyers cannot protect their investment.
PMA VS Nominee
The most common nominee structure is illegal and puts investors’ capital at risk. A foreign investment company is the best legal structure for a foreigner to purchase land in Lombok, Bali, or permit property ownership rights.
BKPM has vetted and highly regulated the PT PMA Alternative. It includes paid-up capital that is used for daily business operations in Indonesia. Additionally, it must meet high-level reporting requirements, which must comply with international investment standards.
Using this PT PMA licensing scheme is an option that some companies offer.
How can they do it?
The companies have a PMA for the real-estate sector. These licenses allow these companies to purchase, sell, and develop land in Indonesia. This license also provides a legal platform for foreigners to purchase property and land in Indonesia without the need of a local nominee.
The only legal structure that foreigners can use for investment purposes is the HGB title. This can be achieved by establishing a new Foreign Investment Company structure or using an existing Foreign Investment Company structure (PT PMA).
While a foreigner cannot own land in Indonesian, a company can. This allows the investor to become a bona fide property owner. A company gives you direct rights to the land and property. This is the closest foreigner can get without the need for a nominee.
The common usage of the nominee structure is not meant for foreign investment but for married couples. While nominee structures are a common practice, many foreigners have had their property and land taken away during disputes. The deeds of a PMA company are held to remove this risk and comply with Indonesian law.
Foreign investors will find it best to buy land through an existing PMA. This is the best option for legality, cost, security, and peace of mind.
How to buy property in Bali
You will need to be able to obtain the Right to Build/Right to Use.
- Send completed forms and supporting documents to the Indonesian National Land Office. Your representative will usually do this.
- You must provide proof of land payment to be eligible for Hak Guna Bangunan and Hak Pakai.
- Get the right to build by obtaining the appropriate building permit (PBG).
- The BPN will issue the certification under your company name.
Why you shouldn’t buy property in Bali with a local nominee
Foreign nationals, or even local companies, cannot acquire Hak Milik (land ownership also known as freehold). Many foreign investors believe that they must use local nominees.
We hope you are able to convince your boss that this is not necessary. You can purchase Hak Guna Bangunan or Hak Pakai from your own PT PMA company, which is the best way to invest in property in Bali.
Sometimes, foreign nationals think they have found someone they can trust 100% and it is easier or better to purchase land under their name.
Although you may have all the trust, and the local person might have the best intentions it is still a risky investment as you won’t have any legal rights to the property.
Sometimes human relations can go wrong. Your trustee might be the victim. Divorce and marriage are all possible scenarios. These external parties may not have the same intentions as you.
Don’t choose to be a trustee unless you are prepared to accept that you may lose all of your investment. Trusting an unreliable nominee for your investment is one of the biggest mistakes foreign investors in Indonesia make.
Buying Property in Bali: A summary
Whatever method you decide to use to go about buying a villa in Bali, Excel Bali can help you navigate the entire process from beginning to close to make the process as simple as possible for you.
Foreigners must also be aware of the type of title of the property they are purchasing. Are they a Freehold, Right of Use, or Leasehold? Our professional, acknowledgeable team of agents can help guide investors through every detail, to help their desire to own a home in Bali turns into reality.