Buying Property in Bali: Essentials Tips for Foreigners

Buying property in Bali has become increasingly popular due to the island’s stunning landscapes and rich cultural charm, making it a prime destination for foreign investment. This guide will lead you through the intricate process of acquiring real estate while ensuring a secure and legally compliant transaction.

Whether captivated by the island’s allure or seeking a sound investment opportunity, understanding the nuances of all the technicalities will benefit foreign property ownership in Bali.

Can Foreigners Buy Property in Bali?

Bali’s beautiful scenery and booming tourism make it a popular choice for foreign investors. However, Indonesian law restricts foreign ownership of land, meaning foreigners cannot directly own freehold property (Hak Milik). Instead, they can opt for alternatives like the Right to Use (Hak Pakai), which allows long-term leases up to 80 years with a valid stay permit, or the Right to Build (HGB), available for foreign-owned companies (PT PMA) to develop property for a set period.

Many investors prefer leasehold agreements, typically lasting 25-30 years with extension options. Some use local nominees to hold property, but this carries legal risks and is not officially recognized. To avoid complications, foreign buyers should seek legal advice and follow approved ownership structures.

Types of Property Rights in Bali

Navigating the landscape of buying property in Bali for expats involves three key permits:

1. Right to Build (Hak Guna Bangunan/HGB)

This permit enables you to construct buildings on leased land, with initial ownership period of 30 years, extendable to 80 years. This right is commonly used for commercial developments, hotels, and investment properties, making it a popular option for foreigners looking to establish a business in Bali.

2. Right to Use (Hak Pakai/HP)

Right to Use title allows you to utilize properties already built on land with a tenure of 25 years, renewable for up to 70 years. To qualify, a foreign buyer must hold a valid stay permit (KITAS/KITAP). This right is typically applicable to residential properties and must be converted from Hak Milik with government approval.

3. Right to Own (Hak Milik/HM)

Hak Milik is the strongest form of land ownership in Indonesia, providing full and unrestricted ownership limited to Indonesian citizens and legal entities. This title allows the owner to freely inherit, sell, or transfer the property without any limitations.

However, foreigners are not allowed to own Hak Milik properties, making it necessary to explore alternative legal ownership structures.

Property Due Diligence in Bali

Conducting due diligence is a crucial step before acquiring Bali’s real estate to ensure legal compliance and protect your investment. Here are the key aspects to verify:

1. Verify Land Ownership

Confirm the property’s legal status and ensure the seller has the right to transfer ownership or lease the land. Check if the title is Hak Milik, Hak Pakai, HGB, or Leasehold and verify its validity with a notary (PPAT).

2. Check Zoning and Land Use Regulations

Ensure the property is in the correct zoning area for residential, commercial, or tourism use. Buying in a restricted zone can lead to legal issues or limitations on property use.

3. Confirm No Legal Disputes or Debts

Check for any outstanding disputes, inheritance claims, or unpaid taxes. Ensure there are no existing loans or financial liabilities tied to the property.

4. Review Contracts and Agreements

Carefully examine the Sales and Purchase Agreement (SPA) or lease contract, ensuring all terms, lease duration, and extension rights are clearly stated and legally recognized.

5. Verify Access and Infrastructure

Ensure the property has legal road access, water, electricity, and essential infrastructure to avoid future issues.

Land Zoning Category in Bali for Property Development

Bali’s land zoning regulations determine where and how properties can be developed, ensuring sustainable growth. Here are the main zoning categories:

Green Zones (Agricultural & Restricted Development)

These areas are primarily for agriculture, preserving Bali’s natural resources. Construction is highly restricted, with limited approvals for buildings like villas.
Locations: Ubud, Nusa Dua, Sanur, Mount Batur, Amed, Lovina.

Yellow Zones (Agriculture with Limited Residential Use)

Land in this category is mainly agricultural but may be converted for residential purposes following specific regulations.
Locations: Ubud, Jimbaran.

Red Zones (Commercial & Industrial Use)

Designated for business activities, allowing the construction of offices, retail spaces, and industrial facilities.
Locations: Denpasar, Seminyak.

Orange Zones (Residential Development)

Allocated for housing, including private homes and apartments for locals and expatriates.
Locations: Denpasar, Kerobokan, Pererenan.

Special Economic Zones (SEZ)

Designed to attract foreign investment and boost economic development, offering business incentives and tax benefits.
Locations: Sanur, Nusa Penida.

Pink Zones (Tourism & Hospitality)

This zone is intended for tourism-related developments, allowing hotels, resorts, and villas to be built.
Locations: Kuta, Seminyak, Nusa Dua, Mount Batur, Amed, Lovina, Uluwatu, Jimbaran, Canggu.

Understanding zoning laws is essential for buying property in Bali to ensure compliance and avoid legal issues.

How to Buy Property in Bali Safely

The safest option to buy a property in Bali for foreigners is using their company name. Therefore, it is better to set up a foreign-owned company in Bali before purchasing your desired property.

Here are five key steps to ensure a smooth and legal purchase: 

1. Understand Legal Ownership Options

Foreigners cannot own freehold property (Hak Milik) in Indonesia but can acquire property through alternatives like Right to Use (Hak Pakai), Right to Build (HGB) through a PT PMA, or long-term lease agreements. Choosing the right structure ensures compliance with Indonesian law.

2. Conduct Due Diligence

Verify the property’s legal status, land certificate type, and any potential disputes or zoning restrictions. Hiring a legal consultant or notary (PPAT) is essential to confirm ownership, check permits, and avoid legal risks.

3. Negotiate and Draft Agreements

Once due diligence is complete, negotiate terms with the seller and sign a Letter of Intent (LOI) or Sales and Purchase Agreement (SPA). Ensure the contract outlines payment terms, lease duration (if applicable), and legal obligations to protect your investment.

4. Secure Permits and Complete Payment

For Hak Pakai, a valid stay permit (KITAS/KITAP) is required, while HGB requires setting up a PT PMA. Payments should be made according to the agreed schedule, with the final amount paid upon signing the Deed of Sale (AJB) before a notary.

5. Register Ownership and Manage Property

Complete property registration under the chosen ownership structure and pay applicable taxes like land and building tax (PBB). If purchasing for investment, consider hiring a property management company to handle rentals and maintenance for a hassle-free experience.

Following these steps ensures a legal and secure property purchase in Bali while protecting your investment in the long run.

 

READ MORE:

• Property Management: 5 Tips to Choose A Property in Bali
• 4 Tips for Maximizing ROI for Your Bali Property
• The Ultimate Handbook for Managing a Rental Property in Bali

Steps of Buying Property in Bali

The procedure for acquiring property in Bali through a foreign-owned company involves several stages:

1. Document Submission

Submit comprehensive forms and supporting documentation to the Indonesian National Land Office (BPN).

2. Compliance Checks

Fulfill the conditions for Hak Pakai, including a valid building permit (IMB) and proof of land payment.

3. Approval and Issuance

The BPN will grant a Hak Pakai under your PT PMA’s name upon satisfying requirements.

4. Legal Requirements for Foreign Property Buyers

For those purchasing property in Bali not for business or commercial use, adherence to the following guidelines is necessary:

• Residency Status: Only foreigners with valid KITAS/KITAP permits can proceed with the property ownership process in Bali.
• Minimum Property Value: Based on the recent legal requirements, a property value must meet the minimum the Ministry of Agrarian Affairs set.
• Ownership Limit: Foreigners with KITAS/KITAP are restricted to owning a single property.

Things to Avoid when Buying Property in Bali

The intricacies of property acquisition in Bali demand vigilance. Employ these proactive strategies to evade potential pitfalls:

1. Thorough Due Diligence

Conduct comprehensive background checks to identify any unsettled taxes, legal disputes, or other issues.

2. Residency Compliance

Avoid being absent from Indonesia for over a year to prevent potential property confiscation.

3. Marital Agreements

Acknowledge that ownership of Hak Milik remains with the Indonesian spouse; safeguard your investment with a prenuptial or postnuptial agreement.

How InCorp Indonesia Can Help

To adeptly navigate the complexities of property acquisition in Bali, seeking expert advice is paramount. InCorp Indonesia offers professional legal assistance and can guide you through each step of the process. Consult our experts at our Bali, Jakarta, Semarang, Surabaya, and Batam offices, or complete the form below to receive personalized guidance and ensure a secure and successful property investment journey.