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Can Foreigners Own Property in Bali? Here’s What You Need to Know

Bali’s stunning beaches, vibrant culture, and thriving tourism have made it a prime destination for property investment. Not only for Indonesian itself, but also for many foreigners. The question looms: can non-Indonesians actually own property in Bali? The answer is a bit complex, but there are clear pathways for those looking to invest.

The Short Answer: No Freehold, But There Are Options
Unfortunately under the law of Indonesia, foreigners are not eligible to hold freehold title(known as “Hak Milik”) in Indonesia. However, this doesn’t mean you’re out of options! There are three main ways foreigners can invest in Bali property:

1. Leasehold (Hak Sewa): This is the most easiest way and common method for foreigners. Leasehold can be granted over land with Freehold title, Rights to Build (Hak Guna Bangunan or HGB), Rights to Use (Hak Pakai), and other less common titles. The lease term generally cannot exceed the duration of the underlying land title. For example, a lease on Right to Build land is typically limited to 30 years, with a possible 20-year extension and another 30-year renewal, subject to conditions.

Under a lease contract, foreigners can lease empty land, build permanent structures, and sell the remaining lease term through a sublease or by transferring their Leasehold Right.

In Indonesia, a Leasehold Right should be established through a notarial deed. Unlike in some other countries, leasehold rights are not formally registered with the local land office (Kantor Pertanahan). We need to make sure as well that the lease contract is include an agreement for extending the lease. However, the price for the extension cannot usually be pre-agreed and the lease extension price will be determined by market value at the time of the extension.

2. Right to Use (“Sertifikat Hak Pakai” or “SHP”)

The Right to Use title allows someone to use state-owned land or land owned by others for a specific purpose, as agreed by both parties. It can be applied to land with a Freehold title (Hak Milik), but the Freehold title must first be converted (downgraded) to the Right to Use title. This conversion is formally registered at the local land office (Kantor Pertanahan), which will issue a Right to Use certificate in the foreigner’s name.

This title can be held by Indonesian citizens, individual foreigners residing in Indonesia, foreign embassies, or representative offices of foreign institutions. The Right to Use title is valid for up to 30 years, with an option to extend for another 20 years, and potentially renew for an additional 30 years, subject to certain conditions.

The key advantage of Right to Use compared to Leasehold is that with Right to Use, the certificate is in your name, and you can sell the property to an Indonesian citizen after converting the title back to Freehold. There are some costs involved in this conversion, but with the Right to Use, the selling price can reflect Freehold value, allowing you to benefit from capital gains. This can make the Right to Use title a more economically attractive option, as the property can appreciate over time. Please keep in mind that this title is only available to foreigners who have resided in Indonesia for a minimum of 5 years and hold a valid KITAP (permanent stay permit).

3. Right to Build (“Sertifikat Hak Guna Bangunan” or “SHGB”)

The Right to Build (HGB) title allows the holder to construct buildings on state-owned or privately-owned land for a specific purpose, based on mutual agreement. This right can be applied to land with a Freehold title (Hak Milik), but the Freehold title must first be converted (downgraded) to HGB under the name of a foreign investment company (PMA). The process is formally registered at the local land office (Kantor Pertanahan), which will issue a Right to Build certificate (Surat Hak Guna Bangunan or SHGB) in the company’s name.

The HGB title can be held by Indonesian companies, foreign investment companies (PMA), individual foreigners residing in Indonesia, foreign embassies, or representative offices of foreign institutions. It is initially valid for 30 years, with an option to extend for another 20 years and potentially renew for an additional 30 years, subject to conditions.

HGB title provides a building ownership certificate (SHGB) under the PMA’s name, allowing the property to be resold to Indonesian citizens after converting it back to Freehold. There are some costs involved in this conversion, but with HGB, the selling price can match Freehold property prices.

This type of ownership offers dual benefits, providing both rental income and capital gains as the property value increases over time.

If you require any further information related with this article please contact us, our team will be delighted to assist you.