Bali, often called the Island of the Gods, is a paradise for tourists and a hot spot for international investors looking to buy property. With its picturesque beaches, rich culture, and thriving real estate market, it’s no surprise that many foreigners dream of owning property in Bali. However, Indonesian law does not allow foreign nationals to own freehold land outright. That said, there are ways for foreigners to invest in Bali’s real estate. This updated 2024 guide provides everything you need to know about how to buy property in Bali as a foreigner.
Can Foreigners Buy Property in Bali?
In short, foreigners cannot directly own freehold property in Indonesia. However, there are legal structures that allow foreigners to purchase property in Bali, such as leasehold agreements, the right-to-use (Hak Pakai) title, or through establishing an Indonesian legal entity (PT PMA). Each option has its pros and cons, and this guide will explain them in detail.
Legal Options for Foreigners to Own Property in Bali
1. Leasehold (Hak Sewa) Agreement
A leasehold agreement, or Hak Sewa, is the most common way for foreigners to buy property in Bali. Under a leasehold agreement, you are leasing the land or property for a specific time period, usually between 25 to 50 years, with the option to extend. While you don’t own the land, you have the right to use the property for the duration of the lease.
- Duration: Lease periods generally last 25-50 years, with an option to extend the lease.
- Renewal: Make sure your lease includes a renewal clause so you can extend your contract when the lease period expires.
- Subleasing: Depending on the contract, you may be able to sublease the property, creating an additional revenue stream.
2. Right-to-Use (Hak Pakai) Title
The Hak Pakai title is another way for foreigners to legally own property in Bali. It’s a right-to-use title issued for residential purposes and can last up to 30 years, with the option to extend for another 20 years.
- Eligible Properties: The Hak Pakai title is only applicable to certain types of properties, such as apartments or houses, and must be registered under your name.
- Extension: After the initial 30 years, you can extend the title for an additional 20 years, giving you a total of 50 years.
- Ownership: You have the right to use and profit from the property during the validity of the Hak Pakai title.
3. PT PMA (Indonesian Legal Entity)
If you’re a foreign investor looking to purchase property for commercial purposes, you can establish a PT PMA (Penanaman Modal Asing), which is an Indonesian legal entity that allows foreigners to own property. This method is ideal for those looking to develop commercial properties such as hotels, resorts, or rental units.
- Full Ownership: Through a PT PMA, foreigners can own commercial properties outright.
- Business Purposes: This option is suitable for investors looking to generate income through businesses like hotels, resorts, or apartment rentals.
- Costs: Establishing a PT PMA can be expensive and involves more legal and bureaucratic procedures compared to other options.
Also read: 7 Tips to Choose The Right Property Agent in Bali
Steps to Buying Property in Bali as a Foreigner
1. Conduct Thorough Research
Before jumping into any property investment, it’s essential to do thorough research on the Bali real estate market. Research property prices, locations, and the type of property you want to invest in. Popular areas include Seminyak, Canggu, Ubud, and Uluwatu, each offering a unique lifestyle and investment opportunity.
- Location: Seminyak and Canggu are known for luxury villas and high tourist traffic, making them ideal for investment. Ubud is perfect for those seeking tranquility and a connection with nature.
- Property Type: Decide whether you’re interested in a villa, apartment, or commercial property, as each offers different investment potentials and legal considerations.
2. Hire a Reputable Real Estate Agent and Lawyer
Navigating the property market in Bali as a foreigner can be challenging. To ensure you’re making the right decisions, hire a reputable local real estate agent and a lawyer who specializes in Indonesian property law. They can help verify the legality of the property, negotiate the price, and ensure all legal documents are in order.
- Real Estate Agent: A knowledgeable agent will help you find properties that fit your budget and requirements.
- Lawyer: Your lawyer will ensure that the property has a clear title, handle lease negotiations, and ensure that all legal processes are followed correctly.
3. Negotiate the Terms
Once you find a property you’re interested in, it’s time to negotiate the terms of the lease or purchase. Key points to focus on include the lease duration, renewal options, maintenance responsibilities, and any associated fees or taxes.
- Lease Period: Confirm the length of the lease and discuss renewal clauses.
- Fees and Taxes: Ask about property taxes, notary fees, and any other additional costs.
- Subleasing: If you plan to rent out the property, make sure the contract allows for subleasing.
4. Sign the Agreement in Front of a Notary
Once negotiations are finalized, the next step is signing the agreement in front of a notary. The notary will ensure that the agreement is legal and binding under Indonesian law. Make sure you receive copies of all signed documents for your records.
Costs Involved in Buying Property in Bali
Buying property in Bali comes with several costs beyond the purchase price. Here’s a breakdown of the common expenses:
- Property Price: This is the negotiated cost of the property or lease.
- Notary Fees: A notary is required to finalize the transaction, and their fees are usually 1% to 2% of the property’s value.
- Taxes: You may be required to pay property taxes, which are typically paid annually and can vary depending on the location and type of property.
- Agent Fees: If you use a real estate agent, you will need to pay their commission, which is usually 5% of the property value.
Common Pitfalls to Avoid
1. Lack of Due Diligence
Many foreigners rush into buying property in Bali without doing proper due diligence. Always verify that the property has a clear title, check for any outstanding taxes or legal issues, and ensure that the property’s ownership is legally valid.
2. Not Consulting a Lawyer
Hiring a lawyer is critical when purchasing property in Bali. They will ensure the legalities of the transaction are in order and that your rights as a foreigner are protected. Skipping this step can result in costly mistakes.
3. Misunderstanding Lease Agreements
Some lease agreements in Bali can be complex and may not include automatic renewal options. Make sure you understand the full terms of the lease and any renewal clauses before signing.
Also read: How to Lease Property in Bali as a Foreigner (2024 Guide)
FAQs About Buying Property in Bali
1. Can foreigners buy freehold property in Bali?
No, Indonesian law prohibits foreigners from owning freehold property. However, you can lease property or buy through an Indonesian legal entity.
2. How long can foreigners lease property in Bali?
Lease agreements typically last between 25 to 50 years, with the option to extend.
3. What are the costs associated with buying property in Bali?
In addition to the property price, buyers must pay notary fees, property taxes, and agent commissions.
4. What is the most common way for foreigners to own property in Bali?
The most common way for foreigners to own property is through a leasehold agreement or by establishing a PT PMA for commercial properties.
Conclusion
Buying property in Bali as a foreigner may seem complex, but with the right guidance and knowledge, it is entirely possible. Whether you’re looking to invest in a villa, apartment, or commercial property, understanding your legal options and following the correct steps will ensure a smooth process. By using a reputable real estate agent, consulting a lawyer, and negotiating smartly, you can successfully invest in Bali’s thriving real estate market in 2024 and beyond.
