How to buy property and land in Bali; Your complete guide – Buying land and property in Bali is the ultimate dream for many; whether it is for investment purposes or a retirement plan, the rules and regulations regarding ownership for foreigners are quite complex and confusing for many. But, fear not, in this article Arika Citra – one of Social Expats amazing team, answers your most common questions about the rules and regulations of buying property or land in Indonesia.
SE: What are the different land and property titles in Indonesia?
AC: Land certificates are evidence or legality of legal ownership or control of land in Indonesia to register landowners or rulers to avoid agrarian conflicts in the future. Meanwhile, property certificates (titles) are legality or proof of property registration on the land owned or controlled, for example in Indonesia it is a building permit (IMB) or post- Omnibus Law (UU Cipta Kerja) is referred to as Building Construction Approval (PBG). The purpose is different from land certificates, where the purpose of this property sign is as a reference and legality of the establishment or establishment of the property so as not to violate local regulations.
SE: Firstly, can foreigners buy land in Indonesia?
AC: Foreigners can buy land in Indonesia, but with limited status, not Rights of Ownership (freehold titles). Ownership of these rights is regulated in Law No. 5 of 1960 on Basic Rules of Agrarian Principals (“UUPA”), Law No. 11 of 2020 on Omnibus Law (“UU Cipta Kerja”), and PP 18 of 2021. Which the rights to land intended by foreigners is only the Right Of Use, Right of Build and Lease. Foreigners are also entitled to the Right of Ownership over Stacked Units.
SE: Why are there regulations in place to stop foreigners from buying land and freehold titles?
AC: For foreigners, there is a prohibition on ownership of property rights (freehold) by Article 21 of the Agrarian Law. This limitation of property rights for foreigners is one of the principles in agrarian law, namely the principle of nationalism. it can be seen from the establishment of Agrarian Law in Indonesia, one of which comes from the Presidential Decree of July 5, 1959, Article 33 of the 1945 Constitution of the Republic of Indonesia, and the Indonesian Political Manifesto which was also emphasized in the Presidential Speech on August 17, 1950, which requires the state to regulate land ownership and lead its use, so that all land in the entire territory of the nation’s sovereignty is used for the greatest prosperity of the people, both individually and in cooperation.
SE: What are the different types of land ownership in Indonesia?
AC: Right of Ownership – Hak Milik, SHM (Article 20-27 Agrarian Law) Property rights are the most fundamental and strong land ownership rights. By having these rights, a person has full control over the land that belongs to the owner. Ownership rights only can be owned by the Indonesian citizen and certain legal determined by the government based on Government Regulation Number 38 of 1963.
Right to Cultivate – Hak Guna Usaha, HGU (Article 28-34 Agrarian Law) the right to cultivate is the right of a citizen or certain institution to carry out a business activity on land controlled by the state. The right of cultivation is granted permanently for a maximum of 35 years. However, the right can still be extended for 25 years and renewed for 35 years.
Rights to Build – Hak Guna Bangunan, HGB (Article 35-40 Agrarian Law) is the right of a person or certain legal entity to construct a building on land that does not belong to the buyer. This type of usufructuary is commonly used for industrial, residential, commercial business areas. Building Use Rights are granted for a maximum of 30 years. Then, this right can be extended for 20 years and renewed for 30 years.
Right of Use – Hak Pakai , HP (Article 41-43 Agrarian Law) Right of Use is the right of a person or certain legal entity to use and/or take the proceeds or products from a land that is not theirs. Land that can be used and/or the proceeds are taken in the Right to Use may belong to a person, a business entity, or the state. Right of Use is granted for a maximum of 25 years. Then, the right can be extended for up to 20 years and renewed for 25 years.
Right of Ownership over Stacked Units – Hak Milik Atas Satuan Rumah Susun, HMSRS parties who are entitled to hold the land title on which the building is erected, foreign citizens; Under GR 18/2021, foreigners can now own apartment units under the right of ownership over stacked unit’s land titles. Foreigners can only acquire HMSRS titles to apartments located in special economic zones, free trade zones, industrial zones, or other economic zones (tourism zones, suburban zones, or urban zones). Moreover, foreigners can also own landed houses built on land with HP titles and apartments units built on land with HP or HGB titles.
SE: If a foreigner makes a PMA, can this be used to buy land/freehold property?
AC: PT. PMA can certainly buy property, but not the land from where the property is built because as already explained above, foreigners cannot have the Rights of Ownership in Indonesia. The property can be purchased using Rights to Build (HGB) and Right of Use (HP). Both titles can make a foreigner the owner of the property within the lawful term of the HBG titles and HP titles and also can sell the property in the future. If the buyer is an Indonesian Citizen, which can make the status of the certificate change to a Rights of Ownership (Freehold/SHM).
SE: Then how to buy a property in Indonesia?
AC: For some people, buying a land/property with a nominee option is enough to help foreigners in obtaining Rights of Ownership (freehold titles); however, this is a risky option as you are in a weak legal position and you could lose the property if your relationship sours.
As the result, a foreign national who wants to invest in property in Bali could do it through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) certificate which is the safest way.
If you do decide to invest in property or land in Indonesia it is wise to ensure your investment is sound and it would be advisable to check the land is in the correct legal position by checking the Certificate of Land ensuring it has the status Right of Use and/or Right to Build according to the National Land Agency (BPN).
After the check is done, the Buyer can submit a certificate application for the Property that can be in the form of a certificate of building rights accompanied by other supporting documents such as Building Permit (IMB) and proof of payment of land payments and fulfillment of Right of Build and also Right of Use and after that, the BPN will issue the certificate under the name of the PMA Company.
This article is only for general information and education. All forms of information and inquiries should be consulted on a case-by-case. You can contact us or LetsMoveIndonesia for further information.
