Buying land in Bali is one of the most attractive investment opportunities in Indonesia. The island’s real estate market offers strong potential, but understanding the legal framework is essential before taking any step. Property ownership in Indonesia is governed by specific land laws that define who can own, use, or lease land.
Understanding Property Ownership in Bali
Foreigners cannot directly own freehold land in Indonesia. However, there are several legal pathways that allow property use or ownership through structured rights.
Here are the main types of ownership and usage rights:
- Hak Milik (Freehold Ownership)
- This is the strongest and most permanent ownership title.
- Only Indonesian citizens can hold Hak Milik.
- Foreigners cannot legally own land under this status, although they can lease or convert it under other legal arrangements.
- Hak Pakai (Right to Use)
- Allows foreigners to use land for residential purposes with government approval.
- Usually valid for 30 years and renewable for additional terms.
- The foreign holder does not own the land but has full residential rights for the duration of the agreement.
- Hak Guna Bangunan (Right to Build)
- Commonly used for commercial or hospitality projects such as villas, resorts, or hotels.
- This right is typically held through a foreign-owned company known as a PT PMA.
- It allows construction and use of buildings for long periods, which can be extended up to 80 years.
- Leasehold (Hak Sewa)
- A private contract between the foreign investor and the landowner.
- Usually runs for 25 to 30 years with possible extensions written into the agreement.
- Easier and faster to set up compared to company ownership, but must be drafted carefully to protect both parties.
Setting Up a PT PMA
For larger investments or business operations, establishing a PT PMA (Foreign Investment Company) is the most reliable and transparent option.
A PT PMA allows foreigners to operate legally within Indonesia and engage in activities such as property development, hospitality, or tourism.
The company can hold land under Hak Guna Bangunan or Hak Pakai titles, making it a secure structure for long-term ownership.
Setting up a PT PMA involves registering through the Investment Coordinating Board (BKPM) and meeting capital requirements, but it provides peace of mind and legal protection for investors.
Steps Before Buying Land
Before making a purchase, investors should follow these key steps:
- Conduct Land Due Diligence
- Verify the land certificate (Sertifikat Tanah) to ensure the ownership is clear and free from disputes.
- Check the zoning designation to confirm that the land can be used for your intended purpose, such as residential or commercial.
- Hire a Trusted Notary (PPAT)
- A notary handles all the legal documentation and ensures the transaction is compliant with Indonesian law.
- Always use a licensed and reputable professional familiar with foreign ownership procedures.
- Understand the Tax Structure
- The buyer is required to pay a 5 percent tax (BPHTB) based on the property’s declared value.
- The seller usually pays a 2.5 percent income tax on the sale amount.
- Additional taxes may apply if the purchase is made through a company.
- Confirm Access and Infrastructure
- Make sure the land has proper access to a public road, electricity, and water.
- Avoid land that lacks legal access rights or relies on informal paths.
- Complete the Transaction Legally
- All transactions must be signed and witnessed by a notary.
- Avoid cash deals or informal agreements that are not legally registered.
Common Pitfalls to Avoid
- Buying land through nominee arrangements without legal safeguards.
- Building on land located in restricted or protected green zones.
- Skipping due diligence and relying on verbal assurances.
- Neglecting to include renewal terms or clear exit clauses in lease agreements.
Key Takeaways for Investors
Buying land in Bali can be rewarding when done with the right understanding and preparation.
Each ownership type such as Hak Pakai, Hak Guna Bangunan, and Leasehold offers unique advantages depending on your investment goal.
Working with licensed professionals, from legal advisors to notaries, ensures that every step aligns with Indonesian law.
By taking the time to structure your investment properly, you safeguard both your assets and your long-term potential in Bali’s thriving real estate market.
