Foreigners can only completely own property in Indonesia by establishing an Indonesian legal entity, known as a PT PMA. The Hak Guna Bangunan (HGB) ownership title is granted to the entity, which provides secure ownership of the property. Alternatively, the Right to Build and Right to Use (Hak Pakai) titles can also provide foreigners with clear legal standing when it comes to property ownership in Indonesia. These titles allow the foreign owner to use and develop the land for a set period of time.
It is not possible for non-Indonesian citizens to directly own land in Indonesia, foreigners can obtain a leasehold title (Hak Sewa) for a specific duration of time. This title grants the foreigner the right to use and occupy the land and building for the agreed-upon time frame. This title is legally valid and can be held in the foreigner’s name, providing protection under Indonesian law.
Freehold ownership: also known as Hak Milik, the most comprehensive form of property ownership in Indonesia. But only Indonesian citizens can own land under this title. Limited liability companies and foreign individuals cannot obtain land with a Hak Milik title. The owner of a Hak Milik title can use the land for any purpose, subject to zoning restrictions, but cannot exploit natural resources found on or under the land. The title has no limit and can be sold, gifted, exchanged, inherited, or used as a mortgage. Foreigners can acquire land under a different form of entitlement called Hak Pakai or Right of Use.
Leasehold Ownership: also known as Hak Sewa, grants the holder the right to use an unoccupied plot of land or existing building(s) on someone else’s land for a fixed period of time. This type of title can be granted over land that is currently held under a freehold title (Hak Milik), right to build title (HGB), or right to use title (Hak Pakai). Leasehold (Hak Sewa) properties are available to Indonesian individuals, legal entities, and foreign individuals and legal entities.
The lease period for Hak Sewa is typically between 1 to 25 years, with an option to extend the lease as specified in the lease agreement between the landowner (Lessor) and the lessee (the party who rents the property). However, Hak Sewa cannot be used as a mortgage and cannot be registered with the National Land Agency.
Under the conditions of a lease contract, a foreigner may lease an unoccupied plot of land, construct permanent buildings on it, and sell the remaining balance of the lease term to a third party by way of sub-lease or transfer of Leasehold Right.
Commercial leases, such as office space, factory buildings, restaurants, hotels, and shops, as well as residential premises, including apartments, condominiums, villas, and houses, are all examples of properties that can have Hak Sewa titles.
At the end of the term, the property must be returned to the original owner.Hak Guna Bangunan (HGB) title, also known as the right to build, allows the holder to construct and own buildings or other structures on state-owned land (Tanah Milik Negara), freehold land (Hak Milik), and HPL (Hak Pengelolaan) land. This is the most common type of title for residential, commercial, and industrial properties. HGB title can be owned by individuals of Indonesian nationality, and Indonesian legal entities, including Foreign Capital Investment Companies (Penanaman Modal Asing/PMA), or Domestic Capital Investment Companies (Penanaman Modal Dalam Negeri/PMDN).However, the HGB title is not available for foreign individuals. The title is granted for an initial period of up to 30 years and can generally be extended for an additional period of 20 years. Subsequent extensions are at the discretion of the state and may be renewed for another 30 years. An approved capital investment company, such as a PMA or PMDN company, may obtain HGB rights for a period of 80 years, including the initial term of 30 years, an extension term of 20 years, and a renewal term of 30 years.HGB title over freehold (Hak Milik) land is valid for a period of 30 years only. Any extensions beyond 30 years would require a new agreement with the landowner and registration of a new HGB/Right to Build title over the privately-owned land.An HGB/Right to Build title can be sold, gifted, exchanged, or encumbered by a mortgage.
In a Freehold property transaction (Hak Milik), the buyer is required to pay the Land and Building Acquisition Duty (BPHTB), which is 5% of the government-assessed value of the property, known as the NJOP. The seller is responsible for paying the PPh income tax, which is 2.5% of the NJOP value.
For a Leasehold property transaction (Hak Sewa), the buyer is not subject to any tax implications. However, the seller is responsible for paying the final income tax, which is 10% for Indonesian nationals or KITAS/KITAP holders, and 20% for foreigners without KITAS/KITAP.
The safest way for a foreign national to invest in property in Bali is to establish a foreign-owned company (PT PMA) and acquire the “Right to Build” (Hak Guna Bangunan) certificate. A PT PMA is a foreign limited liability company recognized by the Indonesian government as a legal entity.
As a result, foreign investors can purchase either of the two types of land titles: the Right to Build (Hak Guna Bangunan) or the Right to Use (Hak Guna Usaha). The Right to Build title is valid for 30 years and can be extended for 20 years, followed by another extension of 30 years. The Right to Use title is valid for 25 years and can be extended for another 25 years, with a further extension of 35 years also possible.
The general guideline for the value of leasehold land is to calculate it at around 1% per year per square meter or per Are (100 m²).
Here’s an example to illustrate this:
For instance, if the freehold (Hak Milik) value of a piece of land that measures 100 m² is IDR 1 billion, the estimated value to lease the land would be around IDR 10 million per year (1% per year) of the lease term.
Regional and Spatial Planning (RTRW) regulations are legally effective for 20 years. The latest RTRW regulations of Badung were ratified in 2013 and will be effective until 2033. To purchase land for any project, it is crucial to check the zoning or Ijin Tata Ruang (ITR) and to determine if the zoning allows for various types of building permits and licenses, either for commercial or residential purposes.
There are 4 primary types of zoning in Indonesia that most purchases pertain to, which include:
To process the Pondok Wisata license there are 5 documents that need to be submitted by the Owner of the Villa: