Foreign Practice in Bali – Buying Real Estate in Bali
The most common practice for foreigners buying into Real Estate in Bali with a leasehold scheme, most banks will though not lend against a lease as they don’t look at it as an asset.
With a Hak Pakai certificate, you purchase the Hak Milik (freehold) titles, and during the process, the notary changes the certificate to Hak Pakai, this process takes about three months after full payment has been received. To be qualified for a Hak Pakai, you need to have a residential permit (KITAS) in Indonesia which you will get from a company that sponsors you.
If you do a bank loan, most banks will hold the certificate as collateral until the loan is paid off. Whether you would qualify for a bank loan in Indonesia or Singapore would be a different story. Indonesian banks requests normally 2-year records of income etc. before they issue a credit to foreigners. If you require a loan as part of the transaction, I would suggest you talk with your bank in Singapore to see if they can help
What is the time frame of a Hak Pakai?
Its a total of 80 years, but at any time you can sell back to an Indonesian individual, and they can upgrade to Hak Milik again, so it’s not a depreciated asset like a lease.
With a foreign owned company PT PMA, can I get HGB and start building on it?
With a foreign-owned company setup, you can acquire the land under the with the company (classification of the company needs to be allowed to own property) and then you can use the company to conduct the business and start your holiday rental process. Although the location needs to be in the correct zoning, so it’s qualified for the necessary permits.
The company, a foreign-owned company PMA, has different classifications as they are recognized as a large business. I would consult with a legal team as what you can do and not when it comes to what the PMA is allowed to do
What is the most common practice to acquire Real Estate in Bali?
A Hak Sewa (Leasehold) is very straight forward. It’s a notarized agreement between the two parties landlord (lessor) and lessee. Then based on the terms put in place in the contract. You usually have a 25 year initially and then an option to extend for another 25 years. What’s essential in the lease agreement is to make sure the terms are defined so no issues or misunderstandings in the future. This is the most common practice as before it was difficult to apply for a foreign-owned company, while today it only takes 2-3 months and most lawyers and agencies out there can help with the process.
Summarize of Foreign Practice in Bali buying Real Estate
With today’s ease of opening a PT PMA (foreign-owned company) in Indonesia its recommended to structure your investments with a foreign company. There is no discrimination between a locally or foreign-owned company as long as they are in line with the regulations put in place. For investors, we recommend setting up an entity and structure the purchase and ownership through the company doing Hak Guna Bangunan or Hak Pakai as its the most liquidate asset as can be converted back to Freehold. For individuals, the lease option might still be preferred and recommended depending on the usage and purpose of the property
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