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Bali Real Estate Laws

How can foreigners acquire property in Bali

Under Indonesian law foreigners are not permitted to have property title in Indonesia. However, foreign individuals can legally acquire property in Indonesia and enjoy full beneficial rights by on one of the following methods.

It is important that you contact a specialist in this field to insure a bullet proof lease or purchase.

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1. Enter into a legal arrangement with an Indonesian nominee, either an individual or PT company, whereby he/she/corporation holds title to the property. Simultaneously, complete a power of attorney, handing over full rights from the Indonesian entity to the foreign investor. ( see details below)

2. Make a leasehold investment in the property, usually for 20-30 years. Partnerships with Indonesian citizens are not required in leasehold transactions. This method does offer complete protection to the foreigner during the term of the lease, however, once the lease term has expired the agreement can be extended or the property reverts to the Owner.

3. Form a foreign investment company (PMA).Here the foreigner can own the company 100% and the title of the property will be in the company name. However, title in this case could only last for 20 or 30 years as PMA companies have to re-apply to the Indonesian Government to extend their license.

   

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   FOREIGN INVESTMENT COMPANY (PMA)

   The most significant change in Indonesian investment law came in 1997 when the Government introduced the 'PMA' (Penanaman Modal Asing or Foreign Investment Company Programme). This allows foreign investors to set up a company in Indonesia, without having to have Indonesian partners; the PMA can be 100% owned by the foreign investor. PMA companies are allowed to own the title of the property for a period of 20 or 30 years, when the title has to be renewed by the Government. To set up a PMA company you will be required to:

   • Submit a detailed business plan.

     Operate in a business environment that adds value to Indonesia in terms of foreign skills, employment and environmental benefit.

     Make an appropriate cash deposit in an Indonesian based bank. (The amount varies and is calculated from the capital employed in the business).

     Show the property investment as an asset of the company.

   The process takes approximately 3 to 4 months and once completed the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up is between 30 to 40 million Indonesian Rupiah.

   BUYING THE PROPERTY

   Land parcels for sale in Bali fall into one of two categories:

   • Pipil : Land that has been passed down through a local Balinese family but has never been formally registered with the Land Registry Office.

     Certificate : Land which has already been registered with the Land Registry Office. Only land which has a certificate can be sold.

   The conversion of 'Pipil' land into certified status is handled by qualified Noataris and normally takes 4-6 months. Once your chosen land has a certificate, a transaction can be completed within 1 day, however, with legal due diligence this process normally takes 1-2 weeks

   All land purchases in Indonesia must by witnessed in the presence of an officially appointed 'Notaris' or lawyer. The standard contracts are written in Bahasa Indonesia language, however, House of Bali can arrange for translations upon request.

    Steps to take for Nominee Ownership

    

    If an Indonesian acts as a nominee for a foreign investor, there are a number of contracts and other documents which must be prepared by and signed in front of a qualified notary.

     These include but are not limited to,

     (1) A Purchase Contract for the property, transferring the rights from the previous owner to the nominee.

     (2) A Loan Agreement for the purchase between the investor and the nominee.

     (3) An irrevocable and transferable Power of Attorney to sell, transfer or otherwise dispose of the property and to represent the nominee in any dispute regarding the property, given from the nominee to the investor.
    

   (4)  The nominee will also be asked to hand over all original land titles to the foreigner.

     In essence, the Indonesian is owner in name only.

     To the best of our knowledge, those who have utilized this type of purchase, when set up with a professional attorney and notaries have had no problems.

     The fees for setting up a nominee system may vary from 1% to 2 % of the value of the property.

     Leasing of land does not require a nominee and is very easy. Land is normally leased for 20 to 25 years with an option to extend.

      The old saying applies to foreign ownership as to most business ventures "if it was easy, everyone would be doing it’.

     The fact that it takes some time and expertise has curtailed large speculation of Balinese property keeping prices at a small fraction of similar properties on other major tourist islands around the world.

     As more, and more foreigners discover that they can enjoy pleasure, and substantial profit by purchasing Bali real estate, prices will probably escalate more rapidly in the future.

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