Property Laws in Bali

PROPERTY LAWS In BALI

Bali – Indonesia – is no longer a third world country. It is an emerging country where the economy booms and bloom. This is the perfect time to own a piece of paradise for your future investment. With 20% to 30% average annual property value increase steady for these past 15 years, there are no other place compatible in this world for property investment.

Nowadays perhaps it is still a ‘little secret’ for some. But now YOU know and WE can help. With local and Western team we assure your investment will be safe and successful. Our local team will ensure you to get the best pricing and our Western (Canadian) team will make sure the legal aspect is internationally approved.

To buy property in Bali is not so difficult and also not so easy, you just need to know and understand certain property legal issue (especially for foreigner ownership) and strategy to get best property which suit to your desire and budget.

We are local Indonesian with long experiences on property that will brings the best worlds for you. Our local team will ensure you to get the best price available International buyers do need to make sure their investment is legal and secure and protected by Indonesian & International  law

Indonesian property Rights & LAW

Land matters except for mining and forestry are under the jurisdiction of the National Land Agency (Badan Pertanahan Nasional) formed to administer all matters relating to the Basic Agrarian Law of 1960 such as the registration of land rights and the granting of rights and various permits to use the land. There are currently only two categories of land rights:

a) Adat land (customary land) where the land is not registered with the relevant land office. There are 2 individual rights and 6 community rights in this category. All rights held under this category will eventually be converted to certified titles.

b) Certified land, the title to which is governed by the Basic Agrarian Law of 1960 and is registered at the local land office. There are five principle types of land rights held under the Agrarian Law. These are:

Right of Ownership (Hak Milik)

This refers to absolute ownership of land and corresponds to a fee simple or freehold title in common law jurisdictions. An Indonesian citizen, not a corporate entity, can only hold this right whether local or foreign. Certain legal entities designated by the government, such as State Banks, agricultural cooperatives, religious bodies, and social foundations may hold this right subject to certain restrictions. This right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and hypothecated (mortgaged).

Right to Build (Hak Guna Bangunan – HGB)

This is the right to construct a building on land for a period of 20 or 30 years (renewable for another term of 20 years). This right can be sold, exchanged, transferred, and mortgaged, and can be held directly by any corporate entity whether it is a local company or a government approved PMA company.

Right to Rent (Hak Sewa Bangunan)

This is the right to use land owned by another private party (the Lessor) for building purposes. The right cannot be registered at the land office and therefore does not exist in certificate form. The law does not stipulate a period for such lease agreements and whether this can be transferred or not depends on the original agreement between the parties. A foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia may hold this right. It cannot be mortgaged.

Right of Use (Hak Pakai)

This is the right to use State-owned or other land by public or private persons or entities for a specific purpose for a definite period or occasionally for an indefinite period. This land right cannot be sold, exchanged or transferred unless explicitly provided in its grant or agreement and Normally for a period not exceeding 10 years. An Indonesian individual or entity or foreigner permanently domiciled may hold this right in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign banks, embassies, etc.

Right of Exploitation (Hak Guna Usaha)

This is the right to exploit State-owned land for agriculture, fishery or husbandry purposes for a period of up to 35 years with a possible 25 years extension. This right can be held by Indonesian individuals/entities as well as government approved PMA companies. The certificate can be mortgaged.

Freehold is a full status of ownership. Lease hold means: You are renting the property for 25 to 99 years period of time. Most lease goes between 20-25 years with optional extensions. The extension value/lease price will depend on the value of the property on the day of lease extension During the period of lease you can re-lease or sell your property to other people. even though the lease time value decreased year by year, the property value nevertheless keeps increasing with time. Annual property value incensement  in Bali are 25% for this past 15 years. If the property is leased for 25, the value will increase by 500% or more. Therefore it is still making money and profitable for some foreigner investor. All of our villa projects are FREEHOLD tittles and a nominee will be arrange for foreign buyers because we want to give you the best and we believe owning a freehold is always better than leasehold (renting)

Legal Documents Required

Lease Agreements

As foreigners and foreign owned companies cannot own property in Bali or in Indonesia a property lease agreement is the best solution. A property lease agreement signed and recorded by a Balinese Notaris is the highest property right a foreigner can have in Indonesia.

Loan Agreements

A time indexed loan agreement is an important part of the lease agreement. The loan agreement ensures that when selling the property you will receive from the lessor both your original capital plus any added value.

Mortgages

By taking out a mortgage on the property in your name you will add another layer of security to your investment protection. If the lessor attempts to sell your property without authorisation the sale will be blocked during the due diligence process as the mortgage is outstanding

Memorandum Of Understanding (MOU)

A Memorandum Of Understanding clearly defines the role of all participants in the contract. It should be annexed to all other documents again increasing your level of protection.

Power Of Attorney

The power of attorney gives you total control over the partnership. The lessor becomes a “sleeping partner” with no control over your property.