If you spend any length of time in Bali, it won’t be long before you start seeing advertisements for real estate, whether it is a “For Sale” sign on properties or ads in magazines. There are even Australian real estate franchises, such as Ray White operating in Bali. Most of the high profile ads that you will see feature professional photography and will be written in English. It would be easy to think that foreigners can buy property in Bali.

Please understand that this article is not intended to be legal advice, it is just my understanding of the laws after living here for a few years.

The Law

Indonesian property law is handled by article Undang-Undang No. 5/1960, Pokok-Pokok Agraria. The law is fairly clear that only Indonesian citizens can own or control freehold property in Bali or anywhere else in Indonesia. Even foreigners marrying an Indonesian citizen are not able to share ownership of property in Indonesia and they usually have to have some kind of agreement like in the form of a prenuptial agreement, stating they will not make any claims for freehold property owned by the Indonesian spouse.

So what types of ownership are open to foreigners? This is a list of the usual ways foreigners can purchase property in Bali.

Hak Pakai (right to use)

Hak Pakai is the closest a foreigner can get to owning property in Indonesia. It is usually for a fixed period like for 25 years. You need to be a permanent resident of Indonesia, you can’t use it to build a business like a hotel and you can only hold one property. If you decide to sell the property, you can apply to have the status of the property back to freehold if an Indonesian person wants to buy the property.

Hak Guna Bangunan (HGB) or Right to Build

This form of ownership is for businesses to own or lease property. For foreigners, this usually means having a PMA (foreign investment company). Again it is a fixed period of ownership. It is intended for real businesses to own property to run their business.

Hak Sewa – Long term rental

Hak Sewa is more of a long-term rental. It is usually an agreement between the landowner and the leasee, rather than a form of ownership registered with the government, like the other forms listed above. It is still important to make agreements using a registered notary. The advantages are that you don’t have to have to be a permanent resident, but you are at the mercy of the property owner, should any dispute occur.

Nominee Agreement

This is perhaps the most controversial form of ownership. This is where a foreigner purchases freehold property in an Indonesian person’s name. Many people will argue that this is illegal, but many notaries will still process the transaction even with the knowledge that the foreigner is intending to purchase and use the property. As you can imagine some people have had problems, usually when the nominee (or their heirs) starts to believe that they are the actual owner and does whatever they can to take control of the property.

In conclusion, buying property in Bali is an extremely risky business. I have seen some people come to grief over dealing in all of the different forms of ownership I have mentioned. There really is no 100% safe way of having property in Bali. All of these have their own risks and people should only invest what they can afford to lose. Having said that, I know some people who have done very well buying and selling properties – there is no doubt it is a high risk, potentially high reward activity to get involved in. Enter at your own risk!

Do you have experience buy property as a foreigner in Bali or anywhere else in Indonesia? Share your story in the comments!