There are several possibilities of ownership regarding property in Bali such as Freehold, Leasehold and Right of Use.
Freehold is outright ownership of the property and land on which it stands. Freehold property is when the property owner has no time limit for his ownership period.
Buying freehold property using an Indonesian Nominee
However, the foreigner may purchase a property by having a legal agreement with an Indonesian Nominee. Nominees play a role to secure the title to the property on behalf of the foreigner. While the Indonesian Nominee is the registered owner, the Foreign Investor holds the land certificates as security. In Indonesia, land cannot be sold without an authentication procedure, including the original land certificates’ sighting.
At the time of property purchase, the Indonesian Nominee and the Foreign Investor simultaneously sign a legal Power of Attorney. A power of attorney waives all Indonesian Nominee rights and gives the property’s full beneficial rights to the Foreign Investor. The Foreign Investor can then build on the property, onward sell or lease the property, and transfer it to their next kin. Additionally, it is possible to specify that if the laws in Indonesia change allowing Foreigners to own land, the titles will automatically be transferred into the Foreign Investor’s name.
The Indonesian Nominee may receive a pre-agreed fee for their responsibilities as the titleholder. The amount largely depends on the relationship the Foreign Investor has with the individual Nominee.
Purchase a freehold property by a Foreign Company
Another way for a foreign citizen to buy property in Indonesia is by using a company’s name. The foreigner can set up a foreign investment company (PT Penanaman Modal Asing, abbreviated PT PMA) and purchase the Indonesian property using its name.
PT PMA is a foreign-owned limited liability company registered in Indonesia. With the PT PMA, foreigners have the right to acquire the Right To Build (Hak Guna Bangunan/ HGB) License and a Right To Use (Hak Pakai) Title under a Freehold Title.
Buying property using leasehold title means owning property for a fixed term but not the land on which it stands. The ownership will be subject to annual land rent payments or full payment for the lease’s entire period.
A Lease Agreement is prepared, specifying the period, usually in terms of up to 25 years, and often with an option to extend. Any options the Foreign Investor would like to include, such as the right to demolish, the right to extend, the right to build and the like, are discussed. The agreement is reached with the owner and stipulated in tight legal documentation prepared by a public notary and lawyer. At the lease period’s expiry, the Agreement can be extended or the property allowed to revert to the Owner. To extend the Lease Agreement period, the application submitted no later than a year before expiry. The Foreign Investor can negotiate directly with the landowner when renegotiating to agree to a property lease rate for the extended lease period.
Right of Use” Arrangement
The Rights to Use is the right to use and/or collect products from land directly owned by the State or other people granted other than those right arisen due to rental agreement or land cultivation agreement. Right to Use can be granted to Indonesian citizens, foreign citizens, Indonesian legal entities, and foreign legal entities.
Using the “Right of Use’ arrangement, you could invest a property in Bali without a “nominee”. “Right of Use” arrangement can be issued to foreign individuals and companies that domiciled in Indonesia. The “Right of Use” arrangement is for people who live in Indonesia, therefore in possession of a permanent visa, a document called KITAS. You still can leave Indonesia or even own property in other countries, but it’s a guarantee that you spend the majority of your time of the year in Indonesia. A foreigner can only have one “Right of Use” arrangement titled on his or her name.