Investing Worldwide: Indonesia « <b>Real Estate</b> Japan – Property For <b>...</b>

Real Estate Japan Note: Fresh Property Bali is Real Estate Japan’s associate site in Indonesia advertising properties in Bali, Indonesia.

Purchasing property or a Villa in Bali is actually a simple and straightforward process. While many people are concerned about an investment in a foreign country, it does not have to be difficult, or risky. The most important thing when purchasing property on this Island Paradise is to follow the laws of Indonesia. Some individual purchasers try to circumvent the law by using the “nominee purchase scheme” and have lost their investments and others who have used it may be at risk. There are ways to do this safely, but be sure to consult with a reputable attorney or PPAT Notaris.

Hak Milik (Freehold)

If you are buying only one property there is a easy and safe way to purchase your villa. Indonesian property law is very straightforward. A foreign buyer cannot, under any circumstances, hold Freehold Title, or in Indonesia “Hak Milik”. But you can still purchase Hak Milik property. It is simply converted to Hak Pakai as outlined next.

Hak Pakai (Right to Use)

This is the safest method for foreigners to own property in Bali. The process is simple, when you buy Hak Milik property, the title is converted to “Hak Pakai”, or Right To Use. This right is for 25 years and is renewable to a total of 70 years. You can only own one property through this method. You have all the rights of freehold title…just not the name. When you sell it, it can be converted back to Hak Milik (freehold) or, you can transfer the title to another.

Right to Build (Hak Guna Bangunan or HGB)

This is the best title for larger investors purchasing more than one property or seeking to enter the tourist market in either villas or hotels. Generally the safest way to purchase property this way is through two layers of companies. The parent company should be offshore, generally Singapore. The second company would be a foreign owned investment corporation in Bali known as a PT PMA. Mortgages, loans and agreements are executed to provide financial protection.

There can be variations on this method depending on the end use of the property, for example, if a developer plans on selling the properties to individual investors.

There are also several other property ownership rights which you may encounter depending on what you are purchasing and what your needs are. They include the following:

Leasehold

This is straightforward. It is a lease for a set period of time. Generally a new lease is for a period of 20 to 50 years, payable in full in advance. The term on existing leases depend on what amount of time is left on the original lease. Leases can be renewable, depending on the agreements with the land owner. Be sure to check that it is and check the index, or what the lease extension is based on. What you want is an extension calculated on a set percentage increase over current value, or based on an independent third party appraisal.

Strata Title (Condominium or Apartment)

This title is geared specifically towards condominiums or apartments. Sometimes referred to as fractional title. It gives you the right to use the unit you purchase and a fractional interest in the common areas.

There are several other methods of ownership which relate to Indonesian’s, agricultural and other more esoteric rights to property which do not apply to foreign buyers.

Ken Gold is the principal broker at Fresh Property Bali. For more information he can be contacted at ken.s.gold@gmail.com.

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