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Properties for sale in Indonesia are generally advertised using terms commonly used in Commonwealth nations, however the meaning may differ as Indonesian property law follows a different legal system. The main terms used in property law:
Freehold (Full Ownership): Properties where permanent ownership rights (Hak Milik title) are transferred from seller to buyer. The law requires that freehold properties can only be owned by Indonesian citizens. Foreigners often use nominee owners to circumvent this, however this is illegal. The safest and legal solution for property ownership by foreigners in Indonesia is establishing a PT PMA, which will be discussed later. The https://indo.rent website does not feature freehold properties, the site exclusively deals with leasehold and rental properties.
Leasehold: Long-term lease properties where the lessee pays upfront for the entire lease period. The lessee enters into an agreement with the owner for the use of the property for a specified period, however ownership does not change. Foreigners have legal rights (Hak Sewa) to temporarily own a property directly in their name without requiring a nominee owner or company. The agreement is recorded by a notary in the form of a lease agreement, which serves as a legally valid document.
Monthly/Annual Rental: Properties rentable on a monthly or annual basis by agreement. This differs from leasehold agreements as restrictions apply. Typically the tenant cannot modify the structure and cannot sublet the property, furthermore the agreement is not necessarily notarized.
Can foreigners buy property in Indonesia? Can foreigners own land in Bali?
Foreigners can buy and own leasehold properties in Indonesia in their name with Hak Sewa or Hak Pakai titles. Property ownership with Hak Milik, Hak Guna Bangunan and Hak Pakai titles is evidenced by certificates registered and maintained at the Land Office (BPN), while Hak Sewa is evidenced by lease agreements prepared and recorded by government-authorized notaries.
Hak Milik: Full ownership title providing permanent ownership rights over a property. Hak Milik is registered at the Land Office in the owner's name, all ownership transfers and title conversions are recorded in the certificate and at the Land Office. Only Indonesian citizens are eligible for this title.
Hak Sewa: Leasehold ownership title providing rights to use another person's property (land or villa) for a specified period. Foreigners can legally own property with this title for up to 30 years, extendable for an additional 20 years, however in practice the lease period is determined by agreement between parties. The agreement also regulates whether the lessee is entitled to modify, renovate and sublet the building.
Hak Guna Bangunan (HGB): Commercial purpose ownership title converted from Hak Milik, and ownership can be transferred to Indonesian or foreign-owned companies. This is the safest legal solution for property ownership by foreigners, enabling acquisition of full ownership properties. HGB is valid for 30 years, extendable for an additional 20 years, and can be converted back to Hak Milik if ownership is transferred to Indonesian citizens or specified legal entities such as state-owned banks or religious organizations.
Hak Pakai: Similar to Hak Sewa, however it includes conversion of Hak Milik to Hak Pakai at the Land Office, which requires more time and cost. Hak Pakai is less common than Hak Sewa, partly because Hak Pakai properties can only be used as private residences.
Apartment/condominium strata titles are available to foreigners, however properties with such titles are rarely found in Bali due to the relatively low condominium stock.
What is zoning regulation? What is Banjar in Bali?
Bali's governance is unique in many aspects, however the property buying and selling process largely follows the rest of Indonesia.
Notary: In Indonesia, the term "notary" may refer to a person who holds two official positions simultaneously. One is the notary, authorized to issue notarial deeds such as lease agreements, the other is the land office official (Pejabat Pembuat Akta Tanah - PPAT), authorized to handle land registration. The two professions are legally separate, however the term "notary" is often used for both positions, as most notaries also hold PPAT positions.
Badan Pertanahan Nasional (BPN): The National Land Office responsible for issuing land certificates in Indonesia. BPN maintains records of all ownership transfers and title conversions, and the notary conducts due diligence on their records.
Land Zoning Classification: Bali has zoning regulations limiting land use based on zoning classification. The most common land zones are: Pemukiman (residential zone), Pariwisata (tourism zone) and Pertanian (agricultural/green zone), each with their own restrictions.
Banjar: Community-level governing body found exclusively in Bali, responsible for administration and governance of a specific community. Each Banjar has its own customs and local regulations.
If purchasing property in Bali or Indonesia for the first time and unfamiliar with the local property transaction system, it is recommended to conduct transactions through licensed real estate agencies.
What is IMB or PBG? What is PT PMA?
The existence of required permits and licenses is fundamental to investment security, especially when operating businesses such as villa rentals. Each land zone has specific restrictions determining whether a property is eligible for certain permits.
Izin Membangun Bangunan (IMB) & Persetujuan Bangunan Gedung (PBG): Property building permit required before construction completion. Building permits cannot be obtained for properties in Pertanian zones. IMB was replaced by PBG in 2021, however the term is still widely used.
Pondok Wisata: Guesthouse permit required for operating a house or villa for tourism purposes as daily rental. Only available for properties in Pariwisata zones and to Indonesian citizens or companies (including PT PMAs), however foreign individuals can purchase properties that already have the license.
Perseroan Terbatas Penanaman Modal Asing (PT PMA): Foreign investment company legally registered in Indonesia, which can be partially or fully foreign-owned depending on business activity classification. Establishing a PT PMA requires significant capital. This is the safest legal framework solution for property ownership by foreigners, enabling acquisition of full ownership properties with HGB (Hak Guna Bangunan - Building Use Rights) title.
How much is property tax in Indonesia?
In addition to general sales tax, additional property taxes arise during property transactions:
Pajak Bumi dan Bangunan (PBB): Land and building tax payable annually. For leasehold or annual rental properties, usually paid by the tenant, not the owner.
Nilai Jual Objek Pajak (NJOP): Tax object sales value applicable to full ownership properties, determining transfer and acquisition tax amounts. The value varies by region and is periodically updated, which the notary must verify during due diligence.
Bea Perolehan Hak Atas Tanah & Bangunan (BPHTB): Land and building acquisition tax applicable to full ownership property transactions, payable by the buyer. Current rate is 5% of sale price.
Pajak Penghasilan untuk Pengalihan Hak Atas Tanah & Bangunan: Income tax on land and building transfer applicable to full ownership property transactions, payable by the seller. Current rate is 2.5% of sale price.
Pajak Penghasilan untuk Sewa Tanah & Bangunan: Income tax on land and building rental applicable to leasehold property transactions, payable by the seller. Current rate is 10% or 20% of sale price depending on whether the seller has a tax identification number (NPWP).
Nomor Pokok Wajib Pajak (NPWP): Tax identification number for individuals and companies in Indonesia. Foreigners staying long-term in Indonesia and/or generating income in Indonesia are required to have NPWP.
Legal Disclaimer: The information provided here serves general informational purposes and does not constitute legal, tax or other professional advice. We recommend consulting experts for specific questions or concerns, including legal and tax experts. Property ownership conditions, regulations and tax laws may change and may differ depending on individual circumstances or locations. The author and PT Bali Data Insights assume no responsibility and provide no express or implied warranties regarding the accuracy, completeness or currency of the information provided here, and cannot be held liable for consequences or damages resulting from reliance on this information.