Everything You Need to Know About Villa Ownership

If you’re interested in owning land or property as a foreigner in Bali, you might be surprised to learn that it’s actually quite achievable.

If you’re interested in owning land or property as a foreigner in Bali, you might be surprised to learn that it’s actually quite achievable. With proper guidance and information, you can turn your dream of villa ownership in Bali into a reality. This guide will provide you with all the necessary information to help you determine if buying land or property in Bali is the right choice for you and, if so, how to make it happen.

What You Need to Know About Owning Land in Bali

Foreign ownership of land and property in Bali is possible with either a Freehold or Leasehold title. However, it’s important to note that foreigners are not allowed to purchase agricultural or undeveloped land in Bali. In such cases, a long-term lease agreement could be an alternative option. If you’re considering buying property in Bali, it’s crucial to seek professional guidance to ensure a smooth and legal transaction. This guide aims to provide you with the necessary information and insights to make an informed decision about your property investment in Bali.

Investing in the Beautiful Bali, Indonesia

Bali, Indonesia is not only a stunning tropical destination but also a lucrative location for foreign investors. The tourism industry is experiencing rapid growth, with a 5% increase rate, providing vast opportunities for investors to take advantage of Indonesia’s thriving economy. If you’re interested in discovering the reasons why Bali is an ideal investment location in 2022 and beyond, keep reading.

Bali’s rapidly growing economy has become a hotspot for local and foreign investment, resulting in significant transformation and expansion. As a result, Bali offers excellent investment opportunities for those looking to purchase land and develop properties for foreigners. Our guide will provide you with comprehensive knowledge of the country’s laws and regulations, which are simple to navigate for foreign investors. Discover why Bali is the ideal destination for real estate investment.

Property Ownership, Laws and Regulations

The Indonesian Agrarian Law (Law No. 5 of 1960) governs property rights in Indonesia and provides for “Hak Pakai” or the right to build and use the land. This law also encompasses regulations that govern the relationship between individuals and their respective lands.

villa ownership
Pengantap Bay |© Invest Islands

Indonesia’s property investment laws have undergone significant changes to become more welcoming for foreign investors in recent years. Although foreigners cannot own freehold titles to land, they are permitted to buy and own different types of properties such as apartments, houses, and commercial buildings. The government has also introduced long-term leases for up to 80 years, making Indonesia’s property market a lucrative opportunity for foreign buyers. With this guide, you’ll have all the information you need to invest in Indonesia’s property market as a foreigner

Buying Property in Indonesia as a Foreigner

Foreigners may not own freehold titles to land in Indonesia, but they can still invest in the country’s real estate market by acquiring full ownership of properties such as Bali properties through investments. This allows foreigners to take advantage of Indonesia’s growing economy and attractive property investment opportunities.

The chart below outlines different ownership types available to foreigners under the Basic Agrarian Law of 1960, all of which are governed under the Foreign Investment Limited Liability Company:

Foreign Investments in Indonesia via PMA

If you’re a foreigner interested in investing in Indonesia, you may need to establish a PMA, or Penanaman Modal Asing, which is a legal entity that allows foreign investment in the country. Through PMA, foreign investors can navigate Indonesia’s strict ownership laws and regulations and obtain a foreign direct investment license from the Badan Koordinasi Penanaman Modal (BKPM). To achieve 100% foreign ownership of your investment plan, you must allow the government to conduct a thorough background check and provide a minimum of 25% paid-up capital. However, recent legislative changes have streamlined the registration process, making it easier for foreign investors to invest in Indonesia.

The Indonesian government has established a new visa called the VITAS, which is available only to foreign investors who wish to invest in the country as a director, commissioner, or shareholder. This visa allows foreigners to stay in Indonesia for up to two years, with the possibility of extension if the business is doing well and there are continuous investments. The introduction of the VITAS visa means that foreigners can now avoid paying the annual tax for the skill and development fund fee, which is quite expensive at $1,200 USD. However, due to the 2020 coronavirus pandemic, the government has imposed certain travel restrictions on those entering the country with a VITAS visa. For example, visa holders must travel with a health certificate confirming that they have not been infected with the virus. If they become infected with the virus while in Indonesia, they will be responsible for paying for their quarantine accommodation, food, and healthcare bills. Without proper evidence and health certificates, individuals with a VITAS visa will not be allowed entry into the country.

Torok hill resort |© Invest Islands

Foreign Investment in Indonesia via Local Nominee System

Many foreigners use the local nominee system when planning on investing in the country. This widespread practice uses an Indonesian nominee to secure the freehold title instead of directly buying from the PMA.

The process includes a mutually inclusive agreement consisting of a partnership established between an Indonesian citizen and a foreigner, where the Indonesian citizen holds the title to the land, and the foreigner invests the capital while simultaneously securing their right to the land. There are three notable agreements that are drawn up between the two parties :

  1. Loan/Mortgage Agreement
  2. An Irrevocable Power of Attorney (POA)
  3. A Permanent Right of Use Agreement

Best Way of Buying Property and Investing in Bali as a Foreigner: PMA vs. Nominee System

By now, you must have realized that there are two notable ways of buying property and investing in Bali as a foreigner. However, the question arises: Which of these two ways is better and more suitable for a foreigner?

Kaliantan, Lombok |© Invest Islands

Investing in Indonesia as a foreigner can be done through two widely used methods, namely the PMA and the Nominee System. However, each of these methods has its own set of advantages and disadvantages. The Nominee System is illegal and puts the investor at risk of losing their investment if caught, making it a less desirable option compared to the PMA. On the other hand, the PMA is highly regulated and vetted by the government, making it a more secure and legal investment option, even though it is relatively more expensive. Ultimately, while the PMA requires more investment upfront, it is a more secure and legal option that offers long-term investment benefits. Therefore, it is important for foreign investors to carefully weigh the pros and cons of each investment method before proceeding with their investments in Indonesia.

So, if you’re looking to invest in business activities in Indonesia or simply wish to reside in the country, it is best to make an investment using the legal PMA process.

Find out more about Invest Islands ownership structure

Invest Island’s Investment Quick Fix

Invest Island offers an excellent alternative solution for foreigners interested in investing in Indonesia. The company provides the PT PMA License Scheme, which offers a legal license for the real estate sector, enabling foreigners to purchase land and property in the country through a regulated platform. This approach provides a secure and affordable way to invest in Indonesia without the need for a local nominee, making it an attractive investment option for foreign investors. By obtaining the PT PMA License, foreign investors can enjoy the same investment opportunities as local investors and can avoid the legal and financial risks associated with the Nominee System. Additionally, Invest Island provides support throughout the investment process, ensuring that the investment is safe and profitable.

So, Are You Ready to Make an Investment in Indonesia?

Indonesia has strict legal structures in place for foreigners interested in investing and purchasing property in the country. However, by following these regulations in compliance with Indonesian law and obtaining land through the PMA, investors can make a secure and profitable investment in Indonesia. Despite the challenges, the country offers endless opportunities for foreign investors seeking long-term profitability, as it has a stable economy as of 2020. By working with reputable companies that specialize in helping foreign investors navigate the legal and financial complexities of investing in Indonesia, such as Invest Island, investors can successfully invest in the country and enjoy the benefits of a thriving economy. With proper due diligence and adherence to regulations, foreign investors can take advantage of the lucrative opportunities that Indonesia has to offer.

After reviewing this guide, if you still have any doubts or questions regarding the rules and regulations for property investment in Indonesia as a foreigner, we encourage you to contact us through our website or by filling out the inquiry form. Our team of experienced advisors will be happy to assist you and set up a meeting to discuss your concerns and help you navigate the investment process in Indonesia. We understand that investing in a foreign country can be challenging, and we are committed to providing our clients with the support and guidance they need to make successful investments in Indonesia. Whether you have questions about legal compliance, investment opportunities, or market trends, we are here to help. Contact us today to learn more about how we can assist you in your investment journey in Indonesia.