The only thing better than visiting paradise, is owning a piece of it, and every year many of the visitors who step off planes in Bali leave thinking how fantastic it would be to own a property here. This trend is evidenced by the large number of real estate developers which has mushroomed up all over the island and the dizzying array of schemes now available to eager buyers. So where do you start and how do you go about buying a property? Well the first thing not to do is to rush it. I have met folks who expended significant effort getting the best deals on flights and hotels to ensure a cheap holiday only to head back home having bought a ridiculously priced timeshare from a sleek high-pressure marketing outfit and then afterward wonder aloud “what the hell have we done here?” It’s amazing how many people fall for the “don’t wait to buy real estate, buy real estate and wait.” pitch line. But then which of us hasn’t bought things on holiday that we regretted afterward, a dodgy shirt or outlandish shoes perhaps. However, those are generally a much easier souvenir to rationalize than an overpriced holiday home with dodgy paperwork. https://rupiah138.xn--6frz82g/
The good news is that buying a piece of property or holiday home here can be a relatively smooth transaction and a good investment to boot. However, it is important not to assume that the real estate and legal system here is similar to home. It’s not. That’s why it is crucial to firstly familiarize yourself with your basic property rights as a foreigner under Indonesian Law by arranging a consultation with a Notaris, Lawyer or Legal Consultant who speaks your language. Lay out what you propose to do and have them give you step-by-step direction. A single consultation should be enough to get you off on the right track, take notes and have them verified to ensure that what you understood from the meeting to be correct. There is a lot of free information available on the web but the problem is identifying what is objective and current. The old adage holds very true at this stage of the process – If you think hiring a professional is expensive, wait until you hire an amateur.
Basically, there are four types of certified deeds of property ownership in Indonesia.
• Hak Milik (HM) – Right of ownership or Freehold, Certificate only in the name of an Indonesian entity – Valid indefinitely.
• Hak Guna Usaha (HGU) – Right to use for Agribusiness, Certificate only in the name of an Indonesian entity – valid for up to 35 years, extendable. Most commonly used by plantation owners and other commercial farming enterprises.
• Hak Pakai (HP) – Right to use, deed may be in the name of an Indonesian or foreigner domiciled in Indonesia – valid for 25 years, extendable.
• Hak Guna Bangunan (HGB) – Right to construct and
possess building on land not owned by HGB holder.
Certificate only in the name of an Indonesian entity – valid for 30 years, extendable.
You may conclude from the above that Hak Pakai title is the only legal deed of ownership that may be held privately in the name of a foreigner. However, many foreigners buy HM properties in the names of Indonesian citizens and then use Nominee agreements such as Power of Attorney, Loan Agreements, etc, to enable the Indonesian national to transfer all rights to the property over to the foreigner. The land law states clearly that HM title may not be transferred directly or indirectly to a foreign entity so should you have a dispute with your Nominee you would most likely lose your investment. Freehold title may be converted to HP so why risk everything when you can hold HP in your name. A Notaris who is PPAT licensed (registered to process land Titles) can handle the deed conversion at the Government Land Office. Extending a HP involves paying a small fee at Department of Lands just prior to expiry of initial period. Hak Pakai title is also accepted by most lending institutions as collateral for lending.
The government is in the process of revising laws on foreign ownership of land and though nothing has yet been signed into law it is widely expected that the current maximum single period will be extended significantly upwards from 25 years. There are wild claims being made by some real estate brokers and developers as to the inflationary effect this revision of the law will have on land prices, however one has to understand that in effect foreigners can already hold long term rights to land through HP extensions and consecutive leasehold contracts.
If you are not familiar with Bali or haven’t had much exposure to the workings of Indonesia, then choosing a property offered by one of the big multinational real estate agents could be a good option. These companies at least carry out limited due diligence on the properties on their books and charge fixed fees for their services. They are also usually owned/managed by foreigners, though that doesn’t mean that you can drop your guard, but at least it facilitates easier and better communication. There are a few such large companies in Bali who also have offices in other countries in the region. They generally charge fees of 5% to 10% of the purchase price which are payable by the seller.
Once you have identified some properties of interest get the “crocs” on and look at some similar properties for sale in close proximity being marketed by other agents or privately. Make sure you are comparing like with like and by doing this homework you are likely to observe how prices can vary dramatically within a small area. For example in Sanur, land on the Renon side of the bypass may cost less than half that on the beach side, literally just across the road. It’s important to forget what “a property like this would cost back home” and ignore the claims of property agents who tell you Bali is the next Hawaii. Just focus more on how similar properties in that area or down the road compare.