8 steps for foreigners to buy property in Bali

With its exotic natural landscapes and hospitable culture, it is no wonder that Bali has become a tourist haven. But more than an island for unwinding, it has also become a place for significant investments to increase your income stream. Many foreigners have seen the potential of Bali, and this article will help you understand all the legal requirements you need to dip into the island’s real estate market. 

Can foreigners own property in Bali?

Foreigners can own property in Bali through a foreign-owned company, named PT PMA. It entails setting up the company before buying land, houses, or apartments. Owning property through either a leasehold or freehold is feasible. However, neither option grants full ownership to the foreign buyer, as only Indonesian nationals can obtain the highest ownership title, Hak Milik.

How can foreigners buy property in Bali?

If you are a foreigner looking to purchase or lease property in Bali, there are some critical steps to consider to ensure the process goes smoothly.

Step 1: Establish a PT PMA

Establishing a PT PMA (a limited liability company with foreign ownership) is the first step to purchasing property in Bali. The PT PMA establishment can be done through the Indonesian Investment Coordinating Board (BKPM), which is the government office responsible for this. However, many foreigners choose to use a local agency to set up a PT PMA, which typically takes around two weeks and costs approximately IDR 25 million ($1,575). Own Property Abroad can assist you with establishing a PT PMA in Bali. Email us at [email protected] for more information on how we can help you.

Using a PT PMA makes purchasing both freehold and leasehold property possible. If buying a freehold property in Bali, the PT PMA becomes the legal owner of the property.

For those who want to use the property for an extended period, leasehold – known locally as Hak Sewa – is a simple and convenient option. However, it is essential to note that with a leasehold, the property is rented for an extended period rather than owned. Typically, leasehold agreements last for 25 years and can be extended for another 25 and 30 years until a maximum of 80 years.

Apart from the legal differences, there are also tax differences between owning property through freehold or leasehold arrangements. You can read more about these taxes in our Bali property tax guide.

Step 2: Use a professional and reliable real estate agent

The Balinese real estate market is hard to understand, especially for foreigners. Using a skilled realty agent in Bali can save you time and energy throughout the property buying or selling process. They also provide access to a broader range of property listings and can easily track down properties that match your criteria. As these agents are experienced negotiators, they can help you navigate tricky negotiations involving delicate matters such as repair liabilities. By acting as intermediaries, they can help smooth out any conflicting personalities between the buyer and seller.

They have experience dealing with real estate contracts and know which conditions to include or remove to protect your interests. Moreover, an experienced real estate agent can help identify potential problems with a property that you may overlook, such as structural issues that may require costly repairs in the future. Spotting these issues early can mitigate future risks and make informed decisions.

Step 3: Find the right property in Bali

The next important step is finding the right property to buy. You can check out our property marketplace to find property for sale in Bali. The ideal property should cater to the needs and preferences of potential guests and be located in a desirable area that is easily accessible and close to tourist attractions. Having a clear vision of the style and layout you want for your villa can help you determine the appropriate property size that will suit your needs.

Bali has various properties, from spacious and luxurious villas or apartments to cozy and affordable townhouses or apartments. The island is big, so there are several areas to buy property. A professional real estate agent or property management company can assist you in finding the right property and ensure that all legal requirements are met before making any purchase or lease agreement.

Step 4: Verify the property licenses

Before starting negotiations or proceeding with a property purchase in Bali, it’s crucial to request two essential documents from the seller:

1. Certificate of Property
2. Building Approval (PBG)

If the seller fails to provide these documents or delays their delivery, it’s a red flag that something is amiss. This step is crucial in preventing real estate scams.

Step 5: Perform due diligence

Conducting due diligence is a necessary step when investing in property in Bali. It involves verifying land ownership, validating licenses, and working with reliable real estate agents. Following these guidelines can streamline the process, negotiate a fair price, and make informed decisions.

When conducting due diligence, you should ask the following questions:

1. Who is the owner?
2. Is the owner married, and do they have their spouse’s consent?
3. Was the property inherited, and are all beneficiaries willing to sell?
4. What type of property certificate does the property have?
5. Are the documents with the owner or at a bank?
6. What are the local zoning laws?
7. How much tax is required to pay for the property?

Note that depending on the transaction’s size and purpose, you can delve deeper into these questions.

Step 6: Sign the Sales Purchase Agreement and make a down payment

The Sales Purchase Agreement (SPA) is a legal document that outlines the buyer and seller’s responsibilities in a property transaction. It must be signed in the presence of a public notary authorized for the area (PPAT). It’s vital to ensure that the SPA protects your interests and that you comprehend all the terms.

Typically, the buyer must pay 10-30% of the total purchase price upfront. The buyer should transfer the payment directly to the person listed in the certificate of ownership. If the seller suggests a different recipient, it’s best to withdraw from the transaction.

If the certificate of ownership is with a bank, it’s necessary to agree on who will pay the remaining balance to the bank. It’s also vital to wait until the notary (PPAT) obtains and verifies the certificates before transferring the remaining payment.

Step 7: Final payment and taxes

The final transfer and signing of the Deed of Sell and Buy should be done in front of the public notary. Before transferring ownership, both parties must pay a property tax. As a buyer, you should be familiar with the Transfer Tax, called Bea Pengalihan Hak atas Tanah dan Bangunan (BPHTB). This tax, also called the land acquisition tax, has a flat rate of 5%.

A seller may suggest an “unofficial” price to lower taxes, but each property has a Tax Object Acquisition Value (NPOP), determining the property taxes’ amount. The transaction price should not be lower than the NPOP and should be considered “realistic” by the local government. Otherwise, it may prompt an audit.

Besides the Transfer Tax, buyers should also be aware of the Land and Building Tax, or Pajak Bumi dan Bangunan (PBB), which is an annual property tax that has to be paid in certain circumstances.

Step 8: Change of ownership

The public notary will transfer the ownership to the buyer and register the transfer at the National Land Agency (BPN). The buyer will receive the Certificate of the Property, including all licenses and certificates. Both the buyer and seller accept the final sale and purchase agreement.

Can you buy property in Bali using an Indonesian nominee?

Since foreign nationals cannot obtain Hak Milik, some investors choose to have an Indonesian national act as a nominee to acquire a freehold title. At the same time, the foreigner enters into a trust agreement to “own” the property. Several foreigners buy property in Bali this way, although it is illegal as it undermines Indonesia’s real estate laws and regulations. If the government finds out, they can take the real estate property themselves.

How to set up a PT PMA? 

Setting up a PT PMA through the BKPM (Indonesia Investment Coordinating Board) can be daunting for foreigners, as even minor errors may result in significant repercussions. As a solution, many foreign investors prefer to use the services of a local agency to establish a PT PMA. This process usually takes around ten weeks and may cost approximately IDR 35 million ($2,205), depending on the agency.

Buy property in Bali with Own Property Abroad

Do you want to buy property in Bali? Own Property Abroad can assist you and ensure a seamless and hassle-free property journey. Thanks to our extensive knowledge and local experience in the Balinese market, we can help with legal requirements, PT PMA establishment, finding suitable properties, negotiating the best deals, and conducting due diligence.

With our expert team, you won’t have to navigate the complexities of the real estate market in Bali alone. For further information on how we can assist you, kindly drop your details below or email us at [email protected]. Let’s start working on your property success story today!

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