Many people decide they are going to start their dream business of renting luxury villas in Bali, whose hopes come crashing down when they discover the complexities of Indonesian law as they apply to property purchases in Bali. The truth of the matter is Indonesian law forbids foreigners from outright ownership of property in that country and given that Bali is part of Indonesia, that law applies there too.
This begs the question “If Indonesian law forbids foreigners from purchasing property in Bali, how can any foreigner own a villa In Bali?”. Well, the law as it applies in Bali forbids outright ownership of property by foreigners, but that does not they cannot enter into legal arrangements which would in effect allow them to own and run a Bali villas rental business.
As you will discover as you read on, there are various categories of property ownership in Indonesia, which means that in Bali you can obtain either ownership or the use of a villa to rent it out to holidaymakers.
Property Ownership In Bali
Under Indonesian law, there are three main categories of property ownership.
Hak Milik: This is the freehold ownership of property or land, and as Indonesian law currently stands this is only open to citizens of Indonesia or specific legal entities which exist in that country. As such it means foreign citizens cannot own property, but keep reading as we will come back to the legal entities.
Hak Pakai: This refers to the right to use a property, but only for residential purposes. This is open to foreigners who can have the right to use a property as their residence for up to 30 years, although that can be extended to a total of 80 years.
Hak Guna: This is the right to build. This right applies to companies registered in Indonesia allowing them to build properties, including villas for up to 30 years, although extensions can add another 50 years to that.
Foreigner Rights Relating To Property
From what we have just discussed it is clear that Hak Pakai and Hak Guna are options for foreigners, albeit the Hak Pakai could not be used to run a Bali villas rental business. Even with these rights, there would be several points that you would need to clarify with the local authorities, including your intention for the property, your residence status, and the current land title.
How To Purchase A Bali Villa With The Intention To Rent It Out
As it stands there are two main ways you could purchase a Bali villa although legally you would not own it. The first is for you to use an Indonesian citizen who would act as a nominee for the purchase. In effect, their name would be on the property title and under Indonesian law they could claim sole ownership. This is a highly risky venture and one which has to be done with the utmost care.
The second, and the more legitimate way is to purchase a property using an Indonesian corporation. To do this you would set up a PT PMA (Perseroan Taratas Penanaman Modal Asing) which would give you the right to conduct business in Bali and earn profits from that business. It obviously would also allow you to purchase a Bali villa although it would be the company that owns it rather than you as an individual.