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Foreign investment in Amed real estate
The real estate market in Amed is attracting a lot of foreign investment as Bali enters a property boom cycle. A recent change to the property laws of Indonesia provides a safe and secure way for foreigners buying property in Amed.
Tourist numbers to Amed are increasing and a trend to rent private pool villas instead of staying in a hotel is exploding. This demand has created an opportunity for foreigners to invest in property as they look to capitalize on the property cycle.
Buying property in Amed as a foreigner
Foreign individuals can not buy a freehold property title (Hak Milik). However, foreign-owned PT PMA companies can acquire a HGB land title attached to a Hak Milik for the strongest level of land ownership. This is by far the most secure way for a foreigner to buy property in Bali. There are however conditions attached that can often be too complicated for the foreigners needs.
The strongest land title for a foreign individual would be a Hak Pakai – Right to Use property title. This title provides security to the investment capital and can secure property ownership rights for up to 80 years.
Below are the land titles relating to ownership of property in Indonesia, with a brief description and their pros and cons.
Stunning view of Amed beach with sunset over Mount Agung.
Hak Milik – Right to Own
This is a freehold title and is strictly reserved for Indonesian citizens. Foreign individuals can not own this title. Foreign-owned PT PMA companies can acquire freehold land under a HGB title (see below).
Pros of Hak Milik;
- Strictly reserved for Indonesian citizens only
- Outright ownership of property
- No time limit expiry of land ownership
Cons of Hak Milik;
- Not available for foreign ownership
- Not available for corporate ownership
- Expensive to acquire
Hak Guna Bangunan (HGB) – Right to Build
The HGB land title is the strongest land title allowed for foreign ownership. A foreign-owned PT PMA company can acquire and secure HGB land for a period of up to 80 years.
HGB titles allow foreign-owned companies to build on the land, sell or rent the property.
Pros of Hak Guna Bangunan;
- 30 years for the first term, 20 years extension, 30 years renewal term
- Acquire land and property in the company name
- Land and property can be sold at any stage of the term
- Highly regulated giving strong legal protection
- Real estate business activities allowed
Cons of Hak Guna Bangunan;
- Foreign investment of 10billion IDR required *note
- Minimum of two foreign individuals required to own shares in the company
- Business reporting obligations
- Strict tax payment laws
*Note – the 10 billion IDR investment is not required in one single payment. The business reporting must show frequent incoming investment to satisfy the terms of incorporating the PT PMA company. Investment requirements can be spread over a period of time proving the business reporting and taxes are paid in a timely manner.
Hak Pakai (HP) – Right to Use
The Hak Pakai title is a secure way for foreign individuals to buy a property in Bali. Foreigners do not need to set up a PT PMA company to acquire the Hak Pakai.
Instead the individual can acquire land or a property with the foreigners name noted on the title certificate.
Pros of Hak Pakai;
- 25 years for the first term
- Extensions are negotiable but can last up to 80 years in total
- Acquire land and property in the individuals name
- Land and property can be sold at any stage of the term
- Land and property can inherited by family of deceased
Cons of Hak Pakai;
- Property is for residential purposes only
- Foreigner must be living in Bali for most of the year
- Residential permit is require (KITAS/KIPTAP)
Foreigners buying a property in Bali under a leasehold title essentially do not own the land or property.
A Hak Sewa lease contract can be structured to add some security to the foreigner acquiring the property, however the ownership rights remain in the name of the land title owner.
Pros of Hak Sewa;
- Initial lease term is typically 30 years
- Options to extend up to 50 years depending on negotiation with the titleholder
- Cost efficient access to Bali real estate market
- Sub-leasing property is allowed, idea for rental property market
- Re-sale of lease during the given lease period allowed
Cons of Hak Sewa;
- Property value decreases as lease time shortens
- Lease renewal costs can be expensive
- Foreigner need titleholders permission to alter the property
Nominee Ownership **WARNING**
Using a local person to act as a nominee when buying property in Amed puts your capital at risk. There are agents that will try to convince a foreign investor into believing that a Hak Milik freehold title can be acquired through a nominee structure.
The nominee structure for foreigners buying property is illegal in Indonesia. Capital is put a risk as the local nominee could take over the property or refuse to sell or transfer the property if the foreigner wishes to.
There are a many number of horror stories with foreigners losing all or part of their investment.
Process of buying property in Amed
Buying a property in Amed as a foreigner is definitely possible. With the right approach and careful planning the process from start to finish can highly rewarding.
1. Residential or Rental?
Will you live in the property or do you plan to rent it out?
Answering this question will help you to determine the type of land title to buy with your property.
Residential;
You could buy the property under a leasehold (Hak Sewa) agreement. The agreement is drawn between the land owner and the buyer.
A much safer option is to buy the property under a Hak Pakai land title as the buyer retains more control of the property during the ownership term.
Rental:
By the letter of the law, a rental property is deemed a business asset that generates revenue.
In this case tax must be paid on that revenue.
Therefore, a PT PMA foreign-owned company should be incorporated.
2. Build or Buy?
Will you build your own property or will you buy one that is ready built?
There are pros and cons to both options with time, budget and patience being the key factors.
Build:
- Custom built home
- Choice of location
- Save money
- Complicated laws
- Ready to move in
- Less hassle
If you decide to build your own villa, due diligence on buying the land and hiring quality professionals is highly advisable.
- Notaris for advice on land purchase
- Architect for quality design
- Contractor with building experience
- Project manager to oversee quality control
Cost to build a property in Amed
Conclusion
With the right approach, buying a property in Amed can be a highly rewarding experience.
The property ownership laws of Indonesia may appear complicated. However the laws are clearly laid out and they provide a level of protection for foreigners wishing to buy property in Amed.
By far the safest way for a foreign investor to buy, own and capitalize on Bali’s real estate market is under a HGB property title.
A foreign-owned PT PMA company is required to obtain this title. Setting up a PT PMA company is often too complicated for some foreigners. In this case a Hak Pakai title should be considered.
The Hak Pakai – ‘Right to Use’ title affords a strong level of capital security for foreign property investors. Individuals can own this title for up to 80 years.
The property is totally transferable and can be sold at any time. Residency conditions are required (KITAS/KITAP) to obtain a Hak Pakai, however these are relatively easy to obtain and essentially act as a 12 month Visa permission to stay.
A third, leasehold Hak Sewa title can be safely used to buy a property in Bali. The strength of the leasehold contact and the length of term should be drawn up by a reputable third party notaris.
A professionally structured lease agreement can secure a property for 25, 50 and even 80 years. This is all dependent on a negotiation between the buyer and the freeholder. This process should be overseen by a legal notrais.
