Hak Milik / Freehold Title
Freehold title, which means full ownership of land and villa, can be held by an Indonesian individual.
This structure consists of a series of contractual agreements between a foreigner and the Indonesian national who the foreigner nominates to hold the Hak Milik title.
This structure should consist of a Notarized loan agreement and mortgage in favor of the foreigner together with an agreement granting the foreigner secured rights to occupy the property. The mortgage will prohibit the nominee selling the property without the discharge of the mortgage by the foreigner.
Occupation rights should be granted by way of a Notarized lease to complete the structure.
Leasehold (Hak Sewa)
This is a contractual agreement between the Hak Milik land owner and the foreigner which grants leasehold rights to the foreigner for the terms of the lease.
This structure offers reasonable security provided that the lease agreement is executed before an Indonesian Notary in Notarial Deed form in the Indonesian language.
The leasehold interest is an unregistered interest in the land so the foreigner’s leasehold rights do not appear on the Hak Milik certificate of title as an encumbrance. However, the unregistered leasehold interest will take priority over subsequent encumbrances on the Hak Milik title.
While the actual term of a lease is not regulated under Indonesian law, Notaries in Bali will generally grant leases to foreigners in terms of 25 years so that the lease term accords with the government decreed 25 year term of the Hak Pakai title available to a foreigner as a registered interest in Hak Milik land.
Hak Pakai over Hak Milik/ equivalent freehold title for non-Indonesian buyers
The leading ownership structure now permitted by the National Land Agency in Bali is known as the Hak Pakai over Hak Milik title.
The Hak Pakai title is the government sanctioned method for foreign purchasers to acquire the exclusive right of use over Hak Milik land which is registered in a separate certificate of title issued in the name of the foreigner.
The Hak Pakai title differs from a lease in that it is a registered proprietary interest in the Hak Milik land rather than an unregistered interest. A foreign purchaser is permitted to hold one Hak Pakai title in Indonesia at any time.
The title can be mortgaged and is freely transferable to another foreigner, an Indonesian National or an Indonesian company.
Corporate ownership (Hak Guna Bangunan)
A foreign investment limited liability company in which the foreigner owns or controls 100% of the shares is commonly known as a PMA company. These companies are permitted to hold a certificate of title known as Hak Guna Bangunan (HGB) meaning the right to own and use buildings on the land.
The initial term of the HGB is 30 years and the terms of extensions and renewals are dependent on whether the HGB is established over Hak Milik land or over State land.
The PMA company has ongoing taxation and reporting requirements to Indonesian government authorities and must engage in a single purpose business. As a result of the PMA company’s corporate and tax compliance obligations, it may be viewed as not being the most appropriate vehicle to hold a single, relatively small villa investment.