Understanding land ownership laws in Bali is crucial for anyone looking to invest in property or construction on the island. Here’s a breakdown of what you need to know:

Freehold Ownership is Not an Option for Foreigners:

• Foreigners cannot own freehold land in Indonesia. The title known as Hak Milik (HM), or “right to own” is reserved for Indonesian citizens.
• Even if a property is advertised as “freehold”, this title is not available to foreigners.
• The Indonesian constitution states that the land is for the benefit of Indonesian people. The Agrarian Law Act also states that only Indonesian citizens may have the fullest rights to land, which includes ownership.
• This means that any attempt to acquire land in perpetuity is not permitted for non-Indonesian citizens.
• Even for Indonesian citizens, the government can take the land if it is not being used for the good of Indonesian people, or if the government needs it for another purpose.

Legal Avenues for Foreign Investors:

• Foreigners can acquire land under renewable title deeds.
• Hak Pakai (HP) or “Right to Use” title allows foreigners to lease land. This title provides the right to use the land for a period of time and can be extended.
• Hak Guna Bangunan (HGB) or “Right to Use for Building” is another option for foreigners, which allows the right to use land for building purposes.
• Leasehold titles (Hak Sewa or HS) is another option for foreigners to lease land.

Risks of Nominee Ownership:

• Some foreigners attempt to circumvent the law by using a nominee, a local Indonesian citizen, to purchase land on their behalf.
• This arrangement often includes a loan agreement, a power of attorney, and the foreigner holding the land certificate.
• However, this method is risky as Indonesian courts may see this as an attempt to circumvent the law.
• The law explicitly states that any transfer of ownership to a foreign national directly or indirectly is not valid.
• Additionally, the law notes the word “indirectly” which suggests nominee ownership is an illegal practice.
• Therefore, it might be decided that foreigners cannot own or control land.

Inheritance and Land Transfers:

• If land is given to a foreigner through a gift or will, the transaction is not considered valid.
• Moreover, any payments made for land transfer under these circumstances cannot be reclaimed.

Key Takeaway for Foreign Investors:

• Do not rely on strategies such as nominee ownership. These practices carry significant legal risks and can lead to complications in the future.
• The safest approach for foreigners to acquire land in Bali is through Hak Pakai (Right to Use). This legal avenue allows for long-term lease agreements that can be extended.

Understanding these legal frameworks is crucial for ensuring your investment in Bali is secure and compliant with Indonesian law. It is essential to consult with legal professionals specializing in Indonesian property law before making any commitments.