Indonesian agrarian law is very different from the laws that apply in Western countries. However, it is possible to invest safely by strictly following the procedures. In order to do so, some specialized notaries present in Bali will be essential for you.
Concerning the certified land in opposition to the land not registered in the national register, there are 3 categories of rights under the law :
1- Hak Milik (right of ownership)
2- Hak Pakai (right of use)
3- Hak Guna Bangunan (right to build)
In fact, the 4 ways generally used by foreigners to buy property in Indonesia are as follows:
I – Le Leasehold (Long-term rental with extensions)
This is a lease contract of up to 25 years negotiated with an Indonesian citizen or a company and signed before a notary with the possibility of renewal. The duration of the extension is negotiated on a case-by-case basis and can be agreed and paid from the beginning in instalments of up to 25 additional years. All types of Indonesian companies (including PMA) and any individual are entitled to it. The contract will give you full authority to build, modify, commercially exploit and resell. Legally, if no extension of the term has been negotiated (which is extremely rare in practice), the contract will automatically end at its term and the constructions present on that day will revert by right to the owner of the land.
II – The Hak Pakai (Right of Use)
This process is used by foreign individuals who wish to acquire property on their own name for private use only. Limited to one property per married couple. This right of use is granted by the Indonesian administration to foreigners for an initial period of 30 years. Possibility to renew it for 20 years and then another 30 years for a total of 80 years. Renewal fees are set by the Indonesian administration (currently around usd 1,000). The purchase price of the property corresponds to the market price for full ownership. It is therefore much higher than for a 25 years leasehold.
III – Hak Guna Bangunan (Right to Build)
Conditions are similar to Hak Pakai but only concerns Indonesian companies including PMA (foreign owned companies). Unlike the Hak Pakai it is possible to conduct business with a Hak Guna Bangunan and the number of properties are not limited.
IV – Hak Milik – Freehold (Purchase with the help of an Indonesian nominee)
Since only an Indonesian citizen can own a property in full ownership in his own name (Hak Milik), the property will be purchased before a notary under his name, he will simultaneously sign several documents giving you full powers.
This method practiced for years by some notaries can be challenged in court. We don’t recommend it.