Buying Property in Bali: Legal Risks Foreigners Must Understand Before Investing a Single Dollar

Table of Contents

The Main Legal Question

What are the real legal risks for foreigners buying property in Bali?
Short answer: Foreigners cannot legally own land in Bali under freehold (Hak Milik) title, and many common “workarounds” marketed to foreigners are illegal, unenforceable, or extremely risky. Buying property in Bali without understanding Indonesian land law can result in total loss of the property, invalid contracts, immigration issues, or forced divestment.

Bali follows exactly the same national land laws as the rest of Indonesia. There is no “Bali exception,” no special island rules, and no legal shortcut that converts foreign buyers into landowners.

Legal Explanation

Why Buying Property in Bali Is Legally Risky for Foreigners

Bali is one of the most desirable real estate markets in Southeast Asia. Villas, beachfront land, and short-term rental properties are aggressively marketed to foreigners—often with promises of “ownership,” “guaranteed returns,” or “safe nominee structures.”

However, Indonesian property law is strict, formalistic, and unforgiving. Courts and land authorities do not recognize informal arrangements, side letters, or private promises that contradict statutory law.

The key legal issue is simple but often ignored:

Foreigners are not allowed to own land in Indonesia.
Everything else—leases, use rights, companies, contracts—must be structured around this legal reality.

Bali Is Not a Separate Legal Jurisdiction

A common misconception is that Bali has “special” rules due to tourism or foreign investment. This is false.

Under Law No. 23 of 2014 on Regional Government, land affairs remain governed by national legislation, not provincial discretion.

Practical meaning:
Any property structure that is illegal in Jakarta is equally illegal in Bali.

The Three Most Common Ways Foreigners “Buy” Property in Bali

1. Nominee ownership (illegal)
2. Long-term lease (legal, but risky if poorly drafted)
3. Hak Pakai (legal, regulated, safest for individuals)

Understanding the legal limits of each structure is critical.

Legal Basis

This section explains the exact laws governing property ownership and use by foreigners in Bali, and what they mean in practice.

1. Basic Agrarian Law

Law No. 5 of 1960 on Basic Agrarian Principles
This is the foundation of Indonesian land law.

Prohibition on Foreign Ownership

• Article 21(1):

Only Indonesian citizens may hold Hak Milik (Right of Ownership).

• Article 26(2):

Any transfer of Hak Milik to a foreigner is null and void by law, and the land reverts to the state.

Practical Meaning:
Any attempt—direct or indirect—for a foreigner to control Hak Milik land is illegal and unenforceable.

2. Hak Pakai (Right of Use)

Law No. 5 of 1960, Articles 41–43

• Article 41(1):

Hak Pakai grants the right to use and collect benefits from land.

• Article 42:

Hak Pakai may be held by foreigners domiciled in Indonesia.

Practical Meaning:
Hak Pakai is the only residential land right designed for foreigners.

3. Government Regulation on Land Rights

Government Regulation No. 18 of 2021 on Management Rights, Land Rights, Apartment Units, and Land Registration

• Article 67:

Hak Pakai may be granted over land or apartment units.

• Article 71:

Hak Pakai may be extended and renewed.

Practical Meaning:
Hak Pakai can provide long-term legal certainty if properly registered and renewed.

4. Foreign Residential Property Regulation

Government Regulation No. 103 of 2015 on Ownership of Residential Houses or Occupancy by Foreigners

• Article 1:

Foreigners with valid stay permits may own residential property under Hak Pakai.

• Article 2:

Property must be used as a residence.

Practical Meaning:
Foreigners must hold a KITAS or KITAP and use the property legally.

5. Marriage and Mixed Marriage Risks

Law No. 1 of 1974 on Marriage, as amended by Law No. 16 of 2019

• Article 35:

Property acquired during marriage becomes joint marital property unless otherwise agreed.

Practical Meaning:
Indonesians married to foreigners lose Hak Milik eligibility unless a prenuptial or postnuptial agreement exists.

6. Investment Law (PT PMA Structures)

Law No. 25 of 2007 on Investment

• Article 5:

Foreign investors may establish Indonesian companies.

Practical Meaning:
A PT PMA may hold land under Hak Guna Bangunan (HGB) for business purposes—not personal villas.

Risks and Legal Consequences

1. Nominee Structures (The Biggest Risk)
A nominee structure typically involves:

• Land registered under an Indonesian name
• Private agreements promising control to the foreigner

Legal Status: Illegal.

Legal Consequences:

• Agreements are void
• No court protection
• Property can be sold without consent

Legal Basis:
Law No. 5 of 1960, Article 26(2)

2. Losing Property Due to Immigration Status
Under Government Regulation No. 103 of 2015, foreigners must maintain valid stay permits.

If your KITAS or KITAP expires:

• Property may need to be sold
• Failure can trigger forced divestment

3. Lease Agreements That Don’t Protect You

Many leases in Bali:

• Are not notarized
• Have no renewal rights
• Are unregistered
• Allow unilateral termination

Result:
You may lose the property despite paying in full.

4. Zoning and Spatial Planning Violations
Using residential land for:

• Airbnb
• Commercial rentals
• Hospitality businesses

without permits violates zoning laws.

Legal Basis:
Law No. 26 of 2007 on Spatial Planning

Consequences:

• Fines
• Permit revocation
• Forced closure

5. Tax and Reporting Violations
Failure to pay:

• Land and Building Tax (PBB)
• Capital gains tax
• Rental income tax

can lead to penalties and audits.

Case Examples

Case 1: Nominee Villa Seized
A European investor buys a villa through a local “trusted friend.” After a dispute, the nominee sells the property.

Outcome:
Investor loses everything. Courts refuse enforcement.

Case 2: Proper Hak Pakai Ownership
An American expat with a KITAS purchases a villa under Hak Pakai, registered with BPN.

Outcome:
Legal, renewable, and enforceable ownership.

Case 3: Lease Without Renewal Clause
A foreigner leases land for 25 years with no renewal clause. Owner refuses extension.

Outcome:
Property reverts to landowner.

Case 4: PT PMA Misuse
A foreigner buys a “villa” through a PT PMA but uses it as a private residence.

Outcome:
Licensing violations and potential revocation.

What Can Be Done (Practical Solutions)

1. Use Hak Pakai Correctly

• Hold valid stay permit
• Ensure proper land registration
• Renew on time

2. Buy Strata-Title Apartments

• Must meet minimum price thresholds
• Must be approved for foreign ownership

3. Use Long-Term Leases Safely

• Notarized agreements
• Clear renewal rights
• Dispute resolution clauses

4. Use PT PMA Only for Business

• Commercial purpose only
• Proper licensing
• Separate personal use

5. Conduct Full Legal Due Diligence

• Certificate verification
• Zoning check
• Permit review
• Tax compliance

Conclusion

Buying property in Bali as a foreigner is not impossible—but it is legally dangerous if done incorrectly. The biggest risks come from illegal shortcuts, nominee arrangements, and misunderstanding Indonesian land law.

With the right structure, legal advice, and compliance, foreigners can legally control and enjoy property in Bali without risking total loss.

FAQ: Buying Property in Bali as a Foreigner

Can foreigners own land in Bali?
No. Bali follows national land law.

Is Hak Pakai safe long-term?
Yes, if properly registered and renewed.

Are nominee agreements legal?
No. They are void by law.

Can foreigners inherit property in Bali?
Only limited rights; Hak Milik must be divested.

Can I rent out my villa legally?
Only with proper zoning and business permits.

Can I buy beachfront land?
Foreigners may only hold usage rights, not ownership.

Professional Legal Assistance
If you are considering buying, leasing, or investing in property in Bali, consult a licensed Indonesian advocate before signing any agreement.
Please refer to the contact details provided in the website navigation to obtain professional legal advice tailored to your situation.