No Freehold, No Nominees: Bali's Three Legal Property Routes Explained

TL;DR

Foreign property buyers in Bali should distinguish a lease, a registered land right and shares in a company that holds land rights.

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The Facts

Foreign property buyers in Bali should distinguish a lease, a registered land right and shares in a company that holds land rights. They provide different rights and obligations; none automatically gives a foreign individual Indonesian freehold land ownership.

This guide compares three common structures: Hak Sewa, Hak Pakai and HGB through an eligible Indonesian company such as a PT PMA. Apartment ownership has a separate framework and is not interchangeable with ownership of a landed villa.

Why a nominee is not a freehold solution

The Basic Agrarian Law, Law 5/1960, Article 21 limits Hak Milik eligibility. Foreign individuals are not eligible to purchase and hold that land title as their own.

Article 26(2) addresses transactions intended to transfer Hak Milik directly or indirectly to an ineligible recipient, including a foreigner. It provides for nullity, the land falling to the State, preservation of qualifying third-party rights and the inability to reclaim payments already received by the owner under that provision.

A private arrangement intended to circumvent that restriction should not be marketed as secure foreign freehold ownership. The outcome of any particular dispute depends on its facts and applicable law; do not confuse the statutory consequence with a promise that the nominee simply becomes the lawful ultimate owner in every case.

Route 1: Hak Sewa

Articles 44–45 of the Basic Agrarian Law describe a right to use another person's land for buildings in return for rent and identify eligible holders, including foreigners domiciled in Indonesia. Payment can be made once or periodically.

Those articles do not prescribe a universal 25-year maximum lease term. That does not make any proposed long lease automatically valid: check the lessor's authority, underlying title, permitted use and the terms of the actual agreement.

A lease should address duration, renewal, assignment or subletting, permitted use, buildings and improvements, default and what happens when the term ends. Paying decades of rent upfront does not convert a lease into Hak Milik.

Route 2: Hak Pakai

Government Regulation 18/2021 provides for time-limited Hak Pakai and eligible holders. Article 52 distinguishes the underlying land.

For State land and Hak Pengelolaan land, it provides an initial term of up to 30 years, an extension of up to 20 years and renewal of up to 30 years. These are conditional legal stages, not an automatic guaranteed 80-year term.

Hak Pakai over Hak Milik land has a term of up to 30 years and can be renewed through a new grant deed. Article 53 specifies a PPAT deed for its creation over Hak Milik; registration requirements must also be satisfied. A generic private or notarial lease is not the same instrument.

Foreign residential ownership is subject to immigration-document requirements and housing conditions under Articles 69–72. ATR/BPN Regulation 18/2021, Articles 185–187 adds conditions for foreign housing ownership, including landed-house limits of one plot per person/family and up to 2,000 square metres, with a ministerial-permission exception under Article 186(2). Applicable price and property-category requirements must also be checked.

These housing provisions must not be presented as a single universal cap governing every foreign lease or every company-held commercial property.

Route 3: HGB through a PT PMA

Article 34 of Government Regulation 18/2021 allows HGB holders to include legal entities established under Indonesian law and domiciled in Indonesia. An eligible PT PMA can therefore hold HGB; the right belongs to the company, not personally to its foreign shareholders.

A company structure introduces separate business-field, investment, licensing, tax and reporting obligations. BKPM Regulation 5/2025, Article 26 distinguishes the general investment requirement of more than IDR 10 billion from minimum placed/paid-up capital of IDR 2.5 billion per PMA company, subject to applicable exceptions and other legislation.

Property and accommodation activities have specific investment calculations, including rules on when land and buildings count. Do not assume that every property company's threshold excludes those assets.

Holding HGB does not itself authorise short-term accommodation, a restaurant or another business on the property. Confirm the intended use, location and operating permissions separately.

In Practice

Decide whether the purpose is personal residence, investment through a company or operating an accommodation business. Then verify the title and the counterparty's authority before selecting the instrument.

Ask a qualified PPAT and adviser to check the land record, encumbrances, access, remaining term and any approvals needed for the proposed transaction. Review spatial use and relevant building or business permissions against the actual intended use.

Do not rely on blanket promises of automatic renewal, universal eligibility or guaranteed rental income. Record the conditions that must be satisfied before payment, the documents to be delivered and the remedy if the transaction cannot proceed as represented.

Sources

• Law 5/1960, Articles 21, 26 and 44–45.
• Government Regulation 18/2021, Articles 34, 49, 52–54 and 69–72.
• ATR/BPN Regulation 18/2021, Articles 185–188.
• BKPM Regulation 5/2025, Article 26.

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Bali Zero Take

Our Analysis

The property and the legal structure must be assessed together. A beautiful villa with the wrong ownership instrument or operating permissions can create a problem that price negotiations cannot solve.

Our Advice

Choose the structure before committing funds. Treat a lease, an individual housing right and a company-owned asset as different decisions, each requiring its own checks. This is an editorial due-diligence recommendation, not a conclusion about any individual transaction.

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Next Steps

Primary Source

Exa: lokalfinds.com

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