Bali Property Due Diligence Checklist for Foreign Buyers

Indonesia recognises four main land titles: Hak Milik (freehold), Hak Pakai (Right to Use), Hak Guna Bangunan (Right to Build) and leasehold (Hak Sewa). Only Hak Pakai, HGB and leasehold are available to foreigners – Hak Milik is reserved exclusively for Indonesian citizens. Choosing between them is the single most important structural decision a foreign buyer makes in Bali, and it determines everything from tax burden to exit options to whether the property can legally generate rental income.

This guide explains, in plain English, what each title actually is, who can hold it, how long it lasts, what it costs, and when it is the right choice. It is written by Indonesian lawyers and PPAT notaries who register these titles every day at the Badung and Denpasar BPN offices.

Why there are multiple land titles in Indonesia

Indonesia’s land-tenure system was built on the 1960 Basic Agrarian Law (UUPA), which consolidated earlier Dutch colonial, Islamic, and customary (adat) land rules into a single national framework. Instead of a single “ownership” concept, the UUPA created a hierarchy of rights, each designed for a specific purpose – personal residence, commercial operation, cultivation, state use, and so on. The four titles below are the ones that matter for property transactions in Bali.

Hak Milik – full freehold ownership

Hak Milik (SHM, Sertifikat Hak Milik) is the strongest land title in Indonesia – absolute, indefinite, inheritable ownership. It carries no term limit, passes freely by inheritance, and can be mortgaged, sold, leased, and subdivided at the owner’s discretion. It is, in effect, the Indonesian equivalent of Anglo-American freehold.

Who can hold Hak Milik

Only Indonesian citizens (Warga Negara Indonesia, WNI) may hold Hak Milik. Indonesian companies, with very narrow exceptions (religious foundations, certain cooperatives), cannot hold it either. Crucially, foreigners cannot hold Hak Milik through any structure – not directly, not through a company, and not through a nominee agreement.

What happens if a foreigner acquires Hak Milik by inheritance or marriage?

If an Indonesian citizen becomes a foreigner (by naturalisation), or if a foreigner inherits Hak Milik from an Indonesian spouse or parent, they have 12 months to either transfer the land to a qualifying Indonesian holder or convert it to a title available to foreigners (usually Hak Pakai). If they fail to act within 12 months, the land reverts to the state.

How Hak Milik appears on the certificate

A Hak Milik certificate is typically red-banded and marked “Hak Milik” at the top, along with the certificate number, the plot’s land book reference, a survey plan (surat ukur), and the owner’s name and KTP (Indonesian ID) number. Always verify at BPN.

Hak Pakai – Right to Use

Hak Pakai is the title most foreign individuals use to hold a residential property in Bali in their own name. Introduced specifically to allow foreigners and certain Indonesian entities to use land for non-commercial purposes, Hak Pakai grants the holder full, enforceable rights to use, occupy, and build on land – subject to a fixed term.

Term and renewal

Under Government Regulation No. 18 of 2021, Hak Pakai is granted for an initial term of up to 30 years, extendable by 20 years, and renewable for another 30 years – a total maximum of 80 years. Each extension and renewal requires an application at BPN and payment of state fees.

Who can hold Hak Pakai

• Foreigners holding a valid KITAS (Kartu Izin Tinggal Terbatas – limited-stay permit).
• Foreigners holding a KITAP (Kartu Izin Tinggal Tetap – permanent-stay permit).
• Indonesian citizens.
• Diplomatic missions and certain government agencies.
• Indonesian legal entities (including PT PMA, though HGB is usually more appropriate for companies).

Rights of a Hak Pakai holder

The Hak Pakai holder may occupy the property, build on it, lease it to others, mortgage it (some banks), sell or transfer it to another qualifying holder, and bequeath it to heirs. The holder may not operate it as a registered commercial business (for that, a PT PMA and an HGB title or a registered lease are required).

Minimum price rules

To prevent Hak Pakai from being used on low-value parcels that displace Indonesian buyers, each regency sets a minimum transaction value for foreigners. In Badung (which includes Canggu, Seminyak, Uluwatu, Kuta), the minimums in 2026 are IDR 5 billion for a house and IDR 3 billion for an apartment. Properties below these thresholds cannot be transferred to a foreigner under Hak Pakai.

Hak Guna Bangunan (HGB) – Right to Build

HGB is the title of choice for commercial property held by a company. It grants the holder the right to build and own structures on land owned by the state, another party, or the company itself for an initial term of 30 years, extendable by 20 years, and renewable for 30 more – again, 80 years total.

Who can hold HGB

• Indonesian citizens (though they typically prefer Hak Milik).
• Indonesian legal entities, including PT (Indonesian-owned limited companies) and PT PMA (foreign-investment companies).

A foreign individual cannot hold HGB directly, but a foreigner who owns 100% of a PT PMA effectively controls the land through the company.

Why HGB is the right tool for villa businesses, hotels, restaurants, and developments

• The PT PMA is an Indonesian legal person, so it can legally operate a business, employ staff, issue invoices, and pay taxes.
• HGB can be mortgaged to Indonesian banks.
• A sale can be structured as either a share transfer (at the PT PMA level) or an HGB transfer (at the land level), whichever is more tax-efficient.
• The 80-year horizon usually exceeds any realistic hold period.

HGB on Hak Milik land (Hak Guna Bangunan di Atas Hak Milik)

One elegant hybrid structure, especially popular for luxury villas in Canggu and Bukit Peninsula, is HGB granted on top of a parcel of Hak Milik land. The Indonesian freehold owner keeps Hak Milik; the PT PMA is granted HGB for up to 30 years (extendable). This gives the Indonesian side full long-term security and the foreign side a strong, commercial-grade title – often at a lower upfront cost than a straight HGB-on-state-land purchase.

Leasehold (Hak Sewa) – contractual right to occupy

Leasehold is the most flexible foreign-holding structure and the fastest to execute. It is a contract between the Indonesian freehold owner (the lessor) and the lessee, giving the lessee exclusive possession of the land (and usually the right to build) for a defined term in exchange for a lump-sum or periodic payment.

Term

Indonesian law does not cap leasehold terms, but Bali practice has standardised around 25 to 30 years for the initial term, with pre-agreed extensions that can take the total to 50, 75, or occasionally 80 years. Longer initial terms (50 years) are possible but rare and usually more expensive.

Who can be a lessee

Anyone – Indonesian or foreign, individual or company – may hold a lease. There are no residency requirements, no minimum price rules, and no company-formation requirements.

What to include in a Bali lease deed

A well-drafted Bali leasehold deed (Akta Sewa), signed before a PPAT notary and ideally registered at BPN, should address: term and renewal formula, the exact permitted use (residential only vs. commercial rental), right to sublease and assign, transferability to heirs, right of first refusal on any future sale of the underlying Hak Milik, dispute-resolution forum, and what happens at the end of the term (does the building revert to the lessor, or can it be removed?).

Tax treatment

Leasehold transactions are treated as rental income to the lessor, attracting a 10% withholding tax on the lease payment. There is no BPHTB on a leasehold (because no transfer of title occurs), which makes leaseholds cheaper to set up than Hak Pakai or HGB purchases on a like-for-like value.

Side-by-side comparison

How to choose the right title for your Bali property

For personal-use villa or retirement home

If you have (or can obtain) a KITAS, Hak Pakai is usually cleanest: title in your own name, no company to maintain, full rights to live in and lease the property. If you cannot get a KITAS, a long leasehold (25–50 years) executed before a PPAT gives you similar personal rights at lower complexity.

For villa rental business, hotel, restaurant, or development

HGB through a PT PMA is the right answer. Anything else is either illegal (personal operation of commercial rentals) or impractical (leasehold operated as a business creates tax and licensing headaches).

For short-term hold (under 10 years)

Leasehold is almost always the most efficient: fast to set up, low transaction tax, no company overhead, and easy to assign or terminate.

For large-ticket investors

HGB via PT PMA gives the cleanest exit – either sell the shares to another foreigner or transfer the HGB – and the strongest operational footing. Some sophisticated investors combine structures: PT PMA holds a long lease over a parcel, with HGB granted on top.

Common mistakes and how to avoid them

1. Signing a lease without notarisation. A lease on a napkin or in a Word document is hard to enforce. Always use a PPAT.
2. Relying on a nominee. Never legal, always dangerous.
3. Skipping BPN certificate verification. Forged certificates exist. Verify at the issuing BPN office in person.
4. Ignoring zoning. A beautiful piece of land in a green zone cannot legally be built on – regardless of title type.
5. Paying before due diligence. Always make any deposit conditional on satisfactory due diligence and refundable if issues are found.