January 2025 - Sanur Villa & Land Hunter

Hak Guna Bangunan (HGB) Property Title in Bali – Detailed Overview

By James, Sanur Villa & Land Hunter Uncategorized

Hak Guna Bangunan (HGB) means the “Right to Build”, this property ownership title allows a foreigner to buy empty land in Sanur or Bali and then build a property on the land – for commercial or residential purposes.

Alternatively, you could also purchase an existing HGB title property.

BUT it is important to highlight – the HGB purchase route can Only be taken if a foreigner sets up, controls and owns a local PT PMA company (a 100% foreign owned Indonesian company).

A foreigner can Not buy empty land under the HGB title using their own name.

If a foreigner wants to buy property in Bali under their own name, they must either use the Hak Sewa or Hak Pakai purchase routes.

Please note that all comments shared in this article are purely my own, based on my own detailed research and personal understanding. As always you should consult with a Balinese notary or property law expert to get full insight into Bali’s real estate laws.

Land owned under the HGB title can be used to develop residential property or commercial property – such as Airbnb villa’s / guesthouses / hotels / a property used for profit making activities.

You can build a single unit property on the land or multiple properties.

HGB titles are registered at the Land Agency (BPN), in your PT PMA company’s name, and value-wise they are seen as comparable to holding a freehold Hak Milik title.

The HGB ownership title is regulated under the Agrarian Law No. 5 year 1960, Articles 35 – 40.

Article 35 paragraph 1 explains that Hak Guna Bangunan (HGB) is the right to build and own buildings on land that you do not own.

Therefore, the holder of a HGB title is Not the freehold owner of the land but possesses the exclusive right to use the land and to construct and own buildings on the land.

When a foreign national purchases freehold Hak Milik land in Bali, under the HGB title, using their PT PMA company, the company does Not receive freehold Hak Milik status – because a foreign owned PT PMA company can Not own Hak Milik status – instead it receives the Hak Guna Bangunan title.

As part of the HGB purchase process, the freehold Hak Milik title is transferred from the seller – who is removed from the Land Agency records – to the government.

The government then grants your PT PMA company the HGB title for a duration of up to 80 years, including renewals of the title.

If you ever sell the land / property to an Indonesian citizen, the HGB title is converted back into Hak Milik freehold title for the new Indonesian owner.

For this reason, value-wise, the HGB title is comparable to owning freehold Hak Milik title.

A 100% foreign owned local company – a PT PMA – that is set-up, controlled and owned by a foreigner, can legally and safely purchase empty land in Sanur or Bali, under the HGB title & then build a villa or house – assuming that all requirements are met.

The HGB title has no doubt been designed for property development companies, allowing them to buy, sell, develop or manage commercial properties in Bali – such as villa rentals, villa complexes and other large commercial real estate activities…

But as it can be legally used by a 100% foreign owned PT PMA company, and to set-up a PT PMA is not too expensive, many individual foreigners have bought empty land in Sanur or Bali using the HGB title and then built their dream Bali villa – for personal use or as a short-term villa rental.

HGB is often called the “ultimate way for a foreigner to buy property in Bali” as it grants you a status that is pretty much the same as owning freehold Hak Milik title.

But whilst it is relatively cheap and easy to set-up a 100% foreign owned local Indonesian company – a PT PMA – you must meet certain documentation requirements, comply with tax reporting regulations & invest a minimum amount of money into the PT PMA.

The good news is, your PT PMA can then sponsor your long-term residency visa for Bali. Your PT PMA can also apply for all building permits and commercial activity licenses as needed.

Key Points About the HGB Property Title

A Hak Guna Bangunan (HGB) title can Only be bought by a foreigner that owns and controls a 100% foreign owned local Indonesian company – a PT PMA (“Perseroan Terbatas Penanaman Modal Asing”).
The HGB title is registered under your PT PMA company’s name, not your individual name.
The HGB title allows you to purchase, through your PT PMA company, Hak Milik freehold land in Sanur or Bali.
However, as a PT PMA is foreign owned, it receives HGB status instead of Hak Milik freehold status.
It can only be used to purchase empty land Or you can purchase an existing property that has HGB title.
It is designed for land development activities.
With the HGB title you can build residential property or commercial property on the land – such as villa rentals on Airbnb.
If the property is to be used for commercial activities, such as nightly rental, extra licenses are needed for those commercial activities, which your PT PMA can apply for.
When you purchase freehold land under HGB title, the Hak Milik freehold seller is removed from the Land Agency records.
You are basically buying the freehold land But the freehold land is instead placed under the government and the government then grants your PT PMA the HGB title over the land.
The total duration granted for a HGB title is up to 80 years, including renewals of the title.
When buying property under HGB title, a sale & purchase agreement is executed & your 100% foreign owned PT PMA company receives a HGB land certificate, stating your PT PMA company’s name, which is registered with the Land Agency (BPN).
A HGB purchase is executed and notarized by a PPAT Notary and is fully protected and valid under Indonesia’s constitution / Agrarian Laws.
Buying land & then building under the HGB title is considered a very safe way for a foreigner to purchase land in Sanur or Bali, however it comes with more costs such as registering a PT PMA company, reporting requirements for the PT PMA company & the cost of converting the Hak Milik freehold title into a HGB title certificate.
The HGB title can be transferred or sold to others, it can also be used to gain a mortgage etc.
When selling HGB title land / property to an Indonesian citizen it is converted back into Hak Milik freehold status for the new Indonesian owner.
Therefore, unlike Hak Sewa long leaseholds, the value of HGB title property does not reduce over time… as it gets closer to the expiry of the HGB title term… as it can be converted into Hak Milik freehold title if the property is sold to an Indonesian citizen.
Cost wise, buying land under the HGB title is priced the same as buying land under the Hak Milik freehold title, as the freehold seller is removed from the land agency records.
Therefore, buying land under HGB title is generally a lot more expensive than buying land under a Hak Sewa long lease title.
HGB is the closest that a foreigner can get to purchasing Hak Milik freehold land status in Sanur or Bali.
A PT PMA, owned by a foreigner, can purchase as many freehold Hak Milik plots of land as it wants under the HGB title.
A foreign national can also get their residency visas for Bali via his / her PT PMA.

Purchasing Land for Sale in Sanur or Bali Under HGB Title – More Details

Hak Guna Bangunan (HGB) ownership title provides the HGB titleholder with the exclusive right to use the underlying freehold land and to construct and own buildings on such freehold land, for up to 80 years (including renewal terms).

The HGB title is initially granted by the government for 30 years but it can be extended for 20 years and then renewed for another 30 years.

This gives the HGB titleholder total rights to the land and buildings built on it for up to 80 years.

Unlike Hak Sewa long leaseholds, when you purchase freehold Hak Milik land in Bali under the HGB title, using your PT PMA, your HGB ownership is clearly stated in the Land Agency (BPN) records & your PT PMA receives an HGB ownership certificate from the Land Agency (BPN).

In essence, when you buy Hak Milik freehold land under HGB title, the freehold land is transferred / placed under the Indonesian government’s ownership and the new HGB PT PMA owner receives the right, granted by the government, to exclusively use the land and build on the land.

HGB ownership is “indirect”, as the HGB title Can Not be purchased and registered by a foreign national in their own name, it can Only be purchased and registered by a foreign national using a 100% foreign owned local Indonesian company (a PT PMA).

The PT PMA, that you own, purchases the freehold land under the PT PMA company’s name and the company receives the HGB ownership status which is stated in the Land Agency records.

Please note, there are rules and regulations when setting up a PT PMA company in Bali, such as regarding the minimum investment monies that must be put into the company, tax reporting, financial reporting and etc.

There are many reputable consulting firms in Bali that can advise you regarding the current regulations for setting up a PT PMA in Bali.

Generally it takes a few weeks and it is not particularly expensive to set-up a PT PMA company (approx. AUD 1,500-3,000).

Whilst the HGB title has been designed for use by property development companies that are focused on larger scale commercial land development – such as multi-unit villas, hotels and etc… it can be used for single dwelling residential property as well.

The reason why the HGB ownership title is considered as comparable, value-wise, to holding a freehold Hak Milik ownership title, is because when HGB land / property is sold by a 100% foreign owned PT PMA to an Indonesian citizen, the HGB title, for a relatively small cost, can be converted, as part of the sale process to the new Indonesian citizen owner, back into Hak Milik freehold status.

An HGB / Right to Build title can be sold, gifted, exchanged, leased out, inherited to others or encumbered by a mortgage.

HGB land can ultimately be used for commercial or residential purposes, as long as it is in accordance with land zoning, building permits and government regulations.

HGB titles can be transferred / sold by 100% foreign owned PT PMA’s to other 100% foreign owned PT PMA’s, also to Indonesian citizens (and converted back into Hak Milik freehold status), or to Indonesian companies.

HGB titles are considered very safe & a great route for foreign nationals to take when buying empty land for sale in Sanur, or Bali, which they plan to develop.

There are of course extra costs for a foreigner when purchasing land in Bali under the HGB status, versus a simple Hak Sewa long leasehold under their own name – such as registering a PT PMA company, the minimum investment monies that are needed to set-up the PT PMA, the ongoing maintenance costs of the PT PMA, the cost to convert the Hak Milik freehold status into the HGB title and etc.

If the property that is built is to be let out and used for commercial purposes, if up to 5 bedrooms in size, a PT PMA can apply for a Pondok Wisata license. If more than 5 bedrooms a PT PMA can apply for a full hotel license.

Once you have built a property under HGB title, you can use the premises for your own personal benefit or for commercial activities.

Key Items Your Notary Should Address When You Buy Land Under HGB Title

When you buy empty land via the HGB title in Sanur, or if you buy an existing property with HGB title, make sure that you ask the notary to provide you with a copy of the sellers freehold Hak Milik land certificate that relates to the land.

The notary must also confirm that the land certificate is valid.

The land certificate will state the name of the current Hak Milik freehold owner & also the land status.

You must make sure that the person selling the land to you, as the Hak MIlik freehold owner, is the same person as stated on the land certificate.

Make sure you take a copy of their KTP ID card and Kartu Keluarga (family card) for your records and also, as best practice, video & photograph the Hak Guna Bangunan sale & purchase agreement signing, in the notary’s office, and save these for your records.

If the person stated on the Hak Milik freehold land certificate has passed away or is different to the person that is signing the sale & purchase agreement, this is a BIG red flag, you must immediately seek the notaries advice.

The Notary will then need to get extra documents signed and permissions documented, to ensure that you have a clean HGB purchase.

It is common in Bali for the person stated on the Hak Milik freehold land certificate to have passed away and the freehold land to have been automatically inherited by the persons heir or heirs… without updating the land certificate with the new ownership name(s).

If this has happened, the notary must get the signed permission of all possible legal heirs – there could be many – for the HGB sale & purchase agreement to be safely executed free from potential challenge in the future from external 3^rd parties.

For example, the person stated on the land certificate has passed away and the land has been inherited, by law, by his 3 sons. 1 of his sons is selling you the land… but he has 2 brothers that are not party to the agreement and could easily & legally contest the sale.

Also in Indonesia, a husband and wife, without a prenuptial or postnuptial agreement, have shared property. Therefore, they must both sign a property sales contract.

So, if the seller is married, make sure that their spouse also signs the sale & purchase agreement to confirm their acceptance of the sale and to ensure there are no potential headaches later on.

If the seller can not write, they can legally sign and validate the sales documents using their fingerprint.

Also make sure that the notary confirms the land / existing HGB property has guaranteed access rights to public roads. As if not, this is a big potential issue.

If you are buying an existing HGB property, with an existing villa or house in Sanur, or Bali, make sure that you ask the notary to confirm that the building already has the required PBG (Persetujuan Bangunan Gedung) and SLF (Sertifikat Laik Fungsi) building permits.

Before 2021 these permits were combined and called the IMB (Ijin Mendirikan Bangunan).

Again, take copies of the PBG and SLF permits.

If you are buying land under HGB title the notary should also confirm that there are no other property ownership interests registered against the land, such as a Hak Pakai title and that there are no other encumbrances against the land / property such as mortgages or debt.

The notary must confirm that there are no court cases or disputes registered against the land.

The notary should confirm that all annual land and building taxes (PBB) for the land are fully paid and up to date. If there are any unpaid PBB taxes this should be cleared by the notary, as part of the purchase and the seller will bear responsibility for this cost.

Make sure you only transfer the purchase monies to the verified freehold Hak Milik seller. If the seller asks you to transfer the money to a different person – this is a BIG red flag, you must consult with the notary 1st. They will then need to issue extra documents / receipts to confirm that the seller has received the money.

Often if the seller is elderly they will not have a personal bank account but one of their children does – and they may ask that the money be transferred to their son or daughter. Not a problem, but get the extra papers needed to verify that the freehold Hak Milik seller authorizes their child to receive the purchase monies on their behalf.

Lastly, if you are buying empty land in Sanur or Bali you must ask the notary to confirm the land zoning that applies to the land, as this will impact what you can build on the land / what permits your PT PMA can apply for.

For example, if you plan to build a villa for short-term rental to tourists, you need to ensure that the land sits within land zoning that allows you / your PT PMA company to apply for all the necessary commercial permits.

Do not buy Green Zone land as this is designated for agriculture – your PT PMA will not be able to get the permits needed to build on Green Zone land.

The notary must confirm all of these items to you before you commit and sign the sale & purchase agreement & make payment to the seller.

A good notary will cover all these due diligence items automatically.

To be 100% legally enforceable and airtight, a HGB purchase agreement must be issued in the Indonesian language, as per Indonesian law.

As a foreign buyer you can & should ask for a certified translation of the Bahasa Indonesia document into the English language.

By taking the steps above, buying empty land in Sanur or Bali under HGB title, or buying an existing HGB property, through a PT PMA company that you own and control, is a very safe purchase route for a foreigner to take.

And value wise it is seen as comparable to purchasing Hak Milik freehold status.

The Extra Costs a Buyer Pays – on Top of Price – when Buying Under HGB Title

When buying Hak Milik freehold land, under the HGB title, or when buying an existing property with HGB title, the buyer pays the Bea Perolehan Hak atas Tanah dan Bangunan (BPHTB), or “land and building acquisition duty”.

The BPHTB Buyers Tax is currently set at 5% of the higher of the government defined land value (NJOP) / Or the declared purchase price.

The seller on the other hand will have to pay the seller’s tax called PPH (or Pajak Penghasilan) amounting to 2.5% of the higher of the government defined land value (NJOP) / Or the declared purchase price.

Often notaries will suggest a declared purchase price that is lower than the actual purchase price… but it must always be higher than the government defined land value, as otherwise the purchase could be audited.

The buyer would usually choose the notary that is used and in turn the buyer would typically be expected to pay the costs associated with the notary’s services.

The notaries service fee is actually defined by law, Article 36 of Law No. 30 of 2004 concerning Notary Positions:

For transactions below IDR 100 million in value: the notary fee is 2.5% of the transaction value
For transactions between IDR 100 million and IDR 1 billion in value: the notary fee is 1.5% of the transaction value
For transactions above IDR 1 billion in value: the notary fee is 1% of the transaction value

Therefore, if the purchase price was IDR 10,500,000,000 the notary fee would be 1% = IDR 105,000,000.

According to Article 1320 of the Civil Code, who pays the notary fee is up to the buyer and the seller. So if the buyer and seller agree to split the fee, as part of the deal… that’s fine.

But typically, the notary fee would be paid by the buyer.

If the seller has used a real estate agent, the commission due to the real estate agent for the sale is the responsibility of the seller.

So in general, if a buyer purchases land under HGB title in Sanur or Bali, or existing property with HGB title, on top of the purchase price, the main purchase costs that the buyer can expect to pay are the notary fee, which is usually 1% of the transaction value & also the government purchase tax equal to 5% of the declared purchase price.

There are various other documentation related fees that the buyer will also pay, which are relatively negligible, there is also the fee for changing the freehold land title from Hak Milik status into HGB status, which the buyer will also pay, but again this is usually not a large cost in the grander scheme of things.

James, Sanur Villa & Land Hunter

James is passionate about Bali & everything to do with real estate! He is a long-term permanent resident of Sanur, Bali and he helps out-of-town Property Buyers find & buy their dream villa, house or plot of land for sale in gorgeous Sanur or the nearby East Coast of Bali.

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Hak Sewa (HS) Long Leasehold Property in Bali – Simple & Easy

By James, Sanur Villa & Land Hunter Uncategorized

Hak Sewa (HS) is definitely the most common purchase route taken by foreign nationals when buying land or existing property in Sanur or Bali. It basically equates to purchasing a very long leasehold interest over land Or land + existing buildings.

Hak Sewa can be safely & legally used by foreign nationals to buy empty land, a house or a villa for sale in Sanur or Bali – for personal use, commercial activities or for land banking as a longer term investment.

The beauty of Hak Sewa is that it is simple, requires few documents, is low cost to execute and generally involves a much lower up-front purchase cost.

Foreigners can also rest well at night, as it is clearly stated in Indonesia law that foreign nationals can buy land / property using Hak Sewa.

Like any leasehold interest, when you purchase property in Sanur or Bali via a Hak Sewa long lease, you are Not buying the underlying freehold (Hak Milik) ownership title – therefore there is no change to the freehold ownership, the freehold owner remains the same.

You are instead buying a long leasehold interest from the freehold (Hak Milik) owner that grants you the exclusive right to possess and use the land / property for the duration of the long lease, subject to the terms of the lease.

A Hak Sewa long lease is entered into between the freehold land / property owner (called the Lessor) who is selling the long lease and the foreign buyer (called the Lessee).

You can also buy existing Hak Sewa long leasehold land / property, and all the rights and benefits associated with the Hak Sewa lease, from the current owner of a Hak Sewa long leasehold property.

Hak Sewa long leaseholds are regulated under the Agrarian Law No. 5 year 1960, Articles 44 and 45.

The great news – foreign nationals can purchase a Hak Sewa long leasehold property in Sanur under their own name – if they plan to use the property for personal / residential purposes (like a holiday home).

But if the foreign buyer plans to use the land / property for commercial activities, such as a villa for short-term rental, it is definitely recommended to purchase the Hak Sewa under the name of a 100% foreign owned local Indonesian company (called a PT PMA) which they set-up, own and control.

A Hak Sewa long lease provides a foreign national with long-term exclusive use of land / property.

But as with any lease, it is ultimately time-defined ownership. So when the lease term expires, the land and any property sitting on the land must return to the possession of the freehold (Hak Milik) owner / Lessor.

Hak Sewa Long Leases – Summary of Key Points

A Hak Sewa long leasehold property can be bought by foreign nationals in their own name or via the use of a 100% foreign owned local Indonesian company (called a PT PMA) that they set-up, own and control.
If bought by a foreign individual in their own name, you just need your passport & a valid tourist visa or any other type of Indonesia residency visa.
When you purchase land / property under Hak Sewa, you are Not buying the freehold Hak Milik title, there is no change to the freehold ownership, you are buying a long leasehold interest from the freehold Hak Milik owner.
As such the cost to buy land or property under a Hak Sewa long lease is typically much cheaper than buying freehold Hak Milik property (which a foreign national can Not purchase).
Hak Sewa can be used to purchase any type of property in Sanur or Bali.
It can be used to purchase empty land, existing residential buildings or property that is to be used for commercial activities – such as villa rentals.
But if the land / property is to be used for commercial activities it is recommended to buy the Hak Sewa using a 100% foreign owned local Indonesian company (a PT PMA) that you set-up, control and own.
Your PT PMA can then apply for all the necessary commercial licenses and permits that are required.
Typically a Hak Sewa long leasehold is structured as an initial lease term of 20-30 years & then 2 x lease renewals for 20-30 years each.
The total Hak Sewa long lease term, including renewals / extensions, can be safely executed up to 80 years in duration.
A Hak Sewa lease is a notarized contractual agreement between the freeholder (seller / Lessor) and the buyer (Lessee).
Because the freehold (Hak Milik) ownership status does not change, a Hak Sewa long lease is Not registered in the Land Agency (BPN).
But a Hak Sewa lease agreement is executed by an authorized PPAT Notary, who represents the Indonesian government.
A Hak Sewa lease agreement is protected and fully valid under Indonesia’s constitution / Agrarian Laws.
Foreigners can buy as many Hak Sewa leasehold properties in Sanur or Bali, under their own name, as they wish – there is no limit.
Using Hak Sewa is considered a very safe way for foreign nationals to purchase property in Bali and is the most common purchase route taken.
The leasehold can be transferred or sold to others, inherited and etc.
But a Hak Sewa long lease can not be used to gain a mortgage.
As with any long lease, as it gets closer to the expiry of the lease term, the re-sale value of the remaining leasehold declines.

How Many Years can a Hak Sewa Long Lease be For?

Technically speaking, from what I understand, there is no legal definition for the maximum duration of a Hak Sewa long leasehold that is purchased by a foreigner in Sanur, or Bali.

But typically in Bali real estate deals, a freehold owner (Lessor) will only be open to selling an initial leasehold term of 20-30 years, plus the right to renew / extend the lease for an additional 50 years in total.

So this provides a maximum lease term of 80 years.

Assuming the leasehold agreement is properly constructed and executed, throughout the Hak Sewa leasehold term, as the Lessee, you possess the legal right to unrestricted use of the land / any property on the land, without disturbance or interference.

Subject to the commercial agreement that is reached with the Lessor, a typical Hak Sewa lease agreement will include:

An initial term of 20-30 years
And the foreign buyer / Lessee will possess the automatic right to renew the initial lease at the end of the initial term, for another 20 – 30 years, subject to lease renewal price negotiation and agreement between both parties at a set point in time (before the initial lease term expires)
And then there will be one final option to renew the lease, again for 20 – 30 years, again subject to lease renewal price negotiation and agreement between both parties at a set point in time (before the 1^st lease renewal term expires).
Totaling up to 80 years of potential lease term duration

Even if the Lessor agrees to longer than 80 years, it would be hard to find a notary willing to execute a longer lease term, as they fear it could potentially interfere with Indonesia’s laws regarding Hak Milik freehold ownership.

Of course, each Hak Sewa deal is unique and different – it depends on the Lessor’s situation and what they are open to selling and the money being offered.

There are cases of Hak Sewa long lease terms of up to 99 years in length.

Of course with the lease renewals, the earlier you pay for them / execute them the better, versus getting towards the end of the initial lease term and then having to negotiate with the Lessor based on market price / value at that time…

What you can certainly try to do, if the Lessor is open to the concept, is aim to set the price for the 2 x lease renewals up-front (based on current pricing) within the lease agreement.

But from my understanding, Lessors & the notary will only accommodate such if the Lessee also pays for the lease renewals up-front, when they pay for the initial lease term… or within a few years of the initial lease term commencing.

Obviously paying for lease renewals up-front increases your Day 1 costs a lot BUT it also provides a much longer lease length & in turn the lease value is much higher if you plan to re-sell.

What I understand is that lease renewals are treated as separate leases by the notary.

So in essence, if you execute the initial lease term & also 2 x future renewal leases at day 1, you would sign 3 separate documents with the Lessor – the initial lease term document and then 2 x lease renewal documents with start dates coordinated to flow one after the other.

Up to 80 year leases, including renewals, are definitely considered “safe”.

It is best to consult with your notary & follow their advice. And of course it will depend on what the freehold owner, the Lessor, is agreeable to.

You will often see Hak Sewa long leasehold property for sale in Sanur with say 16-20 years remaining lease length + extension rights. That is because the leasehold is being sold by an existing leaseholder.

This brings me to my next point, the leasehold agreement should clearly state that the Lessee has the unrestricted right, without the Lessor’s permission, to sell / transfer their remaining unexpired leasehold interest and any lease renewal / extension rights, to anyone else that they wish, subject to the new Lessee obliging with the terms of the Hak Sewa lease agreement.

How Much is Paid on Day 1 when Buying Under Hak Sewa?

When buying a Hak Sewa long leasehold interest the cost for the initial leasehold term (usually 20-30 years in duration) will be stated within the lease agreement, as a price per year.

… And potentially the cost for lease renewals (subject to what is agreed with the Lessor).

And in the vast majority of situations the full cost for the initial leasehold term is payable by the Lessee buyer up-front, at the time of purchase and in one amount.

For example if you purchased a long leasehold interest over a 900 sq meter plot of land, with an existing villa on it, priced at IDR 300,000,000 a year, with an initial term of 25 years, you would pay, up-front, IDR 300,000,000 x 25 years = IDR 7,500,000,000.

In the case of empty land, the price is usually stated as “price per are per year”, which means “price per 100 m2 of land per year”.

For example if you purchased a Hak Sewa long leasehold interest over a 900 sq meter plot of empty land, priced at IDR 15,000,000 a year “per are” / or “per 100m2” of land, with an initial term of 25 years, you would pay, up-front, IDR 15,000,000 x 9 are (900 m2) x 25 years = IDR 3,375,000,000.

Hak Sewa – Additional Things to Know

During the lease term, as the leaseholder, you are typically responsible for all costs related to the land and any property that is on the land / built on the land.

And once the lease has expired the land and any property on it must be transferred back to the original freehold owner / Lessor (even if you built the property).

Once a long leasehold contract is entered into between a foreign buyer (Lessee) and a local Indonesian freehold owner (Lessor), or the owner of an existing long lease (foreign or local), the land and any property sitting on the land, is placed under the time-defined possession and exclusive use of the new foreign Lessee.

The terms of the Hak Sewa long leasehold agreement must state all the conditions that apply to the lease, including the purchase price, the Lessees right to build on the land, the renewal terms of the lease, access rights and etc.

Hak Sewa long leasehold interests can be granted over Hak Milik freehold land / property, they can also be sold or transferred to other people, they can also be granted over land that is subject to a Right to Use title (Hak Pakai), or a Right to Build title (HGB).

As a foreigner that owns a long leasehold property you can sell the remaining unexpired balance of your long leasehold term to any third party, individual or company, local or foreign, by way of sub-lease or by a transfer of your Leasehold Rights.

All types of property can be bought and sold via long leasehold agreements, residential, hotels, villas for short-term rental, restaurants and etc.

However, as mentioned above, if you wish to use the property for commercial purposes, such as a short-term villa rental, you should buy the leasehold through a 100% foreign owned local Indonesian company (a PT PMA) that you set-up, control and own.

That’s because a PT PMA company can apply for all the permits that are needed to operate a commercial property. But there are extra costs and requirements when setting up and operating a PT PMA.

Individual foreigners can Not apply for the necessary permits to operate a property commercially.

So if you buy a Hak Sewa long leasehold under your own name… and then plan to operate the property commercially… you will need the help of the Indonesian Hak Milik freehold owner (the Lessor), as they will need to apply for all the necessary commercial permits on your behalf.

If you plan to simply use the property for residential or holiday home purposes, a foreign buyer can easily buy a Hak Sewa long leasehold under their own name. This makes things cheaper and much simpler.

Hak Sewa long leaseholds are considered very safe and secure – they are protected under Indonesian law. But because a Hak Sewa lease does not impact the freehold ownership of the land they are Not registered in the Land Agency (BPN).

Therefore, to ensure a Hak Sewa long leasehold is 100% valid and legally enforceable, you must make sure it is drafted and executed by an authorized PPAT Notary that is located within the same area as the property you buy. Also make sure that the agreement is detailed and clearly covers all important items.

Operating Commercial Property – Such as a Villa Rental – Via a Hak Sewa Long Leasehold

If a foreigner wishes to purchase property in Bali for commercial activities, for example an Airbnb short-term villa rental, you need the relevant commercial permits / licenses.

If the property has up to five bedrooms, you need to apply for a Pondok Wisata license.

For properties with more than five bedrooms, you need to apply for a full hotel license, also known as a Melati license.

A 100% foreign owned PT PMA company can apply for a Pondok Wisata or Melati license.

But an individual foreigner can Not apply for these licenses. (an individual Indonesian citizen can)

Therefore, if you wish to operate a property for commercial purposes, ideally you should acquire the Hak Sewa long leasehold under the name of a 100% foreign owned local Indonesian company – a PT PMA – that you set-up, control and own.

Because if a foreign national purchases a Hak Sewa long lease under their own name and then wishes to operate the property commercially, they will need the help and support of their Indonesian freehold Hak Milik owner to apply for the relevant licenses.

The freehold Hak Milik owner will need to sign the paperwork for the required permits, which will be applied for under the Indonesian freehold owners name.

This is not ideal – what if the freehold owner is old, or hard to reach etc.

However, you can insert clauses into the Hak Sewa agreement that require the freehold owner to do all they need to do to help you apply for the necessary commercial permits for the property.

Executing a Hak Sewa Long Leasehold Property Purchase

Ultimately a Hak Sewa long leasehold agreement is a private contract between two parties, the Lessor (freeholder) and the Lessee (the long-term leaseholder).

The agreement is written, overseen and legally executed by a 3^rd party PPAT Notary but it is not registered in the land agency, as the freehold status remains unchanged (the Lessor remains the freeholder).

The nature & types of clauses that can be inserted into a Hak Sewa leasehold agreement are flexible and based on the commercial agreement that is reached between the Lessor & Lessee, subject to Indonesian law.

Any Hak Sewa agreement should be drafted by an authorized PPAT Notary (or a local property lawyer) that is located in the same area as the property being bought, and the Hak Sewa agreement must respect Indonesian regulations to ensure its full validity.

A long leasehold agreement should then be signed in front of the notary who will notarise the agreement (sign & stamp), thus making it valid and enforceable as a contract under Indonesian law.

The notary is the key legal party within any property transaction in Bali. A PPAT Notary has a special license to act as a land agent on behalf of the government.

The notary will typically provide a basic template for a Hak Sewa leasehold agreement – make sure you ask them to add any extra clauses that are required.

We would recommend defining the terms and conditions for lease renewals in detail, to avoid any headaches down the road.

Ideally you can try to set an agreed fixed price for the lease renewals, that are stated within the agreement, so that the renewals are not subject to price negotiation in the future, not based on future pricing – but only if the freehold owner / Lessor is willing to accept such.

If you are buying empty land and plan to build a property on it, make sure that the Hak Sewa agreement automatically provides you with the Lessors permission / approval.

Also if you plan to build property you will need to apply for the necessary building permits. The Hak Sewa agreement should state that the Hak Milik freehold owner / Lessor will do all they must to help you apply for and receive the necessary building permits.

What Documents are Needed when Buying a Hak Sewa Long Leasehold

To the best of my knowledge, to buy a Hak Sewa leasehold property in Bali, under your own name, all that a foreigner needs is a valid passport with a current Indonesia visa — this can be a simple tourist visa or business visa or a residential permit.

Foreigners can buy as many Hak Sewa leasehold properties in Bali, under their own name, as they wish, there is no limit.

If buying a Hak Sewa leasehold under the name of a 100% foreign owned local Indonesian company (a PT PMA), which you own and control, you will need additional documents to establish the legal business entity.

How is a Hak Sewa Long Leasehold Price Calculated?

In general, as a very basic rule of thumb, the annual leasehold price for land / property is the land / property’s freehold value divided by 100 years.

Another way to put this, is that freehold value is calculated based on 100 years of exclusive use.

So if you are buying a 25 year Hak Sewa long lease, the lease purchase price would be more or less the freehold value of the property / divided by 100 years X 25 years lease length.

So if the freehold property value is IDR 10,000,000,000 / 100 years = IDR 100,000,000 leasehold price per year.

IDR 100,000,000 leasehold price per year X 25 years lease length = total cost of IDR 2,500,000,000 for a 25 year lease.

As can be seen, when buying land or property in Bali under a Hak Sewa long leasehold, it is generally much cheaper than buying the same property under a freehold title.

This is a major benefit of purchasing land or property in Bali under a Hak Sewa long leasehold title – it is much cheaper.

Many Hak Sewa long leasehold rental properties in Bali generate their foreign owner a 100% Return on Investment (ROI) within 5-7 years. So even relatively short Hak Sewa long leases can be great investments.

The Extra Purchase Costs – on Top of Purchase Price – when Buying a Hak Sewa Lease

When a foreigner buys a Hak Sewa long leasehold property in Sanur there is No purchase tax that applies to the foreign buyer / Lessee.

However, the seller of the lease (the Lessor), must pay a final rental tax to the government, this is handled by the notary.

If the Lessor is resident in Indonesia and possesses an Indonesia Tax ID number, the rental tax is equivalent to 10% of the declared value of the lease purchase price.
If the Lessor is Not resident in Indonesia and does Not have an Indonesia Tax ID number, the rental tax is equivalent to 20% of the declared value of the lease purchase price.

Of course, the Lessor will usually factor in the tax they must pay into the sales price.

The foreign buyer would usually choose the notary that is used and in turn the foreign buyer would typically pay the costs associated with the notary’s services.

The notary service fee is actually defined by law, Article 36 of Law No. 30 of 2004 concerning Notary Positions:

For transactions below IDR 100 million in value: the notary fee is 2.5% of the transaction value
For transactions between IDR 100 million and IDR 1 billion in value: the notary fee is 1.5% of the transaction value
For transactions above IDR 1 billion in value: the notary fee is 1% of the transaction value

Therefore, if the purchase price for a Hak Sewa long lease is IDR 7,500,000,000 the notary fee would be 1% = IDR 75,000,000.

According to Article 1320 of the Civil Code, who pays the notary is up to the buyer and seller. So if the buyer and seller agree to split the fee… as part of the deal, that’s fine.

But as mentioned, the notary costs usually sit with the buyer.

If the seller, the Lessor, has used a real estate agent, the commission that is due to the real estate agent is the responsibility of the seller / Lessor.

So in general, when a foreign buyer purchases a Hak Sewa long leasehold property in Sanur or Bali, on top of the purchase price, they can expect to pay the 1% notary fee.

To ensure that a Hak Sewa long leasehold is as secure as possible under law, make sure that the notary does transfer the sellers final rental tax to the government – and ask for a copy of the payment receipt.

Important Things to Ask the Notary when Buying a Hak Sewa Long Leasehold Property

When buying a Hak Sewa long leasehold property in Sanur, make sure that you ask the notary to provide you with a copy of the freehold Hak Milik land certificate title that applies to the land / property.

The notary must also confirm that the land certificate is current & valid – everything is online nowadays.

The land certificate will state the name of the current Hak Milik freehold owner & also the land status.

You must make sure that the person entering into the Hak Sewa long leasehold agreement with you, as the freehold owner / Lessor, is the same person as stated on the Hak Milik land certificate.

Make sure you take a copy of the sellers KTP ID card and their KK Kartu Keluarga (family card) for your records and also, as best practice, video & photograph the Hak Sewa leasehold agreement signing, in the notary’s office, and save for your records.

If the person stated on the Hak Milik freehold land certificate has passed away or is different to the person that is signing the long leasehold agreement with you, this is a BIG red flag — you must immediately seek the notaries advice.

As the Notary will then need to get extra documents signed and permissions documented, to ensure that you have a clean Hak Sewa long leasehold purchase.

It is common in Bali for the person stated on the Hak Milik freehold land certificate to have passed away and the Hak Milik freehold land status to have been transferred to the persons heir or heirs… without updating the land certificate with the new freehold owners name(s).

If this has happened, the notary must get the permission of all possible legal heirs, for the long leasehold agreement to be safely executed free from any potential challenge in the future.

Also in Indonesia, a husband and wife, without a prenuptial or postnuptial agreement, have shared property. Therefore, to be safe, both husband and wife must sign a property sales contract, even if only one name is stated as the Hak Milik freehold owner on the land certificate.

So, if the seller / Lessor is married, make sure that their spouse also signs the Hak Sewa lease agreement with you to confirm their acceptance of the lease agreement and to ensure there are no potential headaches later on.

If the Lessor / seller can not write, they can legally sign and validate the sales documents using their fingerprint.

Also make sure that the notary confirms the land / property has guaranteed access rights to public roads and that this is stated within the lease agreement.

Make sure that the purchase monies are transferred to the person that is stated in the leasehold agreement as the Lessor. If they ask you to transfer to another person, this is a red flag – the notary will need to get extra documents / receipts signed to confirm that the Lessor has received the purchase monies.

If you are buying a Hak Sewa long leasehold over land with an existing villa or house in Sanur, or Bali, make sure that you ask the notary to confirm that the building already has all the required PBG (Persetujuan Bangunan Gedung) and SLF (Sertifikat Laik Fungsi) building permits.

Before 2021 these permits were combined and called the IMB (Ijin Mendirikan Bangunan).

Again, take copies of the PBG and SLF permits.

If you are buying a Hak Sewa long leasehold property the notary should also confirm that there are no other property ownership interests registered against the land, such as a Hak Pakai or Hak Guna Bangunan title and that there are no other encumbrances against the land / property such as mortgages or debt.

The notary should confirm that all annual land and building taxes (PBB) for the property are fully paid and up to date.

If there are any unpaid PBB taxes these should be cleared by the notary, as part of the purchase and the seller should bear responsibility for this cost.

The notary should confirm that there are no ongoing court cases or disputes regarding the land / property.

Lastly, if you are buying empty land in Sanur, or Bali, ask the notary to confirm the land zoning that applies to the land, as this will impact what you can build on the land / what permits you can apply for.

For example, if you plan to build a villa for short-term rental to tourists, you need to ensure that the land sits within land zoning that allows you to apply for all the necessary commercial permits.

Do not purchase Green Zone land, as you can not build on it.

The notary must confirm all of these items to you before you commit and sign the Hak Sewa long leasehold agreement & make payment to the Lessor (seller).

A good notary will cover all of these due diligence items automatically. However, sometimes you need to be proactive and ask the relevant questions.

To be 100% legally enforceable and airtight, a Hak Sewa long leasehold property purchase agreement must be issued in the Indonesian language, as per Indonesian law.

But it can also be issued in a bilingual Bahasa Indonesia & English version. However, the Indonesian version / wording will always take precedence.

As a foreign buyer you can & should ask for a certified translation of the Bahasa Indonesia document into the English language.

By executing a clear & detailed Hak Sewa leasehold agreement and by doing your due diligence, buying a Hak Sewa long leasehold property, for 20-80 years, is a safe and easy route for a foreigner to take when purchasing property in Sanur or Bali, in their own name or through a PT PMA company that they own.

A major benefit of a Hak Sewa lease is that it is generally much cheaper to buy. But of course, as a Hak Sewa lease progresses over time and you get closer to the expiry of the lease, the re-sale value of the lease drops.

Some Extra Steps To Take When Buying a Hak Sewa Long Leasehold Property

As mentioned, when you buy a Hak Sewa long leasehold, the freehold ownership of the land / property does not change, therefore a Hak Sewa long leasehold is not stated in the Land Agency (BPN) records.

But the leasehold agreement is notarized and protected under Agrarian Law.

It is ultimately a private contract between the freehold owner (Lessor) and the new buyer (Lessee). Alternatively, you may purchase an existing long lease from an existing leasehold owner.

Therefore, as a Hak Sewa leasehold is not registered in the Land Agency (BPN), there is the very unlikely and highly theoretical risk that a dodgy Hak Milik freehold owner could sell you a long leasehold over their land / property and then at a later date mischievously sell the Hak Milik freehold interest to a new Hak Milik freehold owner… without telling the new Hak Milik freehold owner that there is already a Hak Sewa long leasehold over the land / property for the next 20… 50… 70 years etc.

As the Hak Sewa is notarized, you receive a copy of the agreement, the notary keeps the original in their files. But the Land Agency records are not updated to state the Hak Sewa exists.

Therefore, a Hak Sewa long leasehold would not necessarily appear in a due diligence check if the Hak Milik freehold owner was to sell the Hak Milik freehold status to a new Hak Milik owner.

Now, if there is already a physical property on the land, the chances of this situation ever happening are ridiculously low, as the new “potential” Hak Milik freehold buyer would have no way to access and view inside the property (without breaking in)… and would see signs of occupancy and ask “who is using this property… oh it is already leased out on a long term basis… Bye bye.”

But the risk is slightly higher if your Hak Sewa long leasehold is over raw empty land… and you do nothing with the land for an extended period of time… a new “potential” Hak Milik freehold buyer would see nothing to suggest that the land is under the possession of another person.

My strong advice, if you buy an existing property under Hak Sewa long leasehold – immediately change the locks so that the Hak Milik freeholder has no access to inside the property.

And my strong advice, if you buy empty raw land under Hak Sewa long leasehold and have no plans to develop the land for an extended period of time – put up a boundary wall or fence around the land, with a signboard at the main entrance clearly stating that the land is held by you under a Hak Sewa long leasehold.

The chances of the above happening are ridiculously low, as the Hak Milik freehold owner would be breaking the law and go to jail… but it’s worth taking these extra steps.

Also make sure within the Hak Sewa notarized agreement that it is stated the freeholder can not sell the Hak Milik freehold throughout the duration of the Hak Sewa lease and that if they do that any new purchaser of the Hak Milik freehold must be made aware of your Hak Sewa long leasehold and sign into the Hak Sewa agreement with you.

You could also try to insert other clauses into the Hak Sewa agreement such as if the Hak Milik freehold is ever sold by the current freehold owner (Lessor), whilst the Hak Sewa remains valid and active, that the current freehold owner (Lessor) must refund to you the value of the remaining lease term + a defined penalty & the market value of any property that you have built on the land.

Negotiate Clear Hak Sewa Lease Renewals

A Hak Sewa long lease is a negotiated agreement between the seller and buyer. So each is unique and different.

When buying Hak Sewa leasehold land / property the initial lease term length can be negotiated and you can safely include 2 x lease extension / renewal terms.

Notaries tend to treat each extension / renewal term as a new lease and therefore each extension will have its own separate lease agreement document.

The more crystal clear the terms and conditions that apply to any extension / renewal the better.

At a minimum it should be stated that the extension / renewal right is automatically granted to the Lessee and that the price for the extension will be negotiated between the lessor and lessee, based on market value, at the time of future execution.

But a much better scenario – the price for the lease extensions are clearly stated in the document, so it is fixed and you are not exposed to potentially large market value increases over time.

Most Lessors will only agree to setting the price for any lease extensions at the start of the initial lease… if payment for those extensions is received within a short period of time, such as at the commencement of the initial lease or within 5 years of commencement of the initial lease.

Of course this adds a lot to the day 1 cost but it also achieves a much longer lease term and in turn a much higher re-sale value.

Importantly, if you buy empty land in Sanur or Bali under Hak Sewa and plan to build a villa or house on the land, if the Lessor is only open to negotiating the price of the lease renewal in the future, based on market value at that time, you must state in the lease agreement that the future renewal price is based on the market value of the empty land only, at the time of executing the renewal – not the empty land + the value of the property that you have built on it!

The more precise the calculation methodology stated for determining “market value” in the future, the better.

Or at least try to insert a maximum price cap for the lease renewal in the future, to minimise price fluctuation risk.

Of course each Hak Sewa long leasehold purchase is different – what’s possible to include / state will depend on the Lessor’s situation, if they need money fast – great more power to the buyer – how long they are happy to lease for and the money being offered.

Do Not Buy Green Zone Land

When you ask the notary to confirm the land zoning that applies to the land / property being bought under Hak Sewa, make sure that it is not Green Zone land. If it is, it is best to end the deal.

As Green Zone land is protected and can not be built on – as a foreigner you won’t be able to get the required building permits that are needed for a house, villa or etc.

Conclusion – Buying Property in Sanur or Bali Under a Hak Sewa Long Lease

In general, when buying property in Sanur or Bali as a foreigner, under a Hak Sewa long leasehold agreement, it is seen as very safe and incredibly solid from a legal perspective – if handled the right way.

It is clearly stated in the Agrarian Law that foreign individuals and 100% foreign owned local Indonesian company’s (PT PMA’s) can buy Hak Sewa long leaseholds.

It’s a legally enforceable notarized contract and it can’t be challenged, even if the lessor or the lessee passes away, the terms of the lease agreement pass to their heirs.

A Hak Sewa long leasehold property in Sanur, or Bali, that is owned by a foreigner, subject to the terms and conditions that are included within the lease, can be sold or transferred to another foreigner or to a local Indonesian buyer during the lease term with the clauses of the original lease agreement and any extension rights etc passing over to the new leasehold owner.

Ultimately the longer the Hak Sewa lease term is, the better and the more clear and detailed the terms and conditions that apply to the lease, the better!