PA Estates

Bali is just one of Indonesia’s many islands, lying to the east of Java and the west of Lombok.  A modest sized island, at around 150km from east to west and 110km from south to north Bali is about two thirds the size of Corsica or Puerto Rico.  At 8º south of the Equator, the temperature is a stable 30 to 32ºC all year round, cooler in the high range of mountains that lie across the island to the north.

The main motor of Bali’s economic success is tourism, but it is not the only one.  Associated to tourism is a fast growing real estate business, for residential as well as commercial property.

Agriculture is still significant and the export of art and artisan work also provides much local employment.  All of this drives the growth of local services, from restaurants to shopping malls.

The provincial government is democratically elected, is stable and above all encourages an open and welcoming culture because economic growth means greater tax revenues, which permit investment in local development projects.

Increasing investment in infrastructure, increasing foreign investment and the application of standards and regulations that underpin a long term economic success all point to sustained growth.

In summary, the reason to invest in Bali is that it offers an excellent return on investment for anyone investing in property, whether land, houses or commercial ventures tied to tourism.

• all of SE Asia is benefiting from economic growth
• there are more tourists around, not just Europeans
• there is increased demand for tourist friendly locations
• popular locations become more valuable
• other places in Bali are being ‘discovered’ fast
• tourism is vital to Bali so it will be sustained
• all the data point in the right direction

As might be expected, land prices are rising rapidly.  This is particularly evident in the trip of land along the coast from Jimbaran to Petitenget on the west side of Bali, and from Nusa Dua up well past Sanur on the east side.

Places like Seminyak and Kerobokan, which once were villages separated by rice fields and cow meadows, are now connected by highways and strips of stores selling everything.  This may sound off-putting, but from an investment perspective it is always one area to consider for commercial projects and, it should also be said, for residential projects where part of the purpose is to rent the property for short-term stays.

A significant amount of residential property development is being done along the flanks and ahead of commercial development - the obvious areas in the west being towards Canggu, Tanah Lot and Tabanan; in the east stretching up towards PadangBai; in the center around Ubud.

Less evident at present (ie relatively undiscovered) but increasingly of interest is the north coast of Bali, particularly the stretch from Pemutaran to the old capital of Singaraja with a focus on the Seririt-Lovina area in the west, and the area around Bukti in the east.

Overall, there is plenty of choice still available to match interest, activity and budget.

An Indonesian person always owns freehold (HakMilik) title. A person, in law, is either a physical person or a company (which has a legal personality).

Leasehold (HakSewa)

Leasehold is executed by notarial deed and is not registered against the title.  Leasehold cannot appreciate as an asset and will depreciate in time. Ownership of all buildings and/or improvements revert in full to the HakMilik owner at lease end. You must ensure the deed covers renewal and rent increases.

Control over the Freehold (HakMilik)

Option A: Interest in the HakMilik by way of a Nominee Agreement plus the granting of a HakPakai (Right to Use) Certificate, which is issued by the Land Office and registered against the HakMilik. This means two taxes have to be paid so most opt for Option B.

Option B: Interest in the HakMilik with HakPakai tenure by way of a Nominee Agreement plus security over the HakMilik by granting a leasehold interest in the title, with security against the HakMilik being limited to the registration of a mortgage.

Corporate tenure (HakGunaBangunan [HGB])

Independent title to land available to Indonesian companies only  through the grant of the HGB (Right to Build) title, which is issued and registered by the Land Office for a maximum (but renewable) term of 80 years.  The title may be mortgaged and the HGB owner can realize appreciation of the asset.  HGB is the more expensive option and on top there are always ongoing reporting and compliance obligations for the company.