Ownership in Bali : What is Hak Pakai?
Ways to own property in Bali
Today still a lot, may be even the most, people use a contract with an Indonesian to “own” a villa. Foreigners are not allowed to own property on their own name, so a few contracts are made up where the foreigner technically leases the property from the Indonesian citizen, but has the same rights (and obligations) as if he owned the property right out. There are plenty of forms in which these contracts appear, and the creators all believe that theirs is the best. This construction is, besides used a lot, also criticized a lot. It is supposed not to be safe, and would give easy allowance for fraud and corruption. And there are plenty of stories going around where such a construction has gone wrong somewhere and has led to a loss, in one or another way.
Fact is however, that there are plenty of foreigners using this construction, and use it to live happily in Bali, are able to sell and buy property with consent of locals and local authorities, in total contrast with what the most harsh critics may say. It seems however, that the Indonesian government has responded to the need of foreigners to being able to invest in a home in Bali, without needing an Indonesian ‘name holder’, while not immediately opening the gates for the rich to buy up ‘cheap’ Indonesian land. This arrangement is called Hak Pakai. Hak means right, and Pakai means use, so it’s Right of Use.
See this page for more Indonesian property terms. Hak Pakai can be issued to (foreign) individuals, but also to companies, that are domiciled in Indonesia. Please note, domiciled in Indonesia. Hak Pakai is for people actually living here. It does not mean that you cannot leave Indonesia, or cannot own property in other countries as well. It just means that you spend a considerable time of the year in Indonesia. Hak Pakai is not the same as leasehold. (Hak Sewa).
Leasehold is a notary contract with an owner, and the ownership certificate doesn’t change. Hak Pakai is an official certificate issued by the land offices, and can be given for Hak Milik or State owned property. As soon as a Hak Pakai certificate is issued, this certificate has precedent over any other title the property may have. A foreigner can just have one Hak Pakai title on his or her name. The Hak Pakai certificate is valid for an initial 25 years, and can be renewed after that. Some companies seem to offer prepaid renewals for up to a total of 100 years.
It’s freely transferable to another name, so you can buy and sell existing Hak Pakai titles. So, if you want property on your own name in Indonesia, and you are planning to live here, use the Hak Pakai arrangement. But, regardless of what people may say, the Hak Milik / Name Holder construction is a good alternative. Just look at the many many of people using it.