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Ownership in Bali : What is Hak Pakai?

Ways to own property in Bali

Hak Pakai for Foreigners

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 in 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.

The last years however, notaries are discouraging or even refusing to make up "Nameholder Constructions" and therefore companies like us are offering help to arrange long term lease constructions. These constructions are 100% within the Indonesian Law, and allow foreigners to invest safely in property. Not only safely, but the long term lease also makes it possible for foreign investors to make a profit. 

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’ (or a lease contract) 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.

Hak Pakai can be issued to (foreign) individuals, but also to companies, 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. (but marked as leased) 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, existing Hak Milik / Name Holder constructions are honoured. Just look at the many many of people using it. However, long term lease is the trend nowadays, and if done right, as profitable as Freehold / Hak Milik.

If you browse our listings, you mostly will see "Ownership: Freehold / Leasehold". Freehold for individuals or companies who can own property directly, and Leasehold for foreigners.  

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