Foreigners Cannot Own Land — The Indonesian Constitution

In Bali, the #1 thing a foreigner absolutely cannot do is own land directly. By Indonesian Constitution UUD 1945 Article 33 and the Land Law UU 5/1960 (BAL), Hak Milik (full freehold) is for Indonesian citizens only. No condition — marriage, KITAP, long residence — makes foreigners able to own land. Every foreigner villa, hotel, and business in Bali is built on other rights (Hak Pakai, Hak Sewa, Hak Guna Bangunan, or Nominee). The starting point for understanding Bali real estate.

A. Legal Foundations — 5 Core Laws

1. UUD 1945 Article 33:

• "Land, water, and natural resources are controlled by the state and used for the greatest welfare of the people"
• Explicit prohibition on foreign ownership
• Absolute constitutional principle

2. UU 5/1960 — Basic Agrarian Law (BAL):

• Hak Milik (full freehold) — only Indonesian citizens / entities
• Direct foreigner ownership is void
• Defines the hierarchy of land rights

3. UU 25/2007 — Investment Law:

• PMA (foreign-investment company) is allowed
• PMA company — may hold Hak Guna Bangunan (HGB)
• But Hak Milik no

4. PP 103/2015 — Foreign Resident Real Estate:

• KITAS / KITAP holders — Hak Pakai possible
• Residential limited
• Sertifikat Hak Pakai (SHP) issued

5. UU Cipta Kerja 2020 (Omnibus Law):

• Some easing for foreigner PMA businesses
• Some real-estate restrictions eased — Hak Milik still forbidden

Sources: UUD 1945 · UU 5/1960 · PP 103/2015 · UU 25/2007 · UU 11/2020

B. The 6 Land Rights (Hak)

1. Hak Milik (HM) — Full Freehold

• Indonesian citizens / some religious entities only
• Permanent, indefinite
• Free to inherit, sell
• Sertifikat Hak Milik (SHM)
• Foreigners — absolutely not

2. Hak Guna Usaha (HGU) — Business Use

• 25–35 years + 25 renewal
• Agriculture, forestry, livestock, fishery
• Large land
• PMA possible

3. Hak Guna Bangunan (HGB) — Building Use

• 30 years + 20 renewal + 30 renewal = max 80 years
• Construction, residence, commercial
• PMA possible — commonly used by foreigner companies
• Sertifikat Hak Guna Bangunan (SHGB)

4. Hak Pakai (HP) — Use Right

• 25–30 years + renewal
• Residential / some business
• Foreigners (KITAS / KITAP) possible
• Sertifikat Hak Pakai (SHP)
• Most foreigner residential villas use this

5. Hak Sewa (Lease) — Lease Right

• Agreed term (usually 25–30 years, renewable)
• Foreigners possible
• Notaris (notary) contract
• Taxes — borne by lessor (Balinese)

6. Hak Pengelolaan (HPL) — Management Right

• State / government / certain entities
• Foreigners no

Foreigner options (5):

1. Hak Pakai — residence
2. Hak Sewa — lease
3. PMA company + HGB — business / residence
4. PMA company + HGU — agriculture / tourism
5. Nominee — local-name structure (gray zone)

Sources: BPN (National Land Agency) · Sertipikat Tanah Indonesia

C. Why Foreign Ownership Is Prohibited — History

Colonial trauma:

• Dutch colonization 17th–20th c. — some Bali land owned by foreigners
• Bali farmers — lost their own land
• 1949 Independence — land-recovery movement
• 1960 BAL — complete prohibition of foreigner ownership

Nationalist policy:

• Sukarno, Suharto — restrict foreign capital
• Land = national sovereignty
• Similar in all of Southeast Asia — Thailand, Philippines, Malaysia

Practical concerns:

• Accelerated foreign-acquisition of Bali land → Balinese marginalized
• Bule Belt (2.3.2) — threat to Balinese identity
• Property-price spikes

Partial easing post-Reformasi 1998:

• KITAS / KITAP foreigners — Hak Pakai
• PMA companies — HGB
• Hak Milik remains absolutely barred

Future outlook:

• 2020 Omnibus Law — some easing
• Pressure on Bali real estate (demand, foreign capital)
• Full liberalization — politically very difficult

Sources: Boon J., The Anthropological Romance of Bali (1977) · The Jakarta Post — land-law history

D. Foreign Land Disputes — Common Mistakes

1. Nominee disputes (5.4.3 next article)

• Local-name registration — foreigner provides funds
• Dispute on the local's death, divorce, betrayal
• Court — almost never recognizes the foreigner's right
• Dozens of cases each year

2. Hak Pakai renewal refusals

• Renewal applications after 25–30 years
• Refusable on Bali-government policy change
• Foreigner preparation — clear renewal clauses up front

3. Hak Sewa (lease) disputes

• Lessor unilateral termination
• Rent-increase demands
• Bali court — Adat takes priority (4.4.1)
• Foreigner-side lawyer essential

4. Post-PMA company disputes

• Local + foreigner shareholders
• On conflict — HGB rights insecure

5. Forged title rights

• Fake SHM transactions
• Multiple sales
• Notaris fraud

Prevention:

• Reliable Notaris (notary)
• Confirm BPN (land office) registration
• Bali real-estate-specialist lawyer
• Adat — Klian Banjar acknowledgement

Sources: The Jakarta Post — foreigner land-dispute series · Tempo — Nominee fraud cases

E. The Foreigner's View — Safe Entry

1. Residential — Hak Pakai

• KITAS / KITAP required
• Residential limit
• 25–30 years + renewal
• Notaris registration
• BPN certified

2. Business — PMA + HGB

• Set up PMA first (5.6.2)
• Min capital Rp 10B (USD $670K) declared
• HGB in company name
• Hotel / restaurant / yoga / wellness

3. Lease — Hak Sewa

• 25–30 year lease
• Cost — 50–70% of Hak Pakai
• Common foreigner choice
• Formal contract required

4. Taboo — Nominee structure

• Local friend / spouse name
• Legally void — Bali courts
• Foreigner loses in most disputes
• Avoid

5. Procedure

1. Engage Bali lawyer + Notaris
2. Land check — BPN registration, history
3. Adat check — Klian Banjar acknowledgement
4. Mecaru rite (Pedanda)
5. Contract — Bahasa Indonesia + English
6. Taxes, registration, certification
7. Annual tax (PBB) payment

6. Costs — additional

• Notaris — 1–2% of transaction
• Taxes (PPh, BPHTB) — 5% + 5%
• Lawyer — Rp 10–50M
• Adat donation — Rp 5–50M
• Total — about 15–20% of transaction

Quick Summary

Sources / References

• Wiki — Land tenure in Indonesia · Property law
• Official — UUD 1945 (Constitution) · UU 5/1960 (BAL) · UU 25/2007 (Investment) · UU 11/2020 (Cipta Kerja) · PP 103/2015 (foreigner property) · Kementerian ATR/BPN — Land Office
• News — The Jakarta Post — foreigner land series · Bali Post — property disputes · Tempo — Nominee fraud · Reuters — Bali real estate
• Academic — Slaats H., Adat Law and Indonesia (Routledge, 2018); Vickers A., Bali: A Paradise Created (2012); Boon J., The Anthropological Romance of Bali (1977)