Hak Pakai vs PT PMA vs Leasehold in Bali: Which Structure Works for Foreigners 2026

Foreign Ownership in Indonesia: The Legal Reality

Under Indonesia's Basic Agrarian Law No. 5 of 1960 (Undang-Undang Pokok Agraria, UUPA), foreigners cannot own freehold land (Hak Milik) in Indonesia. This is a constitutional prohibition rooted in Article 33 of the Indonesian Constitution of 1945, which establishes that land, water, and natural resources are controlled by the state for the benefit of the people.

Three legal structures allow foreigners to hold property interests in Bali and Indonesia: Hak Pakai (Right to Use), PT PMA (foreign-owned limited liability company) holding Hak Guna Bangunan (Right to Build), and leasehold (Hak Sewa).

Each has different costs, legal strength, duration, and risk profiles.

Hak Pakai (Right to Use)

Legal Basis

Hak Pakai is regulated under the UUPA (Articles 41-43), Government Regulation No. 40 of 1996 on Hak Guna Usaha, Hak Guna Bangunan, and Hak Pakai atas Tanah, and Government Regulation No. 103 of 2015 on Residential Property Ownership by Foreigners.

Under PP 103/2015, foreigners holding a valid residence permit (KITAS or KITAP) can obtain Hak Pakai over residential property. This is the only direct property right available to individual foreigners in Indonesia.

Duration

Hak Pakai is granted for an initial period of 30 years, extendable for 20 years, then renewable for another 30 years, giving a maximum total of 80 years. The extension and renewal are not automatic; they must be applied for through the National Land Agency (Badan Pertanahan Nasional, BPN) at https://www.atrbpn.go.id.

Requirements

The buyer must hold a valid KITAS (temporary stay permit) or KITAP (permanent stay permit). The property must be residential. The property value must meet minimum thresholds set by the Ministry of Agrarian Affairs/BPN (these vary by province; for Bali, the minimum is currently IDR 2 billion, approximately $125,000 USD). The property cannot be in a designated social housing area (rumah sederhana or rumah susun sederhana).

How It Works

The underlying land typically has Hak Milik (freehold) status owned by an Indonesian citizen. The Hak Milik is converted to (or encumbered by) Hak Pakai in favor of the foreign buyer. This conversion is registered at the BPN office.

You receive a Hak Pakai certificate from BPN, which is a registered land right. This provides strong legal protection because it is a formal land right recognized under the UUPA, it is registered with BPN and appears on the land certificate, and it is enforceable against third parties.

Limitations

Only for residential use (not commercial). Requires a residence permit (which means you need a basis for being in Indonesia, such as a retirement visa or work visa). The 80-year maximum is long but not perpetual. If your residence permit lapses and is not renewed, your right to hold Hak Pakai may be affected.

PT PMA (Foreign-Owned Company)

Legal Basis

A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a limited liability company with foreign ownership, established under the Investment Law No. 25 of 2007, the Limited Liability Company Law No. 40 of 2007, and governed by the investment framework administered by BKPM (Badan Koordinasi Penanaman Modal, now part of the Ministry of Investment) at https://www.bkpm.go.id.

A PT PMA can hold Hak Guna Bangunan (HGB, Right to Build), which allows construction and ownership of buildings on land for a period of 30 years, extendable for 20 years, then renewable for 30 years (total 80 years).

Requirements

Minimum paid-up capital: IDR 10 billion (approximately $625,000 USD) under the current Investment Coordinating Board (BKPM) regulations (though recent OSS/Online Single Submission system updates may adjust this for certain business sectors). The company must have a genuine business purpose (property investment, villa rental, tourism). The business activity must be open to foreign investment under the current Positive Investment List (Daftar Positif Investasi) issued under Presidential Regulation No. 10 of 2021.

How It Works

You establish a PT PMA through the OSS (Online Single Submission) system at https://oss.go.id. The company obtains a NIB (Nomor Induk Berusaha, business identification number). The PT PMA purchases or leases land and obtains HGB. Buildings constructed or purchased by the PT PMA are owned by the company.

As the shareholder, you control the company and thereby control the property. This is the standard structure for foreigners operating villa rental businesses in Bali.

Advantages

Can hold commercial property (unlike Hak Pakai for individuals). Allows business operations (villa rental, tourism). No personal residence permit required for the company to hold property. Provides liability protection.

Disadvantages

Significant establishment and maintenance costs. Annual accounting, tax filing, and regulatory compliance obligations. Minimum capital requirements may be prohibitive for smaller investments. The company must maintain its business licenses and remain in compliance with Indonesian corporate law.

Leasehold (Hak Sewa)

Legal Basis

Leasehold is a contractual arrangement, not a registered land right. The lessee obtains Hak Sewa (Right to Lease) through a notarized lease agreement (perjanjian sewa menyewa) with the landowner.

Duration

Typical Bali leasehold terms are 25-30 years with options to extend. There is no legal maximum, but leases exceeding 25 years should be registered with BPN for enforceability against third parties.

How It Works

You negotiate a lease with the landowner (who holds Hak Milik). The lease is drafted by a notaris (Indonesian notary) and typically includes the lease term and rent (often paid upfront for the full term), extension options and terms, the lessee's right to build (ijin mendirikan bangunan, IMB), responsibilities for maintenance and taxes, and transfer/assignment provisions.

Advantages

No residence permit required. Lower upfront cost than Hak Pakai or PT PMA. Simpler legal structure. Widely used and well-understood in Bali's villa market.

Disadvantages

Not a registered land right (unless registered, which is unusual in practice). Weaker legal position than Hak Pakai or HGB. Dependent on the landowner's continued good faith. If the landowner sells the underlying Hak Milik, the new owner may dispute the lease unless it is registered. At lease end, all improvements (buildings, pools, landscaping) belong to the landowner unless the lease says otherwise.

Comparative Summary

| Factor | Hak Pakai | PT PMA (HGB) | Leasehold |

|--------|-----------|---------------|-----------|

| Duration | Up to 80 years | Up to 80 years | Negotiable (typically 25-30) |

| Registered right | Yes | Yes | Usually no |

| Residence permit needed | Yes | No (company) | No |

| Commercial use | No | Yes | Depends on lease |

| Minimum investment | IDR 2B (~$125K) | IDR 10B (~$625K) | Negotiable |

| Setup complexity | Medium | High | Low |

| Annual costs | Low | High | Low |

The Nominee Structure: Do Not Use It

Some agents suggest using a nominee arrangement where an Indonesian citizen holds Hak Milik in their name "on behalf of" the foreign buyer, with a side agreement giving the foreigner control. This structure is illegal under Indonesian law. Article 26(2) of the UUPA explicitly voids any arrangement that transfers Hak Milik to a foreigner directly or indirectly. The Supreme Court of Indonesia has consistently ruled nominee arrangements void. If the nominee decides to sell, you have no enforceable legal claim.

For detailed ownership structure guidance in Bali, Bektu provides resources at https://bektu.com.

Sources

- Basic Agrarian Law No. 5 of 1960 (UUPA): https://www.atrbpn.go.id

- PP 103/2015 on Foreign Property Ownership: https://peraturan.bpk.go.id

- Investment Law No. 25 of 2007: https://www.bkpm.go.id

- OSS (Online Single Submission): https://oss.go.id

- BPN (National Land Agency): https://www.atrbpn.go.id