Buying a property using Hak Pakai

[HSG]

Hello all,

Does anyone have experience using their KITAS visa to purchase a property under Hak Pakai? The main thing I’m unsure of, is what happens if I lose the KITAS? How long do I have to sell the property or would I need to?

The initial purchase term would be 25 years but I can’t guarantee I won’t change jobs within that time or even if the company I work for will exist in 25 years!

Thanks

 

[Markit]

Go nominee agreement. Find yourself some local with a family, religious and possibly in a responsible position.

 

[Fred2]

Your talking about a 25 year lease, no 25 year purchase here. Once you sign up for your 25 year lease with your kitas , thats it as long as you pay the lease price.

 

[HSG]

No I’m not talking about a 25 year lease. I’m talking about buying a place using Hak Pakai.

https://bali-information.com/ownership-in-bali-what-is-hak-pakai/

To answer my own question in case anyone wants to know: if you lose KITAS with a house under Hak Pakai, officially you have 12 months to sell, unofficially you have until the renewal.

Also to consider, while hak pakai is the legal way for a foreigner to own a property, the taxes on purchase are a lot higher than a nominee. The upside is you don’t need to worry about a 3rd party Indonesian ‘owner’.

 

[Fred2]

The real estate agent you quote explains what Markit said Nominee.
Hak Pakai the right to use/ harvest from the land. Not Own
Hak Sewa the right to Lease the land. Not Own
Hak Guna Bangunan The right to lease a building. Not Own
HAK MILIK The right to own the land, Indonesian Citizen ONLY, THAT WILL NEVER CHANGE.
If your spouse is a Indonesian Citizen and owns property, she passes away and you inherit the property, you have 12 months to have the property transferred into a Indonesian citizen name.
A Kitas gives you the right to rent, open bank account, get a drivers license, pay tax, But not the Right to own Land.
You can own an apartment but not the land it sits on.
But what would I know?
If you think you can own land in your name go right ahead.

 

[HSG]

When you purchase a property using Hak Pakai it’s in your name, no one else’s, there is no other owner. This is allowed under the proviso that you sell it after a certain amount of time....

The difference in renting is this: if you get a 25 year lease for $1000/year ($25k), at year 24 your property is worth $1000 as that’s all you have left on the lease. If you have Hak Pakai, it is still worth $25000.

So call that what you want, but it’s not leasing, and it’s in your name, so.....

 

[Markit]

HAK MILIK The right to own the land, Indonesian Citizen ONLY, THAT WILL NEVER CHANGE.

Saying things will "Never Change" is a bad bet. Never is a long, long time.

If your spouse is a Indonesian Citizen and owns property, she passes away and you inherit the property, you have 12 months to have the property transferred into a Indonesian citizen name.

You would also have the option to donate the land to the government and change the poperty to a leasehold with yourself as the tenent for 25/25/30 years. The leasehold is heritable (put it in your will) and saleable. At the end of the leasehold it returns to government ownership which they can do with as they wish.

See above.

 

[tel522]

A refresher on the law here

Land Ownership and the Agrarian Law ActThe situation is further detailed in article 9 of the Agrarian Law Act of 1960 which says "Only Indonesian citizens may have the fullest relation with the earth, water and air space."Article 21 is clearer:"(1)

Only Indonesian citizens can have a hak milik (freehold land title)." - Foreigners are not allowed to own land in Indonesia"(2) The Government is to determine which corporate bodies can have a hak milik and the conditions for it." - Corporate bodies can own land but must be approved by the government."(3) A foreigner who, following the enactment of this Law, acquires a hak milik by way of inheritance without a will or by way of joint ownership of property resulting from marriage and an Indonesian citizen holding a hak milik who, following the enactment of this Law, looses Indonesian citizenship is obliged to relinquish this right within one year following the date the hak milik is acquired in the case of the former or following the date upon which Indonesian citizenship is lost in the case of the latter. If following the expiry of the said time period, the right is not relinquished, then the said right is nullified for the sake of law and the land falls to the State with the proviso that the rights of other parties which encumber the lands remain in existence."- Foreigners who somehow acquire ownership of land in Indonesia or Indonesians who own land and give up their Indonesian citizenship, must dispose of the land within one year or it will become the property of the state."(4) As long as one with Indonesian citizenship concurrently holds foreign citizenship, he/she cannot have land with a hak milik status, and the provision as meant in paragraph 3 of this article should apply to him/her." - Indonesians holding dual nationality cannot own land in Indonesia.

Hak Milik or Title of OwnershipThe nearest thing to freehold title in Indonesia is defined in the Agrarian Law as Hak Milik (hak - title, milik - ownership) Real estate agents, taxi drivers and parrots may offer freehold land ownership to foreigners which, as shown above, is illegal. In fact they are not offering freehold title to the foreigner,

 

[HSG]

What’s the point of debating semantics?

If you want to get philosophical, non-aboriginals can’t own land in Australia either. You just get an indefinite lease from the government (crown) which can be extinguished if they need the land back.

The only difference is the Indo government puts a 25/25/30 year cap on the ownership for foreigners.

Here are some tests: does purchasing a property using Hak Pakai extinguish any Hak Malik ownership claims on the property? Yes. Who now holds the title of the property after purchase? Solely the Hak Pakai holder. Can the Hak Pakai holder sell the property as freehold to a local? Yes. Does the property decline in value according to the amount of time left on the agreement? No.

And here is the big one: do banks recognise a hak pakai property as an asset owned by the holder, and are they willing to consider its value in loan and mortgage applications? Yes.

 

[spicyayam]

And here is the big one: do banks recognise a hak pakai property as an asset owned by the holder, and are they willing to consider its value in loan and mortgage applications? Yes.

Banks, such as?

 

[Fred2]

HSG only a real state agent would give this advise?
As stated in Article 49 section 1 & 2 @ PP NO. 40/1996 please read.
Your idea is to buy Hak Milik Land and convert it to Hak Pakai. you would put the Hak Pakai Title in your name which is legal providing you have DOMICILE in Indonesia (kitas/kitap). The Hak Pakai certificate is for 25 year (the right to use not own)then you can apply for renewal after that( please tell us who and why if you own the land).
You can sell, take a loan(not that any bank would make a loan with someone on a 1 year visa) on what is left on your certificate.
So you only sell it to a person with Domicile in Indonesian and then they would have to transfer the land back to Hak Milik and pay tax?????.
And OOOOOH lets say you loose your visa and as you said you have 12 months to sell, and you don't sell your land goes to the government, not sure they will pay you anything.
Stick with selling land with a nominee.

 

[Fred2]

See above.

Happy to take the bet, but need to know how to collect when you fall off the purch

 

[HSG]

Banks, such as?

Like (all?) the major banks. Here’s commonwealth bank Indo, you can check through the rest if interested

Bank Commonwealth

www.commbank.co.id

To answer Fred2 questions:

• yes when you sell you’d need to sell to someone eligible for hak pakai or hak malik, just like every other avenue to buy/sell a property in Indonesia
• yes hak pakai doesn’t give the right to own indefinitely, you own for 25 years and must sell within that time or extend up to a max of 80 years. Though this situation is different to leasehold due to the reasons I listed above
• the bank thing I’ve explained above and you can ask the banks if you want more info. It’s the only legit way to actually have property in your name and that banks recognise this.
• yes you need a KITAS, or officially you need to sell the property
• Going nominee is definitely cheaper, but you don’t own the property, banks/courts don’t recognise it etc. I’m not saying people should/shouldn’t go nominee, but they should understand the risks and decide for themselves

 

[Fred2]

To answer Fred2 questions:

• yes when you sell you’d need to sell to someone eligible for hak pakai or hak malik, just like every other avenue to buy/sell a property in Indonesia :Yes that's correct but a Indonesia citizen wants Hak Malik so they have to change because you don't hold that certificate, the tax is high because the value ,so you need to be flexible with the price to sell.

• yes hak pakai doesn’t give the right to own indefinitely, you own for 25 years and must sell within that time or extend up to a max of 80 years. Though this situation is different to leasehold due to the reasons I listed above.:So like a lease you negotiate the new Lease/certificate, with a lease you talk to the owner(Pak Made) and work on a price, with Hak Pakai you talk with owner(Indonesian Government)and work on a price. sounds simple as long as you have your Kitas.

• the bank thing I’ve explained above and you can ask the banks if you want more info. It’s the only legit way to actually have property in your name and that banks recognise this. : No Bank will give a loan as you only have a ONE year kitas....

• yes you need a KITAS, or officially you need to sell the property : you need a Kitas for everything, You want to sell the property and Made finds out you don't have a Kitas he waits, the property goes to the government and then he buys it for half the price.

• Going nominee is definitely cheaper, but you don’t own the property, banks/courts don’t recognise it etc. I’m not saying people should/shouldn’t go nominee, but they should understand the risks and decide for themselves: If you have a lease and a Kitas of course the courts will recognize it.

This system has always been use with PMA and the PMA gives you a Kitas to stay here legally .
You should started with
Hi I'm Real estate agent and have come up with a idea to stay in Bali without a PMA

Then not to confuse people with" you can own Land in Bali"
Tell them the truth you can have a Hak Pakai Certificate in your name as long as you have Domicile in Indonesia
Hak Pakai The right to use

 

[HSG]

I don’t know if you are intending it, but you’re responses seem overly combative, bordering on being arrogant/a smart ass. We are basically agreeing but the debate carries on for some reason...

The first point: yes that is what I said, the down side is you have to pay extra tax but the upside is you don’t need an Indonesian owner and it is in your name.

Second point: It’s completely different to a leasehold in practical and legal terms. If you can’t see the difference than let’s just agree to disagree.

Third point: I’ve spojen to the banks and they can and will. Have you had a mortgage application denied? Why would they care if you default on the property because of loss of visa? They’ll take the house and the equity.

Fourth point: if you don’t have your KITAS than you should sell. This is the information I was looking for in the original post by the way, and this thread has been zero help. From my discussion with lawyers, I’ve been told officially you should sell within 12 months, but the government understands if it takes longer than 12 months to sell, as long as you’re trying. It’ll only really become an issue if you try to renew the 25 years. I hope that information is helpful to anyone willing to scroll past the trolling.

 

[Fred2]

Have a nice day

 

[Markit]

Over the last 10+ years we've been discussing these ownership regulations and their interpretation with no end in sight and very little has changed.

Fact: Thousands of foreigners have "bought" land through using the "nominee" title and are very happy with the results. They are able to live here, will it to their children or sell the property and not lose vast amounts on the length of the leasehold remaining. Most leaseholders profess this to be illegal and incredibly dangerous (sour grapes?) - no Indonesian court has ever had a major negative ruling against this form of ownership.

Fact: many people have also bought/built using the "leasehold" scheme and have also lived here for many years. Many have Kitas visas but many do not and reside outside of Indonesia and enjoy their property when they want with no difficulty. This form of ownership is subject to diminishing returns corresponding to the length of lease remaining. It's not possible to create a contract for the full 80 years (25+25+30) at inception but each extension must be newly negotiated. Although many say they can do this easily or state in the original contract the terms/cost of extensions in 25 years, I don't know of any and suspect that after 25 years have gone by there may be a few surprises...

Fact: there is a form of "ownership" that started out as a "nominee" agreement but then the foreign "owner" got the shits and donated his property to the government and changed it to leasehold and it will revert to being owned by the government upon end of the leasehold period or death of leasee (unless it's been willed to his errs, although this hasn't happened to anyone I know so watch this space).

Fact: weirdly Indonesians are not allowed to own land in their own country if they are married to a foreigner, or at least that's the way it works. Unless there is a prenuptial agreement prior to the marriage and buying any land. They could own all the land they wanted (in their own country) if they just weren't married to one of us - how's that for prejudice?

 

[Markit]

Happy to take the bet, but need to know how to collect when you fall off the purch

10 years ago nobody mentioned use of a PMA company to own property here, as they do in Thailand, but slowly I'm seeing more and more mentions of it as a way to own. If that is true then I think that's getting pretty close non-Indonesians being able to own property - in fact, if not virtually, don't you?

 

[Mark]

Over the last 10+ years we've been discussing these ownership regulations and their interpretation with no end in sight and very little has changed.

Fact: Thousands of foreigners have "bought" land through using the "nominee" title and are very happy with the results. They are able to live here, will it to their children or sell the property and not lose vast amounts on the length of the leasehold remaining. Most leaseholders profess this to be illegal and incredibly dangerous (sour grapes?) - no Indonesian court has ever had a major negative ruling against this form of ownership.

Regarding nominee structures, one point of risk is when the nominee passes away. Your good buddy Made may have held ownership on your behalf with no fuss, but when he passes and his wife and kids get their hands on 'dad's' property and see the potential for new cars, motorbikes, trips abroad etc, then all bets are off. Another issue is tax. One day Made will likely be investigated by the tax authorities on how he got the money to buy a choice piece of land and build a nice villa on his income as a rice farmer - maybe it's his land in the first place but still, how did he afford the villa construction? If he didn't declare the property and pay the penalty during the recent amnesty, then you, Made's tamu asing khusus (special foreign friend), will be on the sharp end of a big tax and penalty bill that Made will be forced to pay to settle his tax obligations. Third, when it comes time to sell, you will need Made's signature, as well as that of his wife. There is a good possibility at that time that Bapak and Ibu Made would like to get their hands on some of the sale proceeds in exchange for their signatures. Sober minds would think twice before rushing into a nominee structure because it all works just fine, until it doesn't.

 

[tel522]

I know of an australian nearby whom has a nominee agreement with his neighbour" ketut" , ketut puts him under pressure when he needs money for something ,the aus is scared because he has since realised his nominee agreement is technically ilegal , so he pays ,a bad situation to be in imho .