Acquiring an HGB Property through PT PMA

posted on : April 27, 2020

Acquiring an HGB property through PT PMA

If you have not read about land titles related to acquiring a property in Bali, you can check the information we provide about it by checking it out via this link.

To explain, the highest land title in Indonesia is called Hak Milik (Right of Ownership), more commonly known as “Freehold Title” and this right is only given to a citizen of Indonesia. This basically means that a foreigner can never own a property indefinitely in Indonesia; however, if you have a PT PMA company, you can buy a property in Bali and acquire a Hak Guna Bangunan, in short, HGB (Right to Build) title which is the highest title a foreigner can obtain compared to the other ones.

With Hak Guna Bangunan, your PT PMA company’s name (not your name) will be in the land certificate registered in the Indonesian Land Office. This right is only given to companies, Indonesian or Foreign, owning a PT or PT PMA and is initially valid for 30 years, extendable for 20 years and renewable for another 30 years – in total 80 years – that’s almost a lifetime already!

The main advantage of having an HGB title is that you practically own the land. For a small fee you can convert the HGB title into a Hak Milik title (this goes both ways), which means you actually hold a Freehold certificate in your company’s name. As compared to a Hak Sewa (leasehold) title, the land value of an HGB title do not decrease over time. You may sell your HGB (or converted Hak Milik) title after, say, 20 years with the same value – or hopefully for an even higher value – as today. This means you could purchase a property via HGB title today, rent out the property over the next 5 years – generating rental revenue, and sell the property after 5 years for more than the initial purchase price (given that land prices are rising over time).

One other benefit of buying a property through PT PMA is that you and your purchase are protected by the law in cases of any dispute. This is huge because this is exactly the risk of purchasing a piece of land or a villa in Bali through a local nominee setup. Many foreigners try to purchase a Freehold property by using the nominee structure, whereby a local individual is registered as the official owner of the Hak Milik title. This method is commonly used in Bali, however, it is not legal and will not protect the foreign buyer in case of any dispute. Rather than going for such risks, we strongly recommend to consider a HGB purchase over a nominee structure. After all, you don’t want to risk losing your property investment and get penalized for it.

Even though HGB titles can be obtained for single unit properties, their main purpose is to serve foreign and local property developers who intend to develop multiple properties with the intention to sell. Whereas the Hak Milik title is designed for individual property owners, the HGB title is created for commercial use. That is why a PT or PT PMA company name is used as the title holder instead of an individual’s name. Consequently, the property becomes a part of the company’s assets and is more tightly linked to the company’s tax evaluation.

As an alternative when buying a villa in Bali, foreigners can legally obtain a title called a Hak Sewa (Right to Lease). This right enables you, as a foreigner, to 100% own the property legally in your own name, while you are not required to set up a company for this. Same with a property bought through a PT PMA company, a land or villa, depending on its license, can be used and operated for a variety of business purposes such as a spa, restaurant or villa development with the intention to rent or sell for a profit.

The key to buying a villa or land in Bali (no matter what title you finally intend to use) is to find trusted owners and agencies to work with. Here at Bali Treasure Properties, we make sure to offer properties that are inspected for their quality and having their legal papers validated as a common ground benefitting both buyers and sellers. If you are new to Bali and are interested to purchase a property to start a business, feel free to contact us here for a consultation meeting; we are ready to assist!

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Bali Treasure Properties
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