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Structuring a Bali property purchase with escrow involves setting up secure payment arrangements through a licensed Indonesian notary who holds your funds until all contractual conditions are met.
Foreign buyers must navigate Indonesia's complex ownership laws, which restrict freehold ownership but allow leasehold arrangements or property acquisition through a foreign-owned company (PT PMA). The escrow process typically takes 2-6 weeks and requires 10-30% of the purchase price as an initial deposit, with full payment released only after title verification and document completion.
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Foreign nationals cannot directly own freehold property in Bali but can acquire leasehold rights for 25-30 years or establish a PT PMA for building ownership rights.
The escrow process requires a licensed Indonesian notary, 10-30% deposit, and typically takes 2-6 weeks from contract signing to ownership transfer.
| Escrow Component | Typical Requirement | Timeline |
|---|---|---|
| Initial Deposit | 10-30% of purchase price | At contract signing |
| Document Verification | Land certificate, IMB, PBB records | 1-2 weeks |
| Notary Registration | Licensed Indonesian notary | 2-3 weeks |
| Full Payment Release | Clean title confirmation | At ownership transfer |
| Tax Payment | 5% transfer tax (leasehold) | Before registration |
| Legal Fees | 1-2% of property price | Throughout process |
| BPN Registration | Land Office documentation | Final week |
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Daniel Rouquette 🇫🇷
CEO & Co-Founder at Villa Finder
What kind of property in Bali are you planning to buy, and is it freehold or leasehold?
Foreign nationals cannot purchase freehold property in Bali under Indonesian law.
Your main options as a foreign buyer include leasehold properties, which grant you "Hak Sewa" (lease rights), or "Hak Pakai" (right to use) arrangements. These typically involve villas, apartments, or land parcels where you hold usage rights rather than outright ownership.
Alternatively, you can establish a foreign-owned company (PT PMA) to acquire "Hak Guna Bangunan" (HGB), which allows your company to own the building structure but not the underlying land. This approach provides stronger legal protection than nominee arrangements, which carry significant risks and violate Indonesian regulations.
As of September 2025, the PT PMA route has become increasingly popular among serious investors because it offers legitimate ownership through a properly registered Indonesian entity. The leasehold option remains suitable for buyers seeking vacation homes or shorter-term investments without the complexity of corporate structures.
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How long is the lease term, and what exact extension rights are written in the agreement?
Leasehold terms in Bali typically range from 25-30 years for the initial period.
Extension rights vary significantly by property and must be explicitly negotiated before signing. Most lease agreements include options for 10-20 year extensions, often renewable up to 80 years total. The extension terms should specify fixed renewal rates, payment schedules, and automatic renewal clauses.
Your lease agreement must clearly outline the extension mechanism, including who initiates the renewal process, advance notice requirements (typically 6-12 months), and whether extension fees are predetermined or subject to market valuation. Some agreements include escalation clauses that adjust extension costs based on property appreciation or inflation.
Verify that extension rights are registered with the notary and included in the official land certificate documentation. Extension agreements that exist only as side letters or verbal promises carry significant legal risks and may not be enforceable under Indonesian law.
Who will legally own the property under Indonesian law, and do you need to set up a nominee or a foreign-owned company (PT PMA)?
Under Indonesian law, only Indonesian citizens or qualifying legal entities can hold freehold property ownership.
For leasehold or Hak Pakai arrangements, the property remains owned by the Indonesian freeholder, while you hold contractual usage rights for the specified term. Your name appears on the lease agreement as the leaseholder, but not as the land owner.
Setting up a PT PMA (foreign-owned company) allows your Indonesian entity to hold HGB rights to the building structure. The PT PMA must have at least IDR 2.5 billion in authorized capital and maintain active business operations to remain compliant. This route provides stronger legal protection than nominee arrangements, which Indonesian law explicitly prohibits for foreign property ownership.
Nominee structures, where an Indonesian citizen holds title on your behalf, violate Indonesian regulations and expose you to significant risks including complete loss of the property. As of September 2025, Indonesian authorities have increased enforcement against nominee arrangements, making the PT PMA route the preferred legal option for foreign buyers seeking long-term property control.
What documents do you need to verify from the seller to ensure the land title is clean and free from disputes?
You must verify several critical documents to ensure clean title before proceeding with escrow.
| Document Type | Purpose | Verification Method |
|---|---|---|
| Original Land Certificate (Sertifikat) | Proves legal ownership | Cross-check with BPN (Land Office) records |
| Building Permit (IMB) | Confirms legal construction | Verify with local building authority |
| Property Tax Records (PBB) | Shows current tax payments | Check 5-year payment history |
| Seller's Valid ID (KTP) | Confirms seller identity | Match name with land certificate |
| Marriage Certificate (if applicable) | Proves spousal consent rights | Required for married Indonesian sellers |
| Power of Attorney (if applicable) | Authorizes representative to sell | Must be notarized and current |
| Survey Map (Gambar Ukur) | Shows exact land boundaries | Compare with physical property |
Your due diligence should include a title search at the local BPN office to verify no outstanding disputes, liens, or encumbrances. Request a letter from the village head (Kepala Desa) confirming no local disputes or customary land claims. Check that all property taxes are current and no outstanding utility bills exist.
How do you calculate the full purchase price, including taxes, notary fees, and government registration costs?
The total purchase cost includes the negotiated property price plus mandatory fees and taxes.
Transfer tax for leasehold properties is typically 5% of the transaction value, payable by the buyer. Notary and legal fees generally range from 1-2% of the property price, covering document preparation, registration, and escrow management. Government registration costs vary by property value and location but typically add another 0.5-1% to the total cost.
Additional costs include due diligence fees (usually IDR 10-20 million for property searches), survey costs if boundary verification is required, and translation fees for document preparation. If establishing a PT PMA, add company setup costs of approximately IDR 50-75 million plus ongoing compliance expenses.
For a property priced at USD 300,000, expect total additional costs of USD 20,000-25,000 for leasehold purchases, or USD 30,000-35,000 if including PT PMA establishment. Always request detailed fee breakdowns from your notary before proceeding with escrow arrangements.
Which licensed notary in Bali will draft and register the deed of sale and manage the escrow process?
You must use a licensed Indonesian notary (Notaris) who is registered with the Indonesian Notary Association and authorized to handle property transactions.
Choose a notary with specific experience in foreign property transactions and escrow management. Reputable notaries in Bali include those recommended by established law firms, property agencies, or expat communities. The notary should be fluent in English and familiar with international banking requirements for escrow accounts.
Your selected notary will draft the sale and purchase agreement, manage the escrow account, verify all documentation, coordinate with the BPN for registration, and ensure tax compliance. They serve as the neutral third party who releases funds only when all contractual conditions are satisfied.
Verify that your notary maintains professional indemnity insurance and has a clean disciplinary record with the Indonesian Notary Association. Request references from recent foreign clients and confirm their experience with your specific transaction type (leasehold, PT PMA, or Hak Pakai).
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What percentage of the purchase price should be placed in escrow, and under which bank account will the funds be held?
Escrow deposits typically range from 10-30% of the total purchase price, depending on the transaction complexity and seller requirements.
For straightforward leasehold transactions, a 10-15% deposit is common, while PT PMA purchases or properties requiring extensive due diligence may require 20-30% deposits. The remaining balance is held in your account until all conditions are met and released at final transfer.
Funds must be held in an Indonesian bank escrow account managed by the licensed notary. The account should be specifically designated for property transactions and include clear instructions for fund release conditions. Major Indonesian banks like Bank Mandiri, BCA, or BNI typically handle these arrangements.
The escrow agreement must specify that funds can only be released with written authorization from both parties or when predetermined conditions are satisfied. Ensure the bank account includes your transaction reference number and that you receive regular statements showing fund status throughout the escrow period.
What conditions must be satisfied before the escrow agent releases the money to the seller?
The escrow agent releases funds only when all predetermined conditions in the sale agreement are fully satisfied.
- Clean title verification confirmed by BPN land office search showing no disputes or encumbrances
- All required documents provided by seller including original land certificate, IMB, and tax clearances
- Property survey completed confirming boundaries match legal description
- All government approvals obtained for the specific ownership structure (leasehold agreement or PT PMA registration)
- Transfer taxes and registration fees paid to relevant authorities
- Final property inspection completed with no material defects or undisclosed issues
- All utility accounts transferred or confirmed current with no outstanding bills
- Final deed of sale signed by all parties before the notary
- New ownership documents issued by BPN in buyer's name or entity name
The escrow agreement should include specific timeframes for each condition and remedies if the seller fails to meet any requirement. If conditions cannot be satisfied, the escrow agent returns your deposit according to the terms specified in the purchase agreement.
How long does the escrow process typically take from signing the agreement until the transfer of ownership?
The complete escrow process typically takes 2-6 weeks from initial contract signing to final ownership transfer.
Document verification and due diligence usually require 1-2 weeks, including BPN searches, title checks, and survey completion. Notary registration and government processing add another 2-3 weeks, depending on the complexity of your ownership structure and local office efficiency.
PT PMA transactions generally take longer due to additional corporate registration requirements, potentially extending the timeline to 6-8 weeks. Leasehold transactions with clean documentation can sometimes complete in as little as 2-3 weeks if all parties are responsive and no complications arise.
Delays commonly occur due to incomplete seller documentation, BPN processing backlogs, or issues discovered during title searches. Build buffer time into your planning, especially if you have firm moving dates or financing deadlines that depend on completing the purchase.
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What protections are included in the escrow agreement if the seller fails to meet their obligations?
Escrow agreements include multiple protection mechanisms to safeguard buyer interests if sellers fail to perform.
Deposit return provisions ensure your escrow funds are returned in full if the seller cannot provide clean title, required documentation, or meet agreed conditions. The agreement should specify exact timeframes for seller performance and automatic refund triggers if deadlines are missed.
Breach remedy clauses may include penalty payments from seller to buyer for delays or failures to meet conditions. Some agreements include seller liability for buyer's costs including hotel expenses, legal fees, and additional due diligence charges if seller breaches cause extended delays.
Legal recourse provisions allow buyers to pursue claims against sellers for material misrepresentation or failure to disclose known defects. The escrow agreement should specify dispute resolution mechanisms, including mediation requirements and jurisdiction for legal proceedings if necessary.
Ensure your escrow agreement includes force majeure clauses that distinguish between seller failures and uncontrollable events like government delays, providing different remedies for each situation.
How will the property purchase be reported for tax purposes, and what exact amounts will you owe as a foreign buyer?
Property purchases must be reported to Indonesian tax authorities with specific obligations depending on your ownership structure.
| Tax Type | Rate | Payment Timing |
|---|---|---|
| Transfer Tax (Leasehold) | 5% of transaction value | Before registration |
| Income Tax (if applicable) | 2.5% of transaction value | Withheld at transfer |
| Stamp Duty | IDR 10,000 per document | At document signing |
| Annual Land Tax (PBB) | 0.1-0.3% of assessed value | Annually ongoing |
| Luxury Property Tax | 20% if over IDR 30 billion | At acquisition |
Foreign buyers must obtain a tax identification number (NPWP) before completing the purchase. The notary typically handles tax calculations and payments as part of the escrow process, ensuring compliance with Indonesian tax regulations.
PT PMA entities have additional corporate tax obligations including annual corporate income tax returns and potential withholding taxes on profits distributed to foreign shareholders. Maintain detailed records of all purchase costs, taxes paid, and ongoing expenses for future tax compliance and potential resale calculations.
Once the purchase is complete, what are the next steps to register the property and secure all legal ownership documents in your name or entity's name?
Property registration occurs through Indonesia's National Land Agency (BPN) with specific steps depending on your ownership structure.
For leasehold purchases, the BPN issues a new lease certificate showing your rights as leaseholder for the specified term. The original land certificate remains with the Indonesian freeholder, while you receive documentation confirming your lease rights, extension options, and any restrictions on property use.
PT PMA acquisitions require registering the HGB certificate in your company's name at the BPN office. This process includes updating land records to show your Indonesian entity as the building owner, while land ownership remains separate. Your company receives an HGB certificate valid for the specified term (typically 30-80 years depending on land classification).
Secure certified copies of all ownership documents including the registered lease agreement or HGB certificate, notarized deed of sale, tax payment receipts, and IMB building permits. Store originals in a bank safety deposit box and maintain certified copies for daily reference and potential rental or resale transactions.
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Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Successfully structuring a Bali property purchase with escrow requires careful attention to Indonesia's complex ownership laws, proper documentation, and working with experienced local professionals.
As of September 2025, the PT PMA route offers the most secure legal framework for foreign property ownership, while leasehold arrangements provide simpler access to Bali's residential market for vacation homes and shorter-term investments.
Sources
- Coco Development Group - Freehold vs Leasehold Properties in Bali
- Cekindo - Buying Property in Bali Essentials for Foreigners
- Bukit Vista - Freehold vs Leasehold Bali
- Emerhub - Understanding Investing in Leasehold vs Freehold Properties in Bali
- DSG Pay - Buying Property in Indonesia for Foreigners
- Exotiq Property - Can Foreigners Buy Property in Bali
- Bali Home Immo - Lease Extension in Bali
- LinkedIn - Property Ownership Indonesia Foreigners