Before buying anything in Bali or Indonesia in general, you must do a complete due diligence. It is easy to get excited about a piece of land and rushing into an agreement to realise later on that you cannot build or that it is going to cost you a fortune to have access to the road, water or electricity.
Some of the common things people forget to check when buying a piece of land in Indonesia:
- Who is the rightful owner of the land
- Mortgage / dispute
- Access road
- Soil composition
- Access to water and electricity
- Zoning and building requirements
- Taxes payment
This list is not exhaustive and if I had one recommendation: don’t be cheap! Please spend a few hundred dollars on surveys and bring experts to assess the land before signing anything. It can save you a lot of money, time, energy, and help you to avoid making a huge mistake.
1- Property title background check
Only half of the land in Indonesia has officially been certified!
The person you negotiate with must have legal rights to own the property that you are interested in buying. He/she must hold a certificate issued by the land registry office where the property is located and his/her name must be printed on this certificate.
Once you have the certificate, always perform a background check of its legality! Some issues you could encounter:
- The person on the certificate passed away: you need to update the certificate with the name of the new legal owner.
- Mortgage: big red flag! It means that tomorrow, if the owner does not pay the mortgage, the bank can take the land, leaving you with nothing. Always make sure that the mortgage is paid back before signing the agreement. On the other hand, it can also be a great opportunity to negotiate the price if the owner needs to reimburse the mortgage asap.
- Potential dispute: you can check with the local court if there are any disputes (on who’s the owner for instance) on the land. If there is, better run away or clear the dispute before buying the land.
2- Land size
Conduct an on-site survey, with your notary, to ensure the land matches the same plot as shown in the legal documents. This section should specify the land details, a map, as well as the surrounding lands. Even one overlapping meter can lead to claims and disputes with the neighbour.
3- Road access
Ideally, you should have access to your land from a public road. If it is not the case, you will have to negotiate with neighbours. Never sign a land agreement until the road access is sorted out! You have to sign a lease/ownership agreement or a road access usage agreement or you face the risk that someone will block the access to your land one day, asking for a large sum of money. It is a very common mistake made by investors (especially foreigners), so beware!
4- Electricity and water
In case you purchase (or lease) a land, you need to figure out how to get water and electricity there. There are many factors to consider: is the access to the local network possible, how far is the closest electricity/water supply, do you need to dig deep to find water….
The best is to spend a few million rupiahs for an expert to come and survey the land, such as:
- Soil Test
- Geolistrik analysis
There are 12 different zones in Bali! Always ensure the land you wish to purchase is in the right zone to run the business you intend to. Also, check the building control and the environmental regulations that cover the land. For instance, you cannot build in a green zone.
To be sure, go visit the National Land Agency (BPN). The best is to ask an agent to perform an ITR (Informasi Tata Ruang), a report that will tell you what you can, or cannot do, with your land.
6- Requirements for obtaining a building permit (IMB)
To build a property, you need a Building Permit (IMB). So make sure to check the requirements to get it. Without an IMB, the local government has the legal right to demolish the building at any time, at your own cost. Up to you if you want to take that risk…
If the land you are about to purchase has a building on it, make sure it has a building permit (IMB) and that it corresponds to the actual building (you would be surprised…).
7- Payment of taxes
You cannot apply for an IMB or any other documents with unpaid taxes. Payment of the current year’s taxation must thus be settled before the title of ownership is being transferred: a tax validation will be carried out before the title transfer is conducted.
Unpaid taxes will lower the value of the property and should be part of the negotiation with the seller.
8- Sales and purchase agreement
A valid Sales and Purchase Agreement (SPA) must be lodged at the land registry office to transfer the title from the seller to the buyer. The SPA will be prepared in Bahasa Indonesia by a notary. A few points to include in the contract:
- Make sure the lease agreement is secured if the landowner dies or sells the land and that any new owner must honour the lease agreement
- Payment terms
- Any road access obligation and payment
- Period of time
- Extensions and renewal options
- Extensions and renewals cost: usually at market price
- Who will pay the taxes on the transaction?
- Who will pay the notary fees?
- Who will pay the annual land tax?
- Possibility to sublease
As the official contract will be in Bahasa Indonesia, don’t hesitate to have an official translator translate your agreement in a language that you understand before signing anything.
Documents to provide:
- Indonesian ID (or Kartu Tanda Penduduk (KTP)) as well as the spouse if married
- Family card (kartu keluarga or KK)
- Marriage certificate: if the spouse passed-away, you need to obtain his/her death certificate. In the event the seller is divorced, you need to obtain his/her divorce verdict with the division of property – certifying the property being sold is hers or his
- Original of certificate of land ownership issued by the National Land Registry (or Badan Pertanahan Nasional, “BPN”)
- PBB tax payment (SPPT PBB)
- Seller’s taxpayer number (“NPWP”)
- Copy of KTP / ID
- Family card.
- Marriage certificate.
If a company is buying the property, the required documents will be slightly different.
Please note that this article does not contain all the information required to buy land in Indonesia and it should not be construed as investment, tax or legal advice.
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