By: Esalex Invest | Apr 5 2026
A lot of expats and the “chill crowd” dream of owning a bungalow or villa in Bali or Lombok. But the biggest myth out there is: “Foreigners can’t own land in Indonesia.”
That statement is not entirely true. Yes, you can’t have Freehold Title (Hak Milik), that’s only for Indonesian citizens. But you are allowed to control, build on, and enjoy property on land with Right of Use status (Hak Pakai).
The legal foundation comes from Law No. 5 of 1960 (the Basic Agrarian Law) and Government Regulation No. 18 of 2021. But let’s skip the heavy legal jargon and break it down simply.
Let’s dive into what Hak Pakai really is, how long you can chill in your dream villa, and the pros and cons.
What Exactly is Hak Pakai (Right of Use)?
Simply put, Hak Pakai is the right to use and/or harvest land that is either directly controlled by the state or owned by someone else (like an Indonesian citizen or a company), for a specific period of time.
For foreigners, Hak Pakai is the only legal “highway” to control land with a registered title at the Land Office (BPN). What’s the difference from a regular lease? Hak Pakai is much stronger because it’s a property right (zakelijk recht). This means the right is attached to the land itself and protected by the state, not just a private agreement between two people.
How Long Does It Last? (Term, Extension, Renewal)
This is the most important part. Based on the latest regulations (PP 18/2021), the timeframe for Hak Pakai for foreigners is pretty flexible and offers long-term peace of mind.
| Period | Duration | What It Means |
| Initial Term | 30 years | The first period granted. |
| Extension | 20 years | Given after the initial 30 years, as long as you still qualify. Usually applied for before the term ends. |
| Renewal | 30 years | Granted after the extension period ends. |
Total potential holding period: 30 + 20 + 30 = 80 years.
Imagine this: with one initial application, you get legal certainty for up to 80 years. That’s generational. For serious investors, this is a rock-solid foundation compared to risky nominee arrangements (using an Indonesian name) which can be voided by law.
The Good Stuff: Advantages of Hak Pakai
Why should you (the chill crowd looking for an early retirement or smart investment) choose Hak Pakai?
1. Top-Tier Legal Certainty for Foreigners
This status is registered at the Land Office (BPN). You get a certificate (usually a Hak Pakai Certificate) with your name on it. No more sleepless nights worrying about legal issues down the road.
2. It Can Be Sold (With Certain Rules)
Hak Pakai isn’t just “renting.” This right can be transferred (sold) to another eligible party, another foreigner or an Indonesian citizen. That means your investment has liquidity.
3. It Can Be Used as Bank Collateral (Loan)
Unlike a regular lease, a certified Hak Pakai can be used as collateral for a loan (Mortgage Right). Need cash to renovate or expand your villa business? Banks will accept this certificate as security.
4. Live In It or Rent It Out
You can live there for personal use or commercialize it as a villa or bungalow for short-term stays, as long as you comply with local regulations (like tourism permits or local taxes).
The Not-So-Good Stuff: Disadvantages of Hak Pakai
No legal product is perfect. To keep your expectations real, here are the limitations.
1. You Can’t Convert It to Freehold
This is the main rule. As long as you hold foreign citizenship, you cannot upgrade Hak Pakai to Freehold Title (Hak Milik). If you want Freehold, the only ways are to become an Indonesian citizen or marry an Indonesian (with a prenuptial agreement).
2. Limited Eligibility
Hak Pakai can only be held by:
– Indonesian citizens.
– Foreign citizens (who reside in Indonesia).
– Legal entities established in Indonesia (including Foreign Investment Companies).
3. A More Complex Process
Compared to buying land between Indonesians, getting Hak Pakai requires a few extra steps:
– Recommendations from relevant government agencies (depending on location).
– Strict due diligence to ensure the land isn’t disputed.
– Acquisition fees (BPHTB, PNBP) based on the property’s tax value (NJOP).
4. You Can’t Just Abandon It
There’s a rule that Hak Pakai can be terminated if the holder leaves Indonesia continuously for a certain period without transferring the right. But as long as you manage the property properly and pay your taxes, your rights remain safe.
The Bottom Line: Is Hak Pakai Right for You?
If you’re part of the chill crowd seriously wanting to own a bungalow on Lombok’s coast or a villa in Ubud’s hills, Hak Pakai is the safest and most professional legal route.
Don’t be tempted by nominee schemes (using an Indonesian name). They’re risky and can be legally invalidated. With Hak Pakai, you’re not just physically occupying the land, you have solid legal protection from the Indonesian government.
Ready to Take It to the Next Level? Consider a PT PMA Structure
Besides holding Hak Pakai in your personal name, you can also invest through a Foreign Investment Company (PT PMA) . This is the ideal route if you’re planning to:
– Build more than one villa (commercial purposes).
– Run a hospitality business (Airbnb, boutique hotel, restaurant).
– Hire local and foreign staff legally.
– Get a stay permit (KITAS) through company ownership.
The Indonesian government (BKPM) has made major reforms in 2026 to make life easier for foreign investors. The latest regulation (BKPM Regulation No. 5 of 2025) has made setting up a PT PMA much simpler and more flexible.
Latest Perks for Foreign Investors (2026 Update):
1. Lower Initial Paid-Up Capital
Previously, you had to deposit Rp10 billion (approx. USD 625,000) upfront. Now, you only need to deposit Rp. 2.5 billion (approx. USD 156,000) into the company’s bank account. The remaining investment commitment (up to the total Rp10 billion / USD 625,000) can come from assets like machinery, equipment, or even construction costs.
2. You Can Own 100%
For sectors like tourism, property, and F&B (restaurants/cafes), which are super relevant in Bali and Lombok—you can own 100% of the shares without needing a local partner.
3. Smarter Financing Structure
The cost of purchasing land and buildings for property or accommodation projects can now count toward your Rp10 billion investment commitment. This is huge, especially since land prices in Bali and Lombok keep climbing.
Documents You’ll Need to Get Started:
The process is now integrated through the OSS (Online Single Submission) system. Generally, you’ll need to prepare:
– Personal Details:
– Copy of passport (for all foreign shareholders and directors).
– KITAS (if the director resides in Indonesia).
– Company Structure:
– Minimum 2 shareholders (individuals or legal entities).
– At least 1 Director and 1 Commissioner.
– Legal & Address:
– Company name (minimum 3 words).
– Office address (a virtual office in the right zoning is acceptable temporarily).
– Business Plan:
– Determine the right KBLI code (Indonesia’s business classification system) for your activity (e.g., accommodation, real estate, or F&B).
Quick Comparison: Personal Hak Pakai vs. PT PMA
| Aspect | Hak Pakai (Personal Name) | PT PMA (Corporate Entity) |
| Legal Subject | Individual foreigner (usually with KITAS) | Indonesian legal entity (foreign-owned) |
| Purpose | Personal use, retirement, second home | Commercial investment, villa business, hotel, rental |
| Land Status | Hak Pakai (Certificate in your name) | Hak Guna Bangunan (Right to Build) or Hak Pakai |
| Stay Permit | KITAS (if working/sponsored) | Investor/Director KITAS (through your own company) |
| Initial Cost | Property acquisition + BPHTB (fees) | Rp2.5 billion (approx. USD 156,000) paid-up capital + notary/OSS fees |
Confused About Which Structure Fits You Best?
Don’t risk it with nominee arrangements (using an Indonesian name) that can be legally voided. Both Hak Pakai for personal use and PT PMA for business have their own advantages, it all depends on your investment goals in Bali or Lombok.
The Esalex Invest team is ready to help you analyze your needs and handle the entire licensing process, from checking land certificates, preparing Hak Pakai deeds before a notary, to setting up your PT PMA through the OSS system.
Free consultation for the first 10 registrants!
📞 WhatsApp (chat only): https://wa.me/+6281336643780
Disclaimer: This article is for general informational purposes only. For specific advice regarding your property and investment structure, please consult directly with us
