Applying for a Foreign Mortgage for a Bali House18 May 2021 by Ade
Indonesia’s constitution has made it impossible for foreigners (even those who hold a KITAS) to own land with the strongest title deed possible - the Freehold Title, or Hak Milik. This means that foreign investors are faced with a limited number of options when it comes to obtaining funds to invest in assets in Indonesia. This includes property investments.
You may have heard that it is now possible for foreigners to establish a business out of leasehold villas in Bali or elsewhere in Indonesia. To do this, a foreigner must form a legal entity called a PMA, a foreign-owned company with a minimum total equity of 2.5 billion rupiah to register. This is the same amount that is needed to build a typical minimalist villa here in Bali.
The foreigner would also need a Pondok Wisata license alongside a PMA in order to legally operate the villa as a business.
Is it possible to get a business loan for a property investment in Indonesia?
We must inform you beforehand that regulations can change at any time, and that this is not in any way, legal advice that can guarantee the safety of your investment.
It would be difficult to find banks or any financial institutions that would issue a mortgage (called KPR) directly to foreign investors. The reason behind this is that foreigners will never own the property that they purchase (without the Hak Milik freehold title), so banks cannot use that property as collateral.
However, according to many sources, it is possible for a legal entity PMA to get a loan for a property (or a “mortgage”) through third-party organizations that work together with banks. One example would be Asia Property Finance Management, a financial establishment that can arrange for Indonesian Property Loan (IPL) on behalf of foreign-owned legal entities.
Back to you — why do you want to invest?
If you are a foreigner, the stringent regulations that foreigners need to follow may discourage you to achieve your financial goals here in Bali. However, it is important to always remember exactly why you want to invest in a property in Bali.
There may be easier ways to achieve your goals. Don’t hesitate to contact Bali Coconut Living for some advice on how property financing works in Indonesia.