Bali and Thailand: why a foreigner cannot own land

A villa in Bali at the price of a one bedroom flat in Odesa, and apartments in Thailand with an advertised yield, both look attractive until the question arises of what exactly you are buying. In both countries a foreigner cannot own land, and that is not a detail but the heart of the matter.

Below are the forms actually available, which of them work, and the risks each carries.

Thailand: an apartment yes, land no

A foreigner can hold freehold title to a condominium unit. There is one condition: foreigners may hold no more than forty nine per cent of the saleable floor area in the building. If the quota in that building is used up, title will not be registered in your name however much money you bring.

The second condition concerns the money: to register ownership you must evidence that the funds came from abroad in foreign currency. The bank issues a document for that, and without it registration does not proceed. So settling in cash obtained locally does not work here.

A house or a villa cannot be held freehold by a foreigner, because of the land beneath it. The workable route is a registered land lease: usually thirty years, with renewal that must be written into the contract rather than implied.

The arrangement using a Thai company in which the foreigner holds a minority is common. It sits on the edge: where the company exists only to hold land and carries on no real business, it is open to challenge. We do not recommend such structures.

Bali: a right of use instead of ownership

In Indonesia full freehold, Hak Milik, is not available to foreigners. Other forms are.

Hak Pakai is a right of use: up to thirty years, renewable, under the current rules first for a further thirty and then for twenty. One person may hold one such property, and legal residency status in the country is required.

The second form is a PT PMA, a foreign investment company. Through it you can obtain Hak Guna Bangunan, the right to build and hold a building, for thirty years with renewal, and that is the route for commercial use: villas for letting, hotels.

The third, and the one most often advertised, is a long leasehold of twenty five or thirty years. Legally that is a lease and not ownership, and at the end of the term the property reverts to the landowner unless renewal is provided for.

What this means in practice

First, comparing the price of a Bali villa with an Odesa apartment is wrong, because these are different rights. In Odesa you buy ownership in perpetuity; in Bali a right for a term.

Second, the value of a leasehold property falls over time. A villa with twenty years remaining is worth more than the same villa with five, and that shows up when you sell.

Third, nominee ownership through a local citizen, offered on both destinations, is not protection but a risk. Formally the owner is whoever is on the paperwork, and the case law in such disputes does not favour the foreign buyer.

What to actually check

In Thailand: whether the building has free foreign quota and exactly how much. That is verified from the condominium management's records, not from a seller's word. Then the bank document on funds from abroad, the register extract for the unit, and any service charge arrears.

In Bali: the type of right over the property and over the land beneath it, the term, the renewal conditions, who owns the land and whether their consent to a transfer exists. For a PT PMA also the state of the company: filings, taxes, licences.

In both cases this is work for a local lawyer, and buying remotely without one is unwise. Where there is no ownership register in our sense, everything rests on the contract.

Yield

The advertised rental yields on these destinations are usually the highest you will see, because they are calculated on high season and full occupancy. Actual figures must be requested for the specific complex for last year.

And separately: rental income in these countries is taxable, and a Ukrainian resident has their own obligation to declare foreign income. We cover that in a separate article.

What the transaction looks like

In Thailand: the contract, verification of the foreign quota with the building management, a transfer of funds from abroad with the bank document, and registration at the land office. Attendance is required either in person or under a power of attorney prepared and legalised in advance.

In Bali: a contract before a notary, verification of the type of right and of the land, payment, and registration. The notary is the key figure here, and they are chosen separately rather than on a seller's recommendation.

In both countries the period from contract to registration is usually weeks rather than days, and it depends on the checks rather than on queues.

What happens at the end of the term

This is the question nobody asks, because it concerns the distant future. And it is the central one.

A land lease expires, and then either it renews on the contract's terms or the property reverts to the landowner. If renewal is not in the contract, it will not happen: in twenty years you will be negotiating with someone other than the person who signed.

Hak Pakai is renewable, but under the current rules and subject to holding residency status. If the status is absent at that point, renewal becomes a problem.

When we take this on

When the buyer understands they are acquiring a right for a term rather than ownership, and when the sum is not critical for them. We check the documents through a local lawyer and look at the term, the renewal and what happens at the end.

We do not take it on when the only reason to buy is an advertised yield, or when nominee ownership through a local citizen is proposed. In the latter case we say plainly how it ends.

Write to us with your budget and your purpose: living there part of the year, letting, or holding as an investment. The answer differs, and for some purposes these countries do not suit at all.