Investing in real estate in a foreign country can sometimes seem so daunting that you talk yourself out of it. Yet it need not be so complex. Sure, there are local terms that you would do well to learn, but there is enough help at hand now to make the transition smooth, safe, and stress-free. To make your journey all the easier, Invest Islands sat down with Terje H Nilsen, a founding partner at Seven Stones Indonesia, one of the best real estate firms in Bali and specialists in legal assistance and investment advice, to answer some of the most common questions and clear up any doubts.

“Read More On How Foreign Investors Can Own Land In Indonesia”

Seven Stones has vast experience in dealing with the legal side of property investments in Indonesia. Can you describe the process from start to finish in the simplest way possible?

Well, I think first of all it’s not really complicated. I think that it lacks information, but that’s changing a lot now where most information is available in English and people can look it up themselves. So the process when you invest in Indonesia is to obviously identify what business you want to be in.

In the case of real estate, we talk a lot about goal maps. It’s important to think ‘what’ and ‘why’ you’re doing the investment. Is it residential? Is it an investment? Is it a combination? Because that will also impact the ownership structure of it. So, basically, that’s where it starts: you can either set up a company or you use your own name. Maybe, if it’s a residential title and the whole process depends a little bit on what [business it] is, will take 30 to 60 days to set up.

What is the most important factor that potential investors must consider before buying property in Indonesia? What is that one piece of advice you’d give?

To think through what the investment is for because, as I mentioned before, that will impact the ownership structure. And to do very good due diligence because there’s still areas that might not have the zoning set up properly, so I think a proper, good, strong due diligence [is important] and make sure you also work with respected and reputable agencies or developers.

What are the unique issues to consider when considering investing in Indonesia?

Yeah, I think I’ve answered that… It is less complicated that it looks like it is. I think you know that, deliberately, information has been held back so that certain agencies and people can, you know, charge rather excessive fees to provide services. Every province will have some unique characters to it depending on people and some local regulations, but other than that it’s very, very straightforward.

What does the  ‘30 + 20 + 30 year lease’ mean and when does the ‘80-year lease’ start?

It depends a little bit that when you separate off a title and you get a new title issued under a new company that definitely the period of that HGB can start from scratch again so you can start with 80 years. As I answered before the 30+20+30 years is a mechanism that was built-in when Indonesia was still a socialistic country, but you do have those 80 years as an absolute right to use that. So I don’t see any reason why you cannot use another PT PMA to buy back and forth.

In addition to that, would the land certificates be under the PMA name and how does that reflect the individual investor ?

I think that you can go two ways: That some people own a PT PMA together so that might be an entire complex — let’s say eight or ten villas — and then your specific property will reflect the percentage of the shares that you own and you might have some kind of right in that to cipher it out to your own company at some stage. Or you do that from day one: You put it into your own company and then obviously the PT PMA that you own the shares in, owns the title and the properties.

One thing we get asked all the time is, after the 80 years lease expired, where does the land end up? Can we lease it for another PMA setup?

First of all, I think that the use of the term ‘lease’ is not correct because it is not a lease, HGB – or Hak Pakai in Indonesian – is what we call a primary ownership structure. Lease is what we call Hak Sewa, so those are two different things.

It does have a term, which is related in back to when Indonesia passed the agrarian law in the ‘50s and ‘60s when Indonesia was strongly socialistically motivated. But for experts today the title is granted for 80 years, but you still have these checkpoints of 30 years and 50 years for a renewal of the certificate. After 80 years, I do think that it will continue and that the government will grant you a new period or just restart the whole process, but the challenge is that it hasn’t really been tested yet. But when you look at HGB and Hak Pakai title there’s thousands and thousands of Indonesians who also own these titles and if you tell them that they’re not owning the land or the property of their own, I think you could see a riot. That sort of defines that this is clearly full ownership and you can – if you are concerned about 78-79 years from now – buy and sell technically to yourself with an Indonesian or another company involvement to start up the process again.

Tell us about your journey: How did you end up involved in real estate in Indonesia. And, how Seven Stones come to be?

Yeah, I think I moved to Bali in 2004 and my business in Jakarta was a bit different, so the choice when I moved to Bali was either real estate or tourism. Almost by accident I ended up in real estate. I was involved with a big real estate company prior to Seven Stones, but in 2016 we wanted to change, be a bit different, get more into other activities, general consultancy, legals and so on. So in 2016, we set up Seven Stones with a couple of other partners to try to reflect the changes. Parts of that aren’t available in the market yet.

Are you happy and comfortable living in Indonesia for the past 30 years?

I moved here in 1993, but I came here, first time, I think was 1970 when I was a little little boy. It’s been a while…

You’ve lived in Bali for more than 15 years and people often say Lombok is like Bali 20 years ago. What do you make of such comparisons? Do you agree?

I think that, first of all, it’s wrong to compare Bali to Lombok or Lombok to Flores and so on, I think that all of these new tourist destinations like Lombok have been around for a while, all have their own unique attractions. Definitely Lombok is, in terms of potential capital gain, and then growth, better investment today because it’s just starting to take off.

In terms of regulations, Indonesia is a centralised government and legal structure, and that filters down into the province, so there is really no serious differences between any area region. Sometimes, you’ll have what in Indonesia is referred to as ‘cultural law’ or other law that will impact a little bit on how you engage with the local communities — it might impact a little bit on building permits and so on — but in general it’s more or less the same.

What about the partnership with Invest Islands: How did it come about? What criteria do you look at when considering a collaboration?

I think what attracted us to Invest Islands was the profiling. I think you do a very good profiling and being eager to actually qualify with Indonesian investment regulations is for us a big thing. As you know, the investment in Bali seemed to still feed on a lot of loopholes, a lot of unethical ways of setting up businesses. So I think, yeah, the profiling and then there’s the drive – which is ongoing – to qualify within the Indonesian regulations, providing proper products, proper legal products and structure to your clients.

You have worked with Invest Islands now for two years. What has surprised you the most about the company in that time? What makes them different to the other real estate Companies operating in such a competitive market?  

I think what surprised me, if anything, is the exceptional growth. You know, you seem to come a long way through the startup and I think the variety of product is another unique selling point; that you can cater to people who wants to have a residential – you know, to build a villa in Lombok – people that want to invest into resorts, or just simply do some land-banking. So I think that’s quite unique. You have a very wide variety of products and again, what I said before, about the structures being thought through, so the investor will be in safe hands and well taken care of.

If there’s anything we haven’t touched on that you would like clarification or if you would simply like to discuss anything within the video in more detail, drop us a line at INFO@invest-islands.com (ideally a generic address, not a personal one).