Thinking of buying a property in Bali? Dreaming of living in a beautiful villa surrounded by rice fields or perhaps, making a lucrative business putting your villa in the Bali Rental Market?
All great ideas! Bali is in one word ‘magical’! And, the following guide will help you navigate the path to buying your first villa or that block of land.
Posted by Paula Neron 15 June 2020
Such a small island in the massive Indonesian Archipelago but incredibly unique at the same time with its own culture, traditions, cuisine and religion. The island has been a popular holiday destination for decades already and many ex-pats and travellers choose Bali as their new place of residence. It’s got the perfect blend of unchanged traditional magic and modern conveniences. Especially in the south of the island, you can live in lively beach towns with Western bakeries, cinemas, shopping malls, hip cafes, restaurants and beach clubs. Move away from the main tourist hubs and you’ll feel far from everything and everywhere. Places where it’s just you, the mountains, the sea, the rice fields and local village life. Wonderful! Now, you don’t go buying Bali real estate overnight. You need to think it over, sleep on it and learn all about local laws and restrictions. You need to become a real expert and find a trustable real estate agent to help and guide you in the process of your purchase. Indonesia protects their land and property well, not allowing foreigners to own land or property but still, there are many possibilities for foreigners to go live their ‘Bali Dream’! In fact, the property market in Bali is one of the best performings in all of Southeast Asia. Time to get things straight! You will read all about buying a villa in Bali in this blog, it’s the complete guide to Bali Real Estate.
What’s your real estate goal?
First of all, it’s important to think about what your goal is. Are you buying a villa for yourself to live in here on the island or are you planning to rent it out and make a business out of it? You may think, why do I need to think about it now? Can you not decide it later or make it a 50/50 thing, partly living in the villa and partly renting it out? Well, the thing is, Bali has different zones. Some of these zones are agricultural, some are residential and others are meant for tourism-related purposes. You can not legally rent out your villa if it is built in a residential zone. Also, you need to get a special license called Pondok Wisata if you want to rent out your villa. More than enough reasons to think about your goals and the location of your property before making the purchase. Just remember, you can always make changes to your property but you cannot change the location.
Can foreigners own property in Bali?
Long story short, the answer is no! Indonesia is very protective of its land and properties. Laws are plentiful and the whole process is not transparent which is also why many foreign investors chose to buy property in other Southeast Asian countries. However, Indonesia is looking into making changes to the property ownership regulations for foreigners. They want to attract more foreign investors and in the coming decade, the whole process might become easier and less vague. As for the moment, foreigners cannot own freehold property but there are several titles to obtain, allowing foreigners to use, lease or build properties in Bali and the rest of Indonesia.
So, there is no need to give up on that tropical dream! Here’s an overview of titles to obtain:
Hak Milik (the right to own)
Hak Milik is a freehold title and it is the strongest title one can obtain. However, this title can only be held by local Indonesian citizens and local companies.
Hak Pakai (right to use)
For foreigners, Hak Pakai is the highest title to obtain. It’s a method that the Indonesian government came up with to allow foreigners to get the exclusive use of Hak Milik land. With Hak Pakai, the purchaser gets a separate certificate of title in their name. The initial term is 25 years but it can be extended multiple times up to 70 years. Hak Pakai is transferable should you want to sell your property to another foreign buyer. It is important to note, a foreigner can only own 1 Hak Pakai property at the time. There is one catch: in order to obtain the Hak Pakai title of a Bali property, you need to live in Indonesia and get a stay permit (KITAS). Another option is to start a PMA company, giving you the freedom to own property while residing (partly) overseas. This is the most desirable option although it takes some time and effort to arrange it.
Hak Sewa (right to lease)
Another good option for foreigners to invest in real estate is by leasing property which goes under the title Hak Sewa. Lease periods can be anything up to 50 years, usually agreed upon in advance with the property owner.
Hak Guna Bangunan (right to build)
This title is only available to Indonesian citizens and PMA companies (a foreign-owned company), which is where you would get involved. The title is valid for 30 years and it can be extended for 20 years and then another 30 years.
If you’re thinking about building a property in Bali, it’s important to know that there are restrictions to the height of your building. The locals would say, it shouldn’t be taller than the tallest palm tree around the property which comes down to a maximum height of 15 meters. Also, the property should have some Balinese elements in the design – we don’t want to go offending the Gods here on the island, do we?!
Isn’t there an easier way?
There are always ways to get around the rules but is it wise? Definitely not! You are in a foreign country, you invest a big amount of money and so you want it to be a safe investment, right? That’s what you would think but in reality, many foreign investors bought properties under the ‘Nominee Agreement’ where they bought a property under the name of an Indonesian citizen, bypassing the law. Needless to say, this is a risky business and also it’s illegal. Wouldn’t go there, if I were you as you have no legal protection whatsoever!
So, what’s the safest way to buy property in Bali?
In short, the best and safest option to buy property is by setting up a foreign PT PMA company, allowing you to acquire a Hak Pakai (right to use) title or Hak Guna Bangunan (right to build). It takes time to set up a company and it involves a lot of paperwork and know-how but in the end, it gives you freedom!
Where to buy real estate in Bali?
Prices of land and property vary greatly depending on the area you are looking into. Tourist areas like Seminyak, Canggu and Ubud tend to be expensive. Move away from the centre a little bit and you’ll see prices drop. Canggu, for example, has seen massive growth in the last decade and the tourist area is expanding and expanding which gives great options to invest in a property that is not in the tourist centre of Canggu but just outside. However, you must always choose your location wisely! If you are planning to rent out your property, make sure the property is not too far from the beach or other hotspots or you’ll face difficulties in getting bookings. Always remember, tourists will love the location for the same reason you will love it.
The best places to look for property in Bali are Seminyak, Canggu, Sanur, Uluwatu and Ubud. There are plans to open a second airport in the north of Bali, making places like Lovina and Amed also more attractive and profitable in the long run.
Seminyak: trendy, fashionable, cosmopolitan, beach clubs, sunsets, dining & shopping streets, ongoing popular! View Seminyak Villas for Sale
Canggu: Surfing, nightlife, yoga, trending, weekend markets, beach clubs, sunsets and hipster cafes. View Canggu Villas for Sale
Ubud: cultural hub, spiritual, yoga, raw food, vegan, shopping, dining, nature, rainforest. View Ubud Villas for Sale
Sanur: laid-back, families, villas are high in demand as there aren’t so many in the beach area, Sunday markets, kid-friendly, sunrises, watersports. View Sanur Villas for Sale
Uluwatu: surfers, beach and rock bars, multiple beaches, awesome scooter drives along the coastline, sunsets, yoga, restaurants. View Uluwatu Villas for Sale
Conduct due diligence
Once you have found that perfect property with the ideal location and a fair price tag, don’t go rushing into making the deal – you need to have a real estate agent conducting due diligence before you buy the property. With due diligence, there won’t be any unpleasant surprises popping up to the surface later on. The Hak Milik ownership certificate will be checked to make sure it is authentic and there is no dual ownership of any kind. Access to the property is secured, the zoning will be verified and more. All essential things to avoid problems later on after you’ve already bought the property.
Mistakes to avoid when buying Bali Real Estate
● Buying property through the nominee agreement
● Trying to do it yourself – you really do need a good realtor as well a listing agent. (do note, the ‘other’ listing agent works for the seller of the property).
● Buying a property without conducting due diligence (ask your realtor!)
● Not doing your market research. Know your market and don’t overpay!
Do you still have questions or do you feel uncertain? We are happy to help so don’t hesitate to contact us. No strings attached!
Also read: Seminyak Real Estate Guide