You’re not the first to fall in love with Bali, dreaming of buying a private villa and living the tropical dream! However, some research is required because we’ve all heard about some rip-off stories or perhaps you’ve even heard about the local laws and in specific the (im)possibilities Bali property ownership by foreigners. It is a complicated matter but really, it’s not all that hard as long as you know what you’re doing, you are well-informed and you know what not to do. Buying a villa in Bali can also be a great investment, creating passive income and before you realize it, you’ve earned your investment back! Here’s are some basics you need to know before you get started on turning dreams into reality – how to buy a villa in Bali without getting ripped off:
The Nominee Agreement
Well, let’s start with what you should NEVER do: the controversial nominee agreement is what can get you ripped off big time. This is an agreement solely based on trust and all too often, this has gone wrong and people have lost their money.
How come?
OK – we won’t fluff it up or bind around the bush: foreigners are not allowed to own property in Bali. Even if you are married to an Indonesian, you need to sign a prenuptial agreement which states the foreigner has no right to claim ownership of land or properties in Bali. It is clear and simple – you will never own the villa! The nominee agreement seems like a nice and simple way to go around the rules but honestly, it is not worth the risk! Yes, the legal way takes longer and in the end, you don’t even own the villa but what you do have is a long-term leasehold, legal, safe and solid. With the nominee agreement, you got nothing – your nominee (Indonesian national) owns the property and all too often this has turned out ugly for the investor.
Long-term lease – Hak Pakai & Hak Sewa
What to do? The best and safest way is to get a long-term lease on your Bali Villa. The initial period is often between 25 to 30 years and in most cases there will be an option in the lease to extend meaning you can live your entire life here on the island of Bali in that villa of yours. But we’re not done yet. You also need to determine whether you want to have a villa to live in or if you’re planning to rent it out and create a possible lucrative business (villa rental). Why do you need to think about it now? Well, depending on your plans, you need to obtain different titles from the Indonesian government. A villa with a ‘Hak Pakai’ title (right to use) doesn’t allow you to rent out your villa to anyone. Planning to sublease your property in Bali? You need a villa with the title ‘Hak Sewa’ title and you also need to get a ‘Pondok Wisata’ – an operational license for your villa rental. There is a catch there – the Pondok Wisata can only be given to an Indonesian citizen unless you start a business in Bali (PMA) which leads to a list of other requirements and rules. You can also buy a villa that has a Pondok Wisata already or you can get the owner of the property involved to get it. Another important note: not all areas in Bali allow you to rent out your property. There are residential zones and areas for tourism. You won’t get a Pondok Wisata license in a residential zone.
In short
- Do it the legal way and avoid the nominee construction
- Figure out why you want to buy a villa (residing in Bali or business (or both!))
- Pay attention to the title of the villa (Hak Pakai = the right to use. Hak Sewa = right to rent)
- Pay attention to the ‘zoning’ for your villa. There are residential areas where you’re not allowed to rent out your property to tourists.
- Get the operational license Pondok Wisata if you’re planning to rent out your villa.
Ready for the great plunge? Are you ready to buy a Bali villa? Still confused about the stack of rules and the restriction of Bali property ownership for foreigners? Don’t hesitate to contact us with your questions and requests. We’re happy to assist and advise!
