Buying property in Bali can be confusing between all the different articles you can read. This article sheds light on how to buy a property in Bali and Indonesia and how to proceed.
Key Takeaways
- Foreigners can securely invest in Bali real estate through leasehold, Hak Pakai, and HGB titles, with each option offering unique benefits.
- Investors must navigate legal aspects diligently, such as setting up a PT PMA company for legal entity status, performing due diligence, understanding taxes and fees, and working with real estate professionals to ensure a secure and profitable purchase.
Understanding Property Ownership Options in Bali
Understanding property ownership in Bali can seem confusing, but a clear grasp of the different opportunities available is key for those looking to purchase property.
Foreign investors have access to several types of property titles like leasehold, Hak Pakai (right to use) and HGB (right to build), each presenting distinct advantages and constraints.
In contrast, owning land on a Hak Milik is an option that only Indonesian citizens are entitled to. It’s crucial for foreign buyers to comprehend these nuances in order to make informed choices regarding their investments in property.
1. Leasehold Properties for Foreigners
Leasehold properties provide foreigners with a reliable and stable option for investment. Individuals, Foreigners or companies can lease a property. The party selling the leasehold is called Lessor while the buyer is called Lessee.
- A leasehold has no maximum duration as a court in Jakarta has recognized a leasehold for 100 years. Historically, buyers have been looking to buy a leasehold for a period of 25 to 30 years, although some can request a shorter or longer duration.
- A leasehold can be signed in front of a notary or between 2 parties without a notary
- A leasehold is a private contract between two parties. The clauses have to respect the Indonesian regulation.
- A leasehold contract should be reviewed by a legal or lawyer to make sure all clauses are protecting your rights.
On a leasehold, the buyer doesn’t become the owner. The owner is still responsible for the land and building tax. The buyer has to make sure each clause on the contract cannot be used to cancel the agreement.
2. Hak Pakai: Right of Use for Foreigners
The “right of use” or Hak Pakai title offers a path to property ownership in Bali for foreign nationals. Such individuals can own property under this legal framework if they hold a KITAS, KITAP.
It is important to note that for Hak Pakai the property must have an existing building. Bare land is not eligible for sale to foreigners using this title. The property must have a minimum value that depends on the province.
It is a perfect solution for people willing to buy an apartment as a second home under a Second home visa.
Originally granted for a term of 30 years, the tenure of Hak Pakai can be extended by an additional 20 and 30 years.
3. HGB Title for Commercial Use
The HGB is the highest title that a foreigner can get. A foreign investment company (PT PMA) can buy a freehold property under a Hak Guna Bangunan (HGB) title.
Unlike the leasehold, the company becomes the owner and has responsibilities on the land, such as land and building tax. The purchase of a freehold is a Sales and Purchase agreement and not a leasehold. The company has the right to resell the property to another individual or company as a freehold (by upgrading the land title to Hak Milik) and transfer the land title.
The difference with the leasehod is that the land office changes the name of the owner on the land title and raises the name of the previous owner. The company can even apply for a mortgage on it.
While it commences with a 30-year term, this period can be extended by successive extensions of 20 or 30 years each, culminating in a total tenure of up to 80 years. These titles come with the convenience of being transferrable through sales or inheritance processes.
Legal Aspects of Buying Property in Bali
Navigating through the legal intricacies of acquiring property in Bali requires adherence to crucial procedures for people looking to secure their property purchase in Bali.
- Secure a proper offer with a proper contract
- Undertaking thorough due diligence
- Establishing a PT PMA enterprise if you want to do business with your property and apply for a Vila license to list your property on Airbnb
- Sign a leasehold or purchase agreement and review your contract with a third party to ensure the contract does not favour one side. It is a crucial step, especially on a leasehold.
Secure your contract
Most of the issues come from a wrong contract and misunderstanding. The initial offer is the base of the relation and the rest of the process. Reviewing a leasehold contract is crucial. The language barrier even with a notary can lead to unpleasant situation.
Optimize your tax exposure
Creating a PT PMA (Perseroan Terbatas Penanaman Modal Asing) helps you to acquire a leasehold or HGB but it also helps you to optimize your tax exposure and make your business and investment legal.
- The inclusion of no less than two shareholders
- An allowance for entirely foreign-owned enterprises in the domain of real estate
- A director and a commissioner
Setting a PT PMA company helps you to optimize your taxation and get a better Return on Investment (ROI) and secure your property.
Due Diligence and Property Verification
Conducting due diligence and confirming the validity of property are essential components in acquiring real estate. This includes:
- Ensuring that the seller has a legal right to sell
- Determining if there are any liens or burdens on the title
- Confirming that there is no outstanding litigation concerning land disputes
- Verifying clear and lawful ownership
- Ensuring that the size of the land is correct as on the land title
- Proceed with a soil test to ensure you can build on the land without hassle
- Ensure you have a road access agreement
- Ensure you will not have any issue surrounding
Indonesia classified the land and properties on different zoning. Checking the zoning can influence how you can build and licenses you can get, specially if you are willing to have a license for Airbnb or a restaurant, Hotel etc.
Taxes and Fees Involved
Freehold
Understanding the various taxes and fees that come with buying or selling property is crucial to avoid unexpected expenses.
In freehold property deals, sellers are responsible for a 2.5% PPH tax, while buyers must cover a 5% BPHTB tax.
Every year, owners pay a Property Tax (PBB) which varies between just about0.1-0.2%, based on the government’s valuation of their Bali properties.
Leasehold
The lessor has to pay a 20% lease tax if the lessor is non resident. KITAS holder pays a flat tax at 10%.
Other sporadic expenses might include notary charges—these can be negotiated but typically range from around 1-2% of the transaction value—and legal costs related to preparing necessary documentation as well as potential complications stemming from declaring lower than actual sale prices during transactions.
Working with Real Estate Professionals
Working with real estate experts significantly eases the process of buying property within the Bali real estate market. These professionals, including agents and property management firms, can help you find and secure properties in Bali, offer informed advice, and help you optimize your investment outcomes.
Choosing a Reliable Real Estate Agent
Choosing a reliable real estate agent is a critical part of the process when buying property in Bali. It’s important to ensure that agents in Bali are credible by checking for an authentic property broker certificate and verifying their membership with AREBI, as this attests to their legitimacy and professional conduct.
When navigating the complexities of the Bali property market, it’s beneficial to work with an agent who has demonstrable experience and local knowledge. They can offer valuable advice throughout the acquisition of a Bali property.
It is important to double check that the agents are legit and have the right to practice in Indonesia. You can ask them their company profile or their AREBI license if they are individuals. AREBI provide training to property agents and brokers and ensures a better system to protect buyers and sellers.
Using a non legit agent can turn into a hassle if a problem occurs.
Property Management Services
The significance of adept property management cannot be overstated for investors who do not permanently reside in Bali, ensuring their properties are well-maintained. A Balinese property management firm delivers an all-encompassing range of services that covers:
- Around-the-clock support for guests
- Comprehensive oversight involving the hiring and training of staff members
- Management of financial outlays
- An array of promotional activities including website creation and expert media production.
To maintain clarity and meticulously record every transaction, these property management firms furnish villa proprietors with monthly statements detailing profits and losses. The superior level of service they provide enhances guest satisfaction which leads to better occupancy rates thereby augmenting rental income—a direct economic advantage for those owning villas.
The Most Attractive Places To Invest in Bali (Recommended by Local Real Estate Experts)
Seminyak – Legian
This area is the golden ticket when you start your investment journey in a property in Bali. The occupancy rate was the highest in Bali before the Covid and continues to attract travellers from all around the world. Seminyak attracts a wide range of visitors from all ages and accommodates a large selection of restaurants and hotels. Despite the years Seminyak is where the night life is still active all nights attracting locals from Jakarta and foreigners wishing to experiment the night life in Bali.
The location of Seminayak near the airport makes the place a perfect location, attracting people to stay there for one night or more, at least during their stay before leaving home.
Canggu – Pererenan
The trendy place of Bali is not letting people without an opinion. Canggu has attracted influencers and is the hot point of Bali in terms of development. The occupancy rate is close to Seminyak and still offer some land opportunities while Seminyak has almost no more land to offer for sell. The average rate in 2023 and beginning of 2024 turns around 70% with some villas and others at 90 more. Canggu has been in the spotlight and despite the criticism attract travelers and expat with a life less sophisticated than Seminyak. Most of the best restaurant and brands are now opening in the area.
For those interested in buying property in Bali, Canggu and Pererenan, just two streets from Canggu, still offer lands to build or new villas with high potential and the same occupancy rate, making expats move further north to these new places to be and develop villas until Seseh, Cemagi, and further.
Despite the criticism or image of the Canggu shortcut, Canggu itself has less traffic than areas like Seminyak, Kerobokan or Denpasar itself. The traffic itself is not in Canggu but on the way to reach this bubble inside the Bali bubble itself.
Bukit Peninsula (Uluwatu – Bingin – Balangan)
The new area in development is definitely the Bukit peninsula in the south of Bali. There is not one week without the opening of a new restaurant or new construction. Some hotels and villas offer an occupancy rate close to 100% when they are well located. The best beaches are definitely located on this peninsula. A few years back, there was only surfers moving there while you can see now families and tourists coexisting on the beach.
Bingin with its own charm with no traffic and a pristine beach with everything at walking distance is definitely the area ILA is falling for. Balangan next to Bingin is starting also to see some developments and could probably in the near future a hot spot of development and can be an opportunity for some capital gain and developments.
Ubud
The center of Balinese culture doesn’t have to be described. This magical place, despite its commercial development switching from cultural to outlet shops, continues to attract visitors and honeymooners. Buying property in Bali, particularly in Ubud, cannot be a wrong investment but has to be managed with precautions, especially regarding legality. A lot of lands are located in green zones, which do not allow legal construction. The occupancy rate in Ubud is probably the most stable, and with more and more Indians traveling to Bali, Ubud and Seminyak will likely have the most stable occupancy rates.
Risks and Precautions When Buying Property in Bali
Read also: Things to Know Before Investing In a Property In Bali
Avoiding Nominee Systems
Property ownership for foreign investors in Bali can be attractive when using nominee systems, but such arrangements come with substantial legal hazards. The actual legal owner — the nominee — may impede sales or exert control over the property, potentially resulting in the investor losing their property and savings if complications arise from the nominee arrangement.
Nominee agreement is illegal in Indonesia
The involvement of a nominee system adds complexity to property dealings due to the necessary cancellation of these agreements. This introduces extra layers of difficulty and expense. Despite these challenges, expats frequently gravitate towards nominee systems captivated by freehold ownership’s promise which conveys an enduring sense of possession and authority over Indonesian real estate investments.
Pre-Owned Properties vs. Off-Plan Projects
As an investor, one of your key decisions will be to determine whether to invest in second-hand properties or new off-plan projects. In Bali, opting for off-plan properties can present the advantage of lower initial prices and opportunities for personalization that pre-owned homes may not offer. Investing early in these projects could also result in significant appreciation by their completion, influenced by regional development and inflationary trends.
Conversely, established rental properties come with the benefit of immediate income through rent and a more predictable investment landscape compared to their off-plan counterparts, which are reliant on construction schedules. When it comes time to sell leasehold rental property though, this task may prove difficult because buyers often hesitate over limited-term leases.
Read also: Bali Property Market Trend 2023 – 2024
Cultural and Environmental Considerations
Investing in Bali property involves more than just the financial aspects; cultural and environmental factors are also of significant importance. For instance, local cultural norms, such as the prohibition of development near temples or on religious pilgrimage routes, must be taken into account. Respecting sacred lands and adhering to building codes reflect the importance of being culturally mindful when investing in properties in Bali.
Summary
Investing in Bali’s property market offers exciting opportunities for foreign investors. From understanding the various property ownership options and navigating the vibrant property market to dealing with legal aspects and working with real estate professionals, informed decisions are the key to success. Being mindful of cultural and environmental aspects and understanding the risks and precautions can lead to a harmonious and sustainable investment experience. With the right planning and guidance, your dream of owning a slice of paradise can become a reality.
Frequently Asked Questions
Can a foreigner buy property in Bali?
Indeed, a foreign-owned company known as PT PMA is required to be established by foreigners for the purpose of owning property in Bali prior to making any purchase.
It is feasible for individuals to own property via leasehold or secure it through freehold ownership (HGB)
How much does it cost to buy a house in Bali?
House prices in Bali fluctuate considerably, with the cost being dependent on the specific village where one is looking to purchase.
Is buying property in Bali a good idea?
Indeed, acquiring property in Bali may be considered a wise choice owing to its affordability relative to other sought-after locales. This position it as an excellent spot for investors operating on a modest budget when looking into purchasing property.
What are the popular areas for property investment in Bali?
Seminyak, Canggu, Ubud, Sanur, Nusa Penida, Cemagi, Kedungu, and Munduk are sought-after regions for property investment in Bali due to their promising prospects for investors.
Contact us if you are looking to invest in a property in Bali or book an online meeting with us.
