Foreign Ownership of the Property in Bali

According to Indonesian law No. 5 from 1960, freehold land (Hak Milik) and indefinite property ownership are reserved only for Indonesian citizens and companies. However, foreign investors can own property in Bali for up to 80 years through a lease agreement. For that, a foreigner needs either to set up a company in Indonesia and invest in real estate through this company or act as an individual buyer and purchase a property under their name and a lease agreement.

A decade ago, the system was not so transparent and many foreigners got scammed buying property via a local nominee. To avoid it and protect foreign investments, the government introduced a foreign-owned PT PMA company that can legalize your rights to use the land and build on it and leasehold agreements for individual buyers who are not ready for investments needed for a PT PMA.

Foreign Property Ownership in Indonesia at a glance:

• Right to Use (Hak Pakai) is first issued for 30 years, then you can extend it twice: for another 20 and 30 years, which is 80 years total. This ownership title is suitable only for building a residential property and not a business. Normally, a foreigner can only own one property under this title and it is the strongest title for foreign homebuyers as it allows you to use the land and build. The name on the ownership certificate will be changed and the title is transferable. Requires PT PMA.
• Right of Lease (Hak Sewa) also called leasehold, can be equally issued for up to 80 years. Contrary to Hak Pakai, the name on the ownership certificate will not be changed. Doesn’t require a PMA. Ilot Property can help you own your villa under this title.
• Right to Build (HGB, Hak Guna Bangunan) is normally granted for business and commercial purposes and only applies to the building. Under such a title, you don’t have any land rights. Also is valid for up to 80 years. Requires PT PMA.

What happens when your lease ends? If you don’t want to extend it, the land and property will go back to the local owner and his family or the state and become Hak Milik – a freehold land – again. 

8 steps to invest in Bali property with Ilot Property

• Understand the laws and ownership titles in Indonesia. The right and legal way to buy a villa or land in Bali are through your PT PMA company that you will open in Indonesia. It will require certain paperwork, an appropriate stay permit, and a very large initial capital that very few investors can afford. Alternatively, you can lease the land for the long term as a foreign individual. We have prepared a full guide for foreigners buying property in Bali on our blog.

• Define what are you looking for and your budget. It is important to have a clear vision of what you want to buy and what is your real budget including legal paperwork, fees, and taxes. There is no mortgage available for foreign real estate investors. Make a list of your requirements for a villa considering that you will own it for the next 25 to 80 years, you may want to think about your family and future needs as well. 

• Choose a location. Location is one of the keys to successful property investment in Bali. It will significantly affect the price and potential annual returns if you rent it. Ilot Property can advise you on the pros and cons of any area you like in Bali and Indonesia as we live and work here since 1999.

• Choose a villa with Ilot and book it for only 10%. Once you figured out your plan, budget, and location, we can help you start the process and we only require a 10% deposit. It is a safe investment and we understand that it will help you control your money and project timing better. We will proceed and customize one of our villa layouts based on your requirements. 

• We will start the foundation and the construction of the future villa with another 30% of the payment.
  Foundation is the most important construction step especially when you are building on sensitive soil like that which exists in Bali. Our micro-pile foundations are the most efficient and cost-effective method of securing your foundations and building structure. This is why working with a professional team of engineers is a must. You are free to inspect the property or trust our project managers to do so and send you updates. 

• We set up the roof. This phase triggers another 35% of the payment.
  Another critical part of your future building is the roof. At this point the main structure of your new property is complete, and our team will move on to internal fitting out. 

• We do finishing works and add personal design touches to your villa. This phase triggers another 20% of the payment.
  Our in-house design team will help you add the final touch to your future villa in Bali. Upon request, we can source special kitchen appliances, Balinese antiques, or traditional batik and natural material that you want. We will make sure the design is functional and stylish. 

• We hand you over your dream house and the last payment will be due only 3 months after the completion of the project.
  Within 10 months, your villa will be ready to move in and we are happy to offer you expert property management to keep your villa booked and generating maximum profits. We will ensure the whole process from marketing, cleaning, maintenance, and legal, to filing business taxes is stress and worry-free. We do not require any set-up fees for management and offer a pay-performance model for all our clients. 

Where to buy a villa in Bali?

Bali can be all things to all people. With a range of locations that will suit the personality and lifestyle choices of most.  Currently, Canggu and the close surrounding areas are the most buoyant for tourists and investment.

Some other famous locations are: Pererenan, Seminyak, Ubud, Uluwatu, Jimbaran, and more remote islands close to Bali like Nusa Lembongan, Nusa Penida, Lombok and Gili islands. Check out our blog post about the top 5 locations to buy property in Bali right now.

Families with children prefer to stay close to good international public and private schools and have options to attend extra classes after school, have a nice beach with clean water, a safe area to live in, and a family-friendly community around. Many choose Nusa Dua and Sanur, Ubud, Canggu (Montessori school and many others), Umalas and Kerobokan. 

Tourists love to stay in the epicentre of everything that is going on and often book rooms and villas in Canggu, Seminyak, Legian, or Kuta and make short day trips around the island to see Ubud, Amed, Uluwatu, and even outer Nusa or Gili islands. 

Expats live pretty much everywhere in Bali and Indonesia overall and the choice depends on the lifestyle. Surfers choose Uluwatu or Canggu and do short trips to West Coast and small islands around Indonesia. Digital Nomads who love buzz stay close to Canggu, but a lot of expats move further out, away from crowded tourist spots, and settle in places like Seseh, Kedungu, and North Bali (Lovina), or Amed. Some go even further and move to Lombok or even further islands of Sumbawa to stay connected to nature and local culture. 

Choice of location is vital not only for a regular home buyer as it will decide the comfort of your future living but also essential for an investor to avoid disappointment and investment loss. Who will be your guests – families, couples, or solo travelers? What are the main attractions in the area? Will they stay short or long-term? What is the competition in the area, etc? It will help you choose the right property to buy in the optimal location. 

13 biggest mistakes while buying a villa in Bali

Buying property, land, or villa, in Bali is a journey towards your dream house or high return on investments. Either way, you have to be cautious and avoid common mistakes foreign homebuyers and investors made over the last 20 years. It will keep your money safe and guarantee peace of mind. Some mistakes can cost you not only time and money but your property and legal status in Indonesia. 

The biggest pitfalls generally arise from legal matters and construction. 

1. Buying without seeing
   Blinded by the beautiful dream of living in paradise, some people transfer deposits for long-term leases without seeing the property. It is a huge mistake for many reasons.

   First of all, you should not invest in a property without visiting it. Do not rely on pictures, they may be outdated, edited, and even demonstrate a completely different property. Second of all, a villa or land is safe to buy only after a thorough due diligence check conducted by a trusted lawyer in Bali.

   We strongly recommend visiting Bali and getting familiar with popular locations and properties before making your decisio

2. Not knowing Indonesian laws and ownership restrictions
   Buying property in Bali is a journey to owning highly profitable real estate. Yet, the legal system is complex and differs a lot from most European systems. In Bali, as a foreigner, you cannot own property or land indefinitely.
   
   The 2 main ways to own property in Bali are freehold (Hak Milik in Indonesian) and leasehold (Hak Sewa in Indonesian). Freehold is reserved only for Indonesian citizens, while foreigners can buy a leasehold property. Additionally, freehold title can be transferred to foreign-owned companies and in such a case will become a Hak Pakai or Hak Guna Bangunan title.
   
   A PT PMA requires considerable investments (around $700,000) and takes time to get all the required paperwork done.
   
   Under your agreement, you will own a property for 25 to 30 years initially and your contract will state if you can extend and for what price. 

3. Avoid dishonest agents and cheap PT PMAs
   If your business is willing to invest a large amount of money in freehold property in Bali, you will have to set up a foreign-owned company called PT PMA in Indonesia, but such a process requires a minimum of 10 billion IDR or approximately $700,000 prepaid capital. Of course, not every home buyer has such a large budget.
   
   An alternative solution for an individual homebuyer as we’ve seen is to buy a leasehold property and save money. Unfortunately, some agents instead of explaining all legal options and consequences available for foreign investors, suggest you open a PT PMA without investing the whole 10 billion IDR capital as it is not a strict rule. And sadly it is, many people fall into that trap. If authorities discover you have circumvented in this way you will face expensive legal ramifications.
   
   With Ilot we take care of all the legalities correctly and properly so you don’t have to worry about any of this.

4. Strategize and be prepared
   Property investment is a serious step and you need to meticulously plan your budget, including all hidden costs and fees, set up the goal for your investments, and talk to a financial or investments advisor to have realistic expectations. Research Bali house prices beforehand to get an idea of how much a house in Bali costs.
   
   You also have to have a plan B and/or an exit strategy. If you don’t like living in Bali, will you rent your property or sell it? What returns to expect? What price would you need to cover your investment if you sell? If you are not in the country who will manage your property and so on?
   
   At Ilot Property, we will be happy to help you manage, maintain and market your property to ensure you maximise your returns every year and have a beautiful home to stay in when you choose to do so.

5. Buying under a local nominee
   As we know by now, there are only 2 ways to safely buy a property in Bali. Years ago, when the system for foreign investors was not in place yet, some owners or Indonesian citizens offered their services as nominees to give you access to freehold ownership.
   
   It is illegal and will not grant you any rights to the land or house you want to buy. Unfortunately, you won’t be able to restore the ownership even through legal action. 

6. No due diligence
   A thorough background check of the owner’s documents and ownership title certificate is a must when you’re about to buy a house in Bali.
   
   A notary will help you understand if there are any issues with the land, any unpaid taxes, loans, or other pitfalls lurking under the surface. Due diligence will also confirm the property’s zoning which dictates the purpose that your property can be used for.

7. Not checking the villa’s structure
   You can either build your villa or buy a villa in Bali choosing between numerous options in every location. Both options require you to be very aware of building standards and common issues with building and maintaining a home in Bali. It is quite common for sub-standard building practices to be covered over, only to be discovered by the new owner months or years down the line.
   
   Some things to check or be aware of are: that the foundation is made according to the type of soil, there is a good elevation above rice fields, and good drainage all around the house. You need to check structural designs (columns, beams, roofing) as well as the electric and plumbing layout. Leaking roofs, water trapped inside walls, flood, rust, and poor maintenance.
   
   At Ilot, we are building to European standards, using sustainable technologies, and unique cost- and energy-efficient engineering solutions. You will be safe and happy in your house built by Ilot Property. 

8. Not checking land infrastructure
   If you are planning to buy land in Bali, one of the most important things to pay attention to is the land infrastructure, and, especially, road access as it is quite expensive to make a road and you may need to get approval from your neighbours. Water supply and quality and electrical supply should also be checked over.

9. Signing a standard contract without a notary
   When you buy a home in Bali, you will need a notary to stamp, sign and register your contract. It is an official procedure, however, you should have your contract drafted instead of using a standard one.
   
   A standard agreement may not include specific terms of property lease renewal and you need it to secure your long-term ownership as well as include the pricing conditions for your lease extension.
   
   Ask your notary to include all needed clauses in your contract and only then sign it in the presence of the owner and the notary.

10. Choosing the wrong location and zoning
    In Bali, each area has its zoning that determines how land in this area is utilised. Each land plot has an aspect – a document that states how this specific land can be used. Zoning has restrictions and you need to double-check it before you buy property in Bali.
    
    The choice of location will depend on your lifestyle and investment goals. If you are looking into the rental business, your location is key to your potential income. 

11. Buying a property without appropriate permits
    As we know, zoning and aspect apply restrictions on how your land and house can be used. At the same time, every building in Indonesia has to have a building permit, and a business permit – Pondok Wisata – allowing you to rent. If you are looking to buy a property that doesn’t have the correct permits, look elsewhere, as the obligation to get such permits (along with the cost) will become yours once you buy it.
    
    If you buy a villa in Bali with Ilot Property all villas for sale come with legal paperwork included and you won’t have to worry about it.

12. Forgetting to pay taxes
    When you invest in Bali real estate, you will be liable for a buyer’s tax of 5%. Later, annual property tax will be applicable, and if you are renting your property, you will need to pay income taxes as well.
    
    As a part of our property management services at Ilot, we take care of taxes and legalities, so you don’t have to worry about it.

13. Working with a freelance real estate agent
    It is worth mentioning that there is no standard certification for real estate agents in Indonesia and that leads to an abundance of underqualified freelancers that do not have in-depth knowledge of real estate. Unfortunately, they may provide misleading information about the property or legal aspects of owning the land or a house in Bali. 

Investments in property in Bali. Are they profitable?

Bali has held the mantle of an elite tourism destination for many years. For all the obvious reasons – location, culture, and tourism activities. Backed by steady geopolitical and economic standing, it is considered a solid investment opportunity on the international stage.

For property, the return on investment in Bali has a large part to do with where your property is located, and the quality of the build. There is a large correlation between high occupancy and luxurious modern-designed properties. For example on our managed Madura layout properties in Berawa, Canggu our management team is averaging 80% occupancy – hugely above the Bali average even for the area.

Why trust Ilot Property team with real estate investments in Bali and Indonesia?

We introduced our model of real estate company to Indonesia 20 years ago. French-owned, with an international team, style, functionality, and cutting-edge build technology are the cornerstones of everything we do. 

Comprised of 3 complimentary entities Ilot Property Development, Mastema Konstruksi Solusi, and  Terata Jelas management we provide a hassle-free, hands-off, development and management solution with a proven history of outperforming the market.

Ilot Property Team Expertise in Bali Property at a Glance:

• 20 years of experience in property development, construction, architecture, and property management. 
• We prioritize quality over quantity. We only sell properties we designed and build and can guarantee the highest quality compliance with Western standards. We curate our own developments in Canggu, Umalas and Nusa Dua. We don’t try to fit as many houses on the land we own, we create spacious villas with 4 to 6 bedrooms for comfortable living with views, pools, gardens, and parking lots. 
• 80+ projects completed in Indonesia with an accumulated value of more than 21 million dollars – we only invest in fast-growing and high-yielding locations and build modern villas for our clients. 
• Our unique sustainable construction technologies use less concrete, offer a more durable structure with steel, and are extremely energy-efficient. Our villas are built to last. 
• One-stop solution for home buyers and investors alike: we take care of everything from sourcing the land, planning and building your future villa, and managing it for long profitable years. 
• International team with European construction practices. With Ilot you are guaranteed style, functionality, and an eco-friendly villa with top-performing ROI.
• A villa management team that works for you 365 days a year. We speak five languages. Our marketing team ensures your villa occupancy is high. We put customer experience as our number 1 priority.
• We created our villa layouts that proved their durability and comfort of life through decades. You can pick the one you like and customize it with our in-house architects and design team. 
• We understand the Bali real estate market. We have the local knowledge and contacts to ensure a smooth and effortless building process. 

If you are looking for a hassle-free all-inclusive solution for a safe and affordable investment in property in Bali, trust Ilot Property to meet all your building and management needs. 

Talk to us today to start your journey into property ownership and financial returns in Bali. 

Love to do your research first? Check out our blog where we share the most up-to-date information about owning and buying villas and land in Bali.

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