You’re considering investing in Bali and ready to put your money into its exciting real estate world.
Bali is not just a beautiful place; it’s also a spot where many people want to visit or live. This makes it a great place for investors like you.
But, as you start looking into it, you’ll see there’s a lot to learn.
You might hear terms like “leasehold” and “freehold.” Then, there’s choosing the right place to buy…
Not to mention, you have to be careful with the land zoning.
Don’t worry, though.
This guide is here to help you understand all the important stuff about investing in Bali.
We’ll discuss the different ways to own property, how to pick the best spot, and what properties are available.
We’ll also give you tips on what to ask when talking to real estate agents.
By the end of this guide, you’ll have a good idea of how to make your investment work best for you in Bali.
There are two ways foreigners can buy a property in Indonesia:
When you’re thinking about investing in Bali’s real estate, it’s important to know the two main ways you can own property: leasehold and freehold.
Here’s a simple guide to help you understand what each one means and how they work.
1. Leasehold
Imagine a leasehold as a long-term rental, typically lasting between 25 to 30 years, with the option to extend.
It’s a favorite choice for foreigners because it’s more straightforward and has fewer rules.
Advantages:
- Accessibility: For foreigners investing in Bali, getting a leasehold property is easier.
- Cost-effective: A leasehold often requires less cash upfront than buying outright. This can get you into some of Bali’s nicest spots without breaking the bank.
- Flexibility: You can often negotiate to extend your lease, giving you more time to enjoy your investment.
Limitations:
- It’s Temporary: The biggest thing to remember is that a leasehold isn’t forever. When the lease is up, the property returns to its original owner unless you can extend it.
- Depreciating asset: As the lease ends, the property might not be worth as much if you try to sell your lease to someone else.
2. Freehold
Freehold means the property is yours forever. You can do whatever you want with it – live in it, change it, or sell it.
But, there’s a catch for foreigners. Indonesian law says you can’t directly own freehold property.
However, if you want to own a property in Indonesia, you can set up a foreign-owned company (called a PT PMA) and have the company own the property.
Advantages:
- Permanent ownership: Freehold properties provide a sense of security and permanence without expiration on the ownership period.
- Full Control: Owners have the freedom to develop, modify, or sell the property as they see fit, offering a higher degree of flexibility and potential for personalization.
- Investment Appreciation: Freehold properties often appreciate over time, providing potential long-term capital gains.
Limitation:
- Complex Setup: Establishing a PT PMA involves navigating Indonesian corporate law, requiring time, resources, and a thorough understanding of legal obligations and restrictions.
- Operational Obligations: Owning a property through a PT PMA means adhering to corporate regulations, including annual audits, tax obligations, and potential limitations on business activities.
- Initial Costs: The costs associated with setting up and maintaining a PT PMA can be significant and potentially outweigh the investment’s benefits.
Locations: A Closer Look
When you’re thinking about putting your money into Bali, where you choose to do it is super important.
Each place has cool stuff to offer and things you might want to consider. Let’s talk more about what Seminyak, Ubud, and Canggu have to offer.
1. Seminyak: Fancy and Fun
Seminyak is all about living it up. It’s got awesome resorts, cool shops, and some of the best places to eat. If you love going out at night, you’ll find lots of fun bars and clubs here.
For investors: Buying property in Seminyak means looking at some of the priciest options. But, because many people want to stay here, you could make good money from renting your place. Just remember, it can get really busy, especially when lots of tourists come to visit.
2. Ubud: Artsy and Peaceful
Ubud is the heart of Bali’s culture. It’s great for people who love art, want to chill, or are into healthy living. You’ll find many art galleries, yoga places, and cafes serving amazing organic food here. It’s surrounded by beautiful rice fields and a bit far from the beach.
For investors: Putting your money into Ubud is perfect if you want to attract visitors looking for a quiet spot or who are into the arts. Property prices here can be more reasonable. The fact that it’s not right by the beach makes it special because it attracts people looking for a different kind of Bali experience.
3. Canggu: Surf’s Up and Chill
Canggu is the go-to spot for surfers and people who love a laid-back vibe. It’s known for its cool surf spots, hip cafes, and places where you can work and hang out at the same time. The area is super friendly and mixes Bali culture with stuff from all over the world.
For investors: Canggu is growing fast, which is mostly good news for investors. There’s a strong market for rentals, especially with younger folks and those staying longer. Just keep in mind that as more people come, the traffic goes up, and prices for buying property do, too. But Canggu is still a great place to invest because people love the lifestyle here.
Wrap up
Each location—Seminyak, Ubud, and Canggu—offers distinct characteristics and investment prospects.
Seminyak appeals to those looking for luxury and nightlife, Ubud attracts those searching for culture and tranquility, and Canggu is ideal for investors targeting the lifestyle of the modern nomad and surf enthusiast.
Land zoning
If you’re thinking about investing in Bali, it’s super important to know about land zoning. Land zoning is like a set of rules that tells you what you can build and do on a piece of land. These rules help keep things organized and ensure that buildings and activities fit well with the area.
The Main Types of Land Zoning in Bali
In Bali, there are a few main zones you need to know about:
• Residential Zones (Yellow)
These areas are designated primarily for housing.
Investments in these zones are ideal for developing villas, apartment complexes, and residential estates.
Regulations in residential zones ensure that developments maintain the tranquility and aesthetic of the area, often with restrictions on building height and density.
• Commercial Zones (Red)
These zones are for business stuff.
If you’re into opening shops, offices, hotels, or restaurants, you’ll want land in a commercial zone.
These areas are easy to get to and have specific rules for things like parking and how tall buildings can be.
• Tourism Zones (Pink)
Bali’s tourism zones are specially designated areas that cater to tourists and the hospitality industry.
This includes hotels, resorts, tourist attractions, and related services.
Properties in tourism zones are strategically located near beaches, cultural sites, or areas of natural beauty.
Regulations in these zones focus on preserving Bali’s cultural heritage and natural landscapes while accommodating tourists.
• Agricultural Zones (Green)
These zones are reserved for agriculture, including farming, livestock, and related activities.
Agricultural zoning aims to protect Bali’s fertile lands and ensure food security.
That’s why investors cannot make any Investments in these areas.
Why It’s Important to Match Your Plans with the Right Zone
Following the zoning rules is a big deal because:
- Legal compliance. Ensuring that your investment conforms to zoning regulations is essential for avoiding legal issues, fines, or the possibility of having to alter or halt development projects.
- Investment security. Investing in a property that aligns with zoning regulations safeguards your investment against future zoning changes that could negatively impact your project.
- Maximizing ROI. Aligning your investment with the appropriate zoning ensures that you can fully utilize the property according to its designated purpose, which can significantly affect the return on investment. For example, investing in a property zoned for tourism in a prime location can yield higher returns through rental income.
Building new or buying an existing property?
Confused about choosing a property that is already built or building it from scratch? Find out what are some advantages and limitations both types offer.
Building villa (Off-plan purchases)
Purchasing property off-plan means committing to buying before the construction has been completed or, in some cases before it has even started. Investors often favor this approach for several reasons:
- Lower Initial Cost:
Developers typically offer properties at a lower price during the early stages of construction to attract early investment and fund the project. This can result in significant savings compared to buying a completed property.
- Appreciation Potential:
There’s a good chance the property’s value will increase by the time it’s completed. Investing early in a developing area or a project by a reputed developer can lead to substantial capital appreciation.
- Customization Opportunities:
Buying off-plan sometimes allows for property customization to suit personal preferences or appeal to a particular rental market, giving investors an edge in creating desirable living spaces.
Considerations:
- Project Delays:
Construction projects can face delays due to various reasons such as permit issues, financial constraints, or logistical challenges. This can affect the timeline for when you might start seeing a return on your investment.
- Risk of Changes:
There’s always a risk that the final product may differ from the original plans or expectations due to design, materials, or finishes changes.
- Market Risk:
While the property may appreciate by the time it’s completed, there’s also the risk of market downturns affecting its value negatively.
Already Built Villa
Investing in an already-built villa, particularly on a leasehold basis, presents different advantages and considerations:
- Immediate Use and Rental Income:
An already-built villa can be used immediately as a personal residence or a rental property. This immediacy allows investors to start generating income without the waiting period associated with off-plan purchases.
- What You See Is What You Get:
With a completed villa, investors have the advantage of inspecting the exact property they are purchasing and assessing the quality of construction, finishes, and the overall condition of the property before making a decision.
- Established Location:
Typically, already-built villas are located in established areas, giving investors a clearer understanding of the neighborhood, access to amenities, and the overall demand for rental properties.
Considerations:
- Higher Initial Cost: Since the property is already completed and ready for immediate use, it often comes at a higher price than off-plan properties.
- Limited Customization: There’s little to no room for customization without undergoing renovations, which can be costly and time-consuming.
- Review Lease Terms Carefully: For leasehold villas, it’s crucial to carefully review and understand the lease terms, including the lease length, renewal options, and any restrictions on the use or further transfer of the lease.
Whether you purchase an off-plan or an already-built villa, each choice offers unique opportunities and challenges. These will guide you in choosing the path that best suits your goals in Bali’s real estate market.
Questions you can ask a real estate agent:
When engaging with a real estate agent, it’s beneficial to delve into specifics that can affect the viability and profitability of your investment. In addition to tax, building permits, payment structures, and location specifics, consider asking:
- ROI Expectations: What is the expected return on investment for properties in this area? Ask for historical data and projections based on current market trends. This can help you gauge the profitability of your investment over time.
- Lease Terms: Different lease lengths can affect the investment’s value. Ask, “Which lease terms currently offer the best balance between cost and potential appreciation?” Typically, longer leases provide more stability and potential for appreciation, but the specifics can vary based on location and property type.
- Optimal Lease Length for ROI: Specifically inquire about which lease duration—25, 30, or even 50 years—has historically shown to yield the best returns. Different areas in Bali may have different benchmarks for what constitutes a good lease length in terms of investment return.
- Break-even Point: Discuss the average time it takes for investments in the area to reach their break-even point. Understanding when you can expect to start seeing a return on your investment can significantly impact your decision-making process.
- Rental Income Potential: For investors interested in generating rental income, ask about the average rental yields for similar properties in the area. This includes occupancy rates and seasonal fluctuations, which can affect overall profitability.
Incorporating these questions into your conversation with a real estate agent will provide a clearer picture of the investment landscape in Bali, helping you make a more informed decision about where and how to invest.
Conclusion
Now you’ve got a good starting point for diving into Bali real estate market.
You’ve learned about the different ways to own property, figured out how to pick the best spots for your investment, and even got a handle on what properties are out there.
Plus, you now know the right questions to ask real estate agents to make sure you’re making smart choices.
Investing in Bali can be a smart move.
With its beautiful scenery and growing popularity, it’s a place where your investment can grow.
If you have more questions about investing in Bali, drop us some questions below or get a free consultation, and our real estate experts in Bali will be ready to help.
