Bali is no wonder a dream destination for anyone who loves living in an earthly paradise with an ambience of nature. Its breathtaking landscapes, magnificent mountains, great surfing locations, white sand beaches and palm trees will definitely make you fall for Bali in no time. So, it’s no surprise if you would love to see the luxury properties for sale here and invest in to buy your dreamy location!
But, you need to go over a few considerations and have a clear idea of the legal requirements and market in Bali. And, if you are interested, you have landed on the right page! Let’s get started.
Things You Need to Know as a Foreigner Before Buying Any Property in Bali
If you desire to purchase a land or villa in Bali, we recommend having a clear picture of the real estate market, location and legal requirements. Understanding these metrics will help you ideate if it matches your lifestyle. For example:
Being a foreigner, if you wish to invest in Bali properties, you can take advantage of rental accommodation. In this case, you can enjoy the property as you prefer.
On the other hand, you can boost your passive income by renting properties and using them for tourism businesses, such as renting holiday homes for tourists, or commercial activities, such as cafes, shops or restaurants. And, while doing so, you should know a few facts. Such as:
- You need a Pondok Wisata permit (limited to Tourism Zones) to invest in holiday rental properties or you can use a management company that allows you to operate in the tourism business without any limitation areas.
- Rental commercial activities come with an agreement from 3-5 years with an extension option.
- Renting Bali villas for the tourism business can be profitable for foreign investors while guaranteeing a huge ROI since the rental accommodation charges keep rising each year as Bali has become a dream vacation spot for international tourists.
- A holiday home rental business can cost you more for the investment due to the higher rates of tourism zones. Moreover, you have to maintain, manage and market villas to ensure great ROI.
Buying freehold properties in Bali comes with a right to own the land title (Hak Milik), making it an appealing opportunity to foreigners. After all, it allows them to enjoy the property value over time.
Moreover, being a foreigner, you can gain ROI by renting the villa out. Recent research shows that the ROI was 7% to 8.5% every year during the pre-covid period. Yet, you can imagine how much you could have earned from your investment in Bali property in about 8 to 12 years. Furthermore, the title owner (Hak Milik) can use the land (subject to the zoning restrictions) for anything, such as selling it, gift, exchanging or even using it for obtaining a mortgage, except for making use of the natural resources on or under it.
However, according to Indonesian Constitution and Agrarian Law – Undang-Undang No.5 Tahun 1960 article 16 (1), freehold land and property ownership are restricted only to Indonesian citizens. Yet, foreign-owned companies and foreign individuals cannot have land with “Hak Milik” title- A right to own.
Contrarily, as per this regulation, if you are a foreigner and wish to invest in Bali villas, you can use a trusted Indonesian nominee on your behalf to acquire this title only if that person is your legal spouse. Otherwise, there’s not enough protection for your investment since your trusted nominee can overtake your land anytime!
Yet, in this case, we recommend foreigners gain this “Hak Milik” title through “Hak Guna Bangunan or HGB” (right to build) and “Hak Pakai” (right to use) certificates and leasehold Bali villas. You may not be the legal property owner but acquire the right of using the land for an initial 25 years with an extension of up to 80 years in total. During this period, you can pass on the land as an inheritance to the next generation or sell it. Also, foreigners are allowed to sublease or rent the property for a short term during this licence period to boost their passive income and gain a huge ROI. However, the location doesn’t have to be within the tourism zone!
Now, if you want to obtain an HGB licence, you need to set up a foreign-owned company (PT PMA), while for Hak Pakai, you should have a permanent stay permit (KITAP) or a limited stay permit (KITAS).
No matter which option you choose to invest in Bali properties- Bali leasehold villas or rental ones, have a legal partner by your side to legalise the property you are seeking. At Prestige Property Bali, we just don’t help you find the ideal location for Bali villas and vacation homes but with property legalisation. Our experts are familiar with property management rules and Indonesian laws.
Contact us today to see the best property lists and market prices in Bali!