Bali Property Guide

Guide how to acquire real estate / property in Bali

Under Indonesian law, foreigners are not permitted to have real estate / property title in Indonesia. However, foreign individuals can legally acquire real estate / property in Indonesia and enjoy full beneficial rights. We always recommends to clients that they should secure the best legal advice when securing property in Bali. This is a summary of the various alternatives.

1. Enter into a legal arrangement with an Indonesian nominee, either an individual or PT company, whereby he/she/corporation holds title to the property / real estate. Simultaneously, complete a power of attorney, handing over full rights from the Indonesian entity to the foreign investor.
2. Make a leasehold investment in the property, up to 25 years. Partnerships with Indonesian citizens are not required in leasehold transactions. This method does offer complete protection to the foreigner during the term of the lease, however, once the lease term has expired the agreement can be extended or the property / real estate reverts to the Owner.
3. Form a foreign investment company (PMA). Here the foreigner can own the company 100% and the title of the property / real estate will be in the company name. However, title in this case could only last for 20 or 30 years as PMA companies have to re-apply to the Indonesian Government to extend their license.

Nominee power of Attorney

This is done by providing the investor with an Indonesian nominee, who has title to the property / real estate but who simultaneously enters into a legal power of attorney with the foreigner. The power of attorney gives the investor beneficial rights on the property and waives all rights of the nominee. The investor is then free to build on the land, sell or lease the property and transfer the title to next of kin, the nominee will receive a nominal fee for his responsibilities as the title holder.

Foreign investment company (PMA)

The most significant change in Indonesian investment law came in 1997 when the Government introduced the ‘PMA’ (Penanaman Modal Asing or Foreign Investment Company Programme). This allows foreign investors to set up a company in Indonesia, without having to have Indonesian partners; the PMA can be 100% owned by the foreign investor. PMA companies are allowed to own the title of the property for a period of 25 years, when the title has to be renewed by the Government. To set up a PMA company you will be required to:

1. Submit a detailed business plan.
2. Operate in a business environment that adds value to Indonesia in terms of foreign skills, employment and environmental benefit.
3. Make an appropriate cash deposit in an Indonesian based bank. (The amount varies and is calculated from the capital employed in the business)
4. Show the property investment as an asset of the company.

The process takes approximately 3 to 4 months and once completed the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up is between 30 to 50 million Indonesian Rupiah.

Buy a real estate / land / build on your own or buy existing villa.

Land parcels for sale in Bali fall into one of two categories:

#Pipil Land that has been passed down through a local Balinese family but has never been formally registered with the Land Registry Office.
#Certificate Land which has already been registered with the Land Registry Office. Only land which has a certificate can be sold.

The conversion of ‘Pipil’ land into certified status is handled by us and normally takes 4-6 months. Once your chosen land has a certificate, a transaction can be completed within 1 day, however, with legal due diligence this process normally takes 1-2 weeks. All land purchases in Indonesia must by witnessed in the presence of an officially appointed ‘Notaris’ or lawyer. The standard contracts are written in Bahasa Indonesia language, however, we can arrange for translations upon request.

If you are interested in buying an existing real estate / villa in Bali, please keep in mind that all better houses are owned by foreigners who have financed their vacation home in foreign currency. If they agree to a sale they understandably wish to recover at least the same amount they originally spent in dollars, francs, marks, or any other currency.

The important advantage of purchasing an existing real estate / villa is that you can carefully inspect all details before making a buying decision and therefore know exactly what you get for your money. You will be immediately the owner of a completed villa - usually fully furnished - so you can either move in yourself the next day or start generating a return on your investment by renting your villa out.

Alternatively if you have lots of time to supervise the construction of your dream home yourself you can acquire a plot of land and build your own Bali villa. The disadvantage is that you’ll have all the worries and responsibilities connected with building a house anywhere in the world.

In Bali this can be a truly frightening experience, especially if you are not personally on-site all the time, do not speak Balinese or at least Indonesian, and are not a construction expert yourself. Even when you appoint the most reputable architects and contractors, you have to be present yourself to achieve satisfactory results!

Most people ask for top quality, fast completion, and low cost. Be aware that, if you’re lucky, you can perhaps achieve two out of these three points, but never all three together! The choice is yours.

Purchase Prices, Land & Construction Costs

To give you some idea about prices: existing high-quality villas with garden and a swimming pool which have been built a few years ago start around US$400,000 and can go up to US$1,500,000 and more.

Land prices range currently from US$40 to US$150 per square meter (11 square feet) depending on the location (in the middle of nowhere your might still find land for less than US$10). A plot not too far from the beach and the tourist areas in South Bali will cost today about US$50 to US$100 per square meter. If it’s located right on the beach, offers a spectacular view or is part of an up-market development, it can be more than double that price. Properties in crowded Seminyak and in Ubud are again priced much higher.

The basic cost of good quality construction is right now about US$400 to US$650 or more per square meter. This does not include any access roads, site preparation and development, water and electricity supply, swimming pool, water pumps or filtration, waste water treatment, power generators, landscaping, architects and consultants fees, costs for the many licenses and permits required, etc.

Which areas of Bali are most recommended for real estate?

LOCATION is the most important factor - in Bali as anywhere else in the world. Land prices in beach front and town centre locations and properties offering spectacular views will increase most, and houses on the beach or offering a great view will be the easiest to rent out if you do not want to live in them yourself throughout the year.

Most recommendable are (in our opinion) locations in Jimbaran Bay and on the Sawangan (the hill on the southern peninsula between Nusa Dua, Ulu Watu, and Jimbaran), the area from Seminyak, Petitenget, Canggu to Tanah Lot on Bali’s West coast, in or very near the town of Ubud, and near the Handara golf course and Lake Bratan near Bedugul. These locations promise in to produce the highest increase in value over the next few years. In the long term, the area between Tanah Lot and Negara as well as the coastal areas in Bali’s North-East should also show attractive price increases.