Understanding the Bali real estate market and regulations
Understanding the Bali real estate market, property ownership, and laws is critical when investing in Bali real estate. The two primary types of ownership in Bali are freehold and leasehold, each offering different rights and options.
Property ownership in Bali
Freehold or Hak Milik (HM) is the most powerful form of ownership, granting absolute control over the property. Only Indonesian nationals can acquire freehold properties. As a result, investing in Bali real estate through this route isn’t an option for foreign investors. However, legal entities, such as a PT PMA, can also buy and hold freehold property. As a PT PMA can be foreign-owned, many foreigners buy freehold property through a PT PMA.
Leasehold ownership in Bali
Leasehold or Hak Sewa offers another, more accessible alternative. This form of ownership implies leasing a Bali property for a fixed period, typically spanning 30 years but extendable up to 80 years. The lessee can use the property during this term, but ownership remains with the original owner. Both foreign nationals (WNA) and PT PMAs can invest in Bali property through leasehold.
Hak Pakai and Hak Guna Bangunan
Foreigners investing in Bali real estate should know about two essential land titles: Hak Pakai (HP) and Hak Guna Bangunan (HGB). Some properties in Bali can be sold under the Hak Pakai title. These properties can be bought by foreigners who have a residency permit in Indonesia. Hak Pakai properties can only be used for residential purposes, so it’s illegal to rent Hak Pakai properties out to others and generate income.
Hak Guna Bangunan allows a PT PMA to own a structure on leased land. This means the land is owned by someone else, primarily an Indonesian national entity or the state, while the PT PMA owns the structure built upon the land.
For foreigners investing in Bali real estate, the most popular option is to invest through a PT PMA, which allows them to start a rental business and generate revenue. PT PMAs can buy freehold property, lease property, or own property through Hak Guna Bangunan.
Setting up a PT PMA for property investment
Foreigners can buy freehold and leasehold property with a Bali PT PMA, meaning Perseroan Terbatas Penanaman Modal Asing. This foreign-owned company is used for business and investing in Indonesia and can legally own the property. Using a PT PMA to buy property in Bali is recommended for those who want to start villa rentals in Bali.
Establishing a PT PMA in Bali can take six to ten weeks, and costs between IDR 25 million ($1,575) to IDR 35 million ($2,205). The company can be established at the Indonesian Investment Coordinating Board (BKPM). Many foreigners use a local legal agency to set up a PT PMA, as navigating the Indonesian bureaucracy is daunting.
Buying property in Bali explained
Buying property in Bali isn’t as straightforward as many foreigners hope for. The Indonesian government has set limitations on buying property in Bali as a foreigner. However, there are several ways foreigners can buy a house in Bali. These are the three common ways for foreigners to buy real estate in Bali as an investment:
1. Leasing land and owning the property through Hak Guna Bangunan
Many foreigners buy leasehold land through a PT PMA and construct their dream villa in Bali. This approach allows you to design a custom-built property that aligns perfectly with your preferences and requirements. You need Hak Guna Bangunan to own the villa.
2. Leasing the land and property
Many leasehold properties in Bali, including apartments, houses, and villas, are already constructed and ready for occupancy. This option allows you to enjoy the benefits of owning a property without fully committing to building a villa in Bali and is popular for off-plan property.
3. Freehold land
Freehold land in Bali is a perfect option for those seeking full ownership and control and can be done through a PT PMA. Owning freehold land provides security and long-term investment potential. While the availability of freehold land for sale in Bali may be limited to certain areas, it offers the advantage of complete ownership rights and the possibility for substantial returns on your Bali investment. The PT PMA can build property on top of the land and rent it out.
Investing in Bali real estate in 7 steps
Do you want to start investing in Bali real estate? Foreign nationals can do so by following these seven steps:
Step 1: Do your research
Investing in Bali real estate starts with learning how to own property in Bali, the different land titles and property certificates, and how to find Bali real estate for sale. Familiarize yourself with the Indonesian real estate laws and local real estate rules in Bali to better understand the market you’re entering.
Step 2: Work with a reliable real estate agent
Working with a liable and trustworthy real estate agent in Bali is highly recommended when investing in Bali real estate. An agent can help set up a PT PMA, find the right property, conduct due diligence, and manage the property. Using a real estate agent costs money but saves you money in the long run.
Step 3: Establish a PT PMA in Bali
You need a PT PMA to invest in Bali real estate and generate income through property rentals. Every foreign national can establish a PT PMA in Bali. This PT PMA can buy or lease property and is an excellent way to start investing in Bali real estate and make money from villa rentals in Bali.
Step 4: Find your dream villa in Bali
The next step is to find the right property to buy. Look for a property that will attract potential guests, ideally located in a popular area close to tourist spots. Knowing exactly what style and layout you want for your villa can help you choose the correct size property. There are several types of properties in Bali. You can buy an apartment in Bali, find a vacation home in Bali, or buy a cheap house in Bali. There are also many luxury villas in Bali for sale.
Building a villa in Bali is one of the other possibilities. Some foreigners buy or lease land and construct a new villa on it. You might need certificates such as Hak Guna Bangunan and Building Approval (PGB) to do this.
Step 5: Conduct due diligence
Conduct due diligence and check everything properly when investing in Bali property. This means confirming who owns the land, containing licenses, and working with reliable real estate agents. Doing research makes buying a villa in Bali easier and less risky.
Step 6: Sign the agreement and pay taxes
Finding Bali real estate for sale can be challenging, as is all the paperwork involved. If you’re a foreigner buying land in Indonesia, you must handle the legal paperwork and understand your tax duties. You might want to hire a tax agent or a lawyer to help you, as there are several taxes you have to pay.
Step 7: Obtaining the titles, certifications, and permits
Once you’ve signed the contract, you’ll get all the land titles, certificates, and licenses you need, like Hak Guna Bangunan and Hak Pakai. You’ll need these to build on the land or use the property.
Bonus: Get residency in Bali after investing in Bali real estate
You can apply for a temporary residency permit called KITAS to live in Indonesia. This visa in Bali lasts up to 24 months, and after living in Bali for five years, you can even apply for a permanent residency (KITAP).
Costs and rental profits on investing in Bali real estate
Investing in Bali real estate can be a good move, as the prices of buying a villa or land for sale in Bali are lower than in many other places. Because of that, buying property in Bali can make you a lot of money.
How much does buying a house in Bali cost?
Price is a big part of investing in real estate in Bali. Size, location, property type, and materials significantly affect the total costs. The average price of a house in Bali is IDR 2.6 billion ($163,800), and IDR 14.8 million ($932) per square meter. However, the villa prices in Bali differ significantly per region, so here are the average house prices in four popular destinations:
- Singaraja: IDR 500 million ($31,500)
- Canggu: IDR 43 billion ($2.71 million)
- Seminyak: IDR 3 billion ($189,000)
- Ubud: IDR 2 billion ($126,000)
Rental yields and ROI for Bali real estate
On average, you can make a 42.4% profit from renting houses in Bali. Commercial properties can make a 44.5% profit, and lands can make a 10.5% profit. Because tourism is on the rise, property owners can expect to make 12-20% profit each year on property in Bali. Our Bali real estate ROI calculator can help you figure out how much money you might make.
Is it better to buy or build a villa in Bali?
Building a villa in Bali is sometimes cheaper than buying a property. To determine how much it costs to build a villa in Bali, use our Bali villa construction cost calculator or look at the price estimations in the table below.
Besides those costs, it’s essential to consider that building a villa in Bali yourself, even when outsourcing to a contractor, will cost more time and energy. So, before building your property in Bali, ensure you have time to oversee the project.
| Property type | Average price per m2 |
|---|---|
| Single villa | IDR 7.6 million ($479) |
| Multi-story villa | IDR 10.9 million ($687) to IDR 12.4 million ($781) |
| Villa with luxury materials (e.g., wood and marble) | IDR 22.9 million ($1,443) |
| Villa with swimming pool | Villa type cost + IDR 2 million ($126) per m2 of the pool |
Managing your Bali real estate investment
Investing in Bali real estate requires efficient property management to ensure long-term success. Property management in Bali includes property bookings, receiving guests, property cleaning, maintenance, and security.
Outsourcing these tasks to a professional property management company is a wise choice, as it saves time, offers expertise, reduces costs, manages risks, and presents a professional image to guests. From handling bookings on popular platforms like Booking.com and Airbnb to maintaining cleanliness and ensuring property security, property management companies in Bali provide comprehensive solutions for maximizing your Bali investment returns.
Looking to invest in Bali real estate? We’re here to guide you!
Investing in Bali’s real estate market offers great opportunities, but understanding the legal requirements, ownership structures, and market dynamics is essential for success. Whether you’re planning to buy a villa, leasehold property, or land, our team of experts is here to provide personalized guidance. From navigating Indonesian property laws to finding the right investment, we make the process smooth and secure. Leave your details below, and we’ll reach out to assist you, or email us directly at [email protected] for professional support.
Frequently Asked Questions (FAQs)
Is Bali good for property investment?
Are you looking for a lucrative property investment? Bali offers excellent opportunities, with options like land for sale, luxury villas, and beachfront houses. Investing in Bali real estate can be very lucrative.
Is it safe to buy real estate in Bali?
Buying real estate in Bali is generally safe for both locals and foreigners. The Indonesian government has implemented measures to protect property rights. However, to navigate the local market and ensure a secure transaction, it is advisable to work with a reputable real estate agent or property management company.
Can a foreigner buy property in Bali?
Yes, foreigners can buy property in Bali in several ways, such as through a leasehold, a PT PMA, Hak Pakai, Hak Guna Bangunan, or just a passport. While freehold ownership is restricted to certain areas, all other options provide a viable solution to foreigners who want to reside in Indonesia or invest in Bali property.
Why is investing in Bali real estate smart?
Investing in Bali real estate is a smart choice for several reasons. Bali’s popularity as a tourist destination ensures a steady demand for rental properties. The island’s natural beauty, cultural appeal, and robust infrastructure make it an attractive investment location. Additionally, the potential rental income makes Bali attractive to property investors.
Does Bali have property taxes?
Yes, Bali has property taxes. The rates and regulations may vary depending on property type, location, and ownership status. It’s wise to read our complete tax guide when investing in Bali real estate.
Can foreigners do business and invest in Indonesia?
Foreigners are welcome to do business and invest in Indonesia. The country has implemented favorable regulations to attract foreign investment. From establishing a company to acquiring property, foreigners can participate in various sectors and benefit from Indonesia’s growing economy.
How much is a house in Bali?
House prices in Bali vary depending on location, size, and amenities. The cost of a house in Bali can range from affordable options like cheap houses to luxurious beachfront villas.
Can foreigners build a villa in Bali?
Foreigners can build a villa in Bali if they have a PT PMA to lease the land and hold the villa under Hak Guna Bangunan. Foreigners also need to apply for PBG, which is a building approval certificate.
