How to Build a Villa in Bali From Start to Finish as a Foreigner

It is no wonder that travel restrictions struck a heavy blow to Bali, the small island that almost entirely economically depends on the tourism industry, including its villa rental sectors. However, despite challenges, Bali has a long history of remaining a top global destination. Building a villa in Bali has always been a promising investment for foreigners.

Take a severe financial crisis in 1998, for example, when Bali’s tourism industry was one of the few economic sectors that successfully preserved consumer demand, while most other sectors were in distress following the hard devaluation of the Indonesian Rupiah.

Most recently, in 2017, Bali’s tourism industry once again showed its resiliency when foreign arrivals recovered 90% in just three months after Mount Agung erupted that year.

In the present year, the villa construction market in Bali is telling us the same tale. Despite the harsh economic influences of the COVID-19 pandemic, many villa construction projects have been started, and interestingly, they have been commissioned by foreigners.

Suppose you are a foreign investor considering investing in Bali’s tourism and hospitality sector. In that case, this article will tell you why this is the right time and how you can build a villa in Bali from start to finish as a foreigner.

Is Building A Villa in Bali A Good Investment?

Building a villa in Bali is a smart investment decision due to its booming tourist industry, high demand, and stable market conditions.

The changing nature of office work during the pandemic is one of the biggest influencing factors projected to boost demand for luxury housing in Bali.

According to Numbeo, the world’s largest cost-of-living database, the island is ranked 370th least expensive place to live out of 589 cities. Despite these positive contributing factors, one important question remains.

How close is Bali to tackling the COVID-19 pandemic? If we look at Indonesian vaccination statistics, it is the province with the highest vaccination rate, which has reached above 50% of its total population for second vaccination and 100% for their first vaccination.

Indonesia’s daily new cases have dramatically decreased since last October—averaging just under a thousand—and Bali is already opening its doors to certain foreign travelers. This could be a sign that Bali travel and the tourism industry might be on their way to a full recovery.

Read more: Investing in Lombok: Top Reasons to Buy a Villa on the Island

Can A Foreigner Build A Villa in Bali?

Yes, foreigners can build a villa in Bali, but it’s important to understand the legal framework. While outright ownership isn’t typically available, options like leasehold agreements or partnerships with local landowners can facilitate property development.

How Much Does It Cost to Build Your Villa in Bali?

The cost to build a villa in Bali can vary significantly based on the desired specifications and quality. Generally, construction costs range from approximately $500 to $1500 per square meter, with standard villas on the lower end and luxury building villas in Bali on the higher end.

When considering the cost of building a villa in Bali, it’s important to factor in these variations to align with your budget and vision.

Villa Bali Regulations

When planning to build a villa in Bali, it’s important to familiarize yourself with the island’s unique land ownership laws. Foreign investors have two primary options: leasehold and freehold.

Leasehold

• Leasehold is the most common option for foreigners. It involves renting land from an Indonesian landowner.
• Lessees have the right to use the land as agreed upon in the lease agreement, including building a villa, living in it, or renting it out.
• The lease agreement outlines the lease terms, such as the duration and any restrictions on use.

Freehold

• Freehold ownership is reserved for Indonesian companies, including foreign-owned limited liability companies (PT PMA).
• While foreigners can’t directly own freehold land, they can hold the “Right to Build” through a PT PMA.
• Some foreigners have used Indonesian nominees to hold the freehold title on their behalf. However, Indonesian law may need to recognize or protect this practice entirely.

The Process and Steps to Build Your Villa in Bali

You are prepared to purchase once you’ve chosen a suitable piece of land and formed a limited liability company.

Secure a Down Payment

To demonstrate your serious intent, pay a downpayment to the seller. This amount will be held in escrow and refunded if due diligence reveals any issues.

Choose Your Notary

Select a reputable notary in the region where the land is located. Do not let the seller choose the notary.

Appoint a Buyer Representative

Consider hiring a local representative to handle the paperwork and attend meetings at the notary’s office on your behalf, especially if you need to become more familiar with Indonesian law or need more time to be involved in every detail.

How to Build A Villa in Bali in 2024 as A Foreigner

Building or buying a villa in Bali can be complicated without the correct guidelines and professional assistance, especially in a country with complex land ownership regulations and investment requirements. Below is a step-by-step guide for effectively building your villa in Bali.

Step 1: Establish a PT PMA

A Foreign-Owned Company or PT PMA is the only legal entity that allows foreigners to conduct business or own property in full compliance with Indonesian laws and property regulations.

Step 2: Identify A Suitable Location

Even though Bali is a relatively small Island, land prices can differ from corner to corner. In developing and developed areas such as Canggu and Seminyak, land prices are estimated to cost approximately between IDR 600 million and 1.5 billion (USD 40,000 – 105,000) per 100 square meters, while outlying land is priced at approximately IDR 100 million to 350 million (USD 7,000 – 24,000) per 100 square meters.

Step 3: Acquire Land

Indonesia has many forms of land titles and ownership that concern foreign investors building a villa in Bali. Generally, real estate agents and private landowners refer to leasehold or freehold property. Contact InCorp for more concise information regarding land ownership in Indonesia.

Step 4: Appoint A Project Manager

Building a villa in Bali requires time, capital, and effective construction management skills. This is important if the projects are to be completed within an established timeline to meet cost limitations and quality requirements.

Step 5: Appoint An Architect

Choosing an architect suitable to your specific design requirements will require an in-depth knowledge of the local market and a considerable understanding of the specific style design you desire. Consider contacting Meraki Concept for effective spatial planning and cost estimation to build a villa in Bali.

Step 6: Apply for Building Permits

An Izin Mendirikan Bangunan, or IMB, is a legal permit for building construction in Indonesia. Before obtaining one, you must check the spatial planning and land zoning regulations for the area where your building will be constructed.

This is because certain lands or zones only allow specific building uses. The IMB permit is currently being phased out. It will be redundant by January 2022, when it will be replaced by PBG and SLF permits under the new Omnibus Laws overhauling and regulating Indonesian legislation under the guidance of President Joko Widodo’s administration.

Step 7: Appoint A Contractor for Building A Villa in Bali

Construction costs for building a villa in Bali can start from IDR 6 million per square meter to as high as IDR 14 million per square meter, so finding the right contractor to deliver services on time, on budget, and meet high standards is quite challenging.

Step 8: Appoint A Suitable Villa Management Service

Having a property in Bali requires professional care to make it profitable and sustainable. Villa management services can assist you in creating a competitive business model for your property.

Read more: How Foreigners Can Legally Rent Out an Airbnb Villas in Bali

Common Issues in Building Villas in Bali

Avoid these common pitfalls when building a villa in Bali. Avoiding these issues can ensure a successful and enjoyable villa construction experience.

• Lack of Research: Understand local regulations, cultural norms, and environmental factors before choosing a location.
• Underestimating Costs and Time: Set a realistic budget and timeline, including a contingency plan.
• Ignoring Legal Complexities: Consult a legal expert to navigate Indonesian property laws.
• Overlooking Local Style and Materials: Use sustainable materials and incorporate local architectural elements.
• Neglecting Skilled Labor: Hire experienced local workers for quality and efficiency.
• Inadequate Weather Planning: Design your villa to withstand Bali’s tropical climate.
• Failing to Consider Future Maintenance: Choose durable materials and design for easy upkeep.

Let InCorp guide you through the process, ensuring you avoid common pitfalls and achieve your vision. From land acquisition to legal compliance, we provide comprehensive solutions tailored to your needs.

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Building Your Villa in Bali with InCorp and Meraki Concept

Conducting your property business through your PT PMA is the safest and most secure investment method. InCorp, with its comprehensive business setup solutions, cuts the hefty procedures in half and provides hassle-free business registration services.

Effective due diligence and trustworthy notary services are imperative when acquiring land as a foreign investor. InCorp can also help you secure your land and property investment plan.

As for villa building operations, the Meraki concept offers exclusive project management services, providing high-end design and construction solutions for your project.

Meraki’s contractors are held contractually liable for construction guarantees and undergo a detailed construction defect snagging process to rectify any construction issues before handover.

This article is written in collaboration with The Meraki Concept.