6 Mistakes To Avoid When Buying Property in Bali

6 Mistakes To Avoid When Buying Bali Real Estate

  • InCorp Editorial Team
  • 18 June 2024
  • 7 reading time

Investing in Bali real estate and throughout Indonesia has become more accessible with the introduction of new laws. These laws actively encourage foreign property investments, especially in the captivating destination of Bali. This new regulatory environment is transforming Bali real estate market into an attractive hub for property investment.

Global property markets faced stagnation in recent years due to the COVID-19 outbreak, and Indonesia was no exception. However, the long-term outlook for Indonesia is optimistic. Several factors contribute to this optimism, including relaxed foreign property ownership regulations, affordable property prices, and a delayed purchase decision by many buyers, bringing new opportunities in the following year.

The Outlook of Bali Real Estate Investment

The trend of buying property in Bali has seen a remarkable surge in return on investments and capital gains. Property prices are rising to 40% in some popular areas, making it the highest increase rate in land prices across Indonesia.

Regarding taxes, the Indonesian government has revised the luxury goods (PPnBM) tax policy for properties. Previously, apartments with a selling price of at least IDR 10 billion and houses with a selling price of at least IDR 20 billion were subject to a 20% luxury goods tax. The latest revision has raised the minimum price to IDR 30 billion for all property types, aiming to stimulate Indonesia’s luxury property sector.

In 2019, AirDNA, a leading data and analytics provider for global short-term vacation rentals, recorded an increase of 42,000 active rentals in Bali listed on Airbnb and HomeAway. These active rentals accounted for a 7% quarterly growth since 2017, with an average occupancy rate of 57% and an average daily rate of US$144.

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Signs of Recovery in Bali Real Estate Market

Bali is on the path to recovery as the local government initiates an island-wide vaccination program, prioritizing hospitality workers, and the central government reopens its borders for selected visa holders. In April 2021, domestic arrivals in Bali reached approximately 8,000 visitors a day, 50% of the pre-COVID-19 domestic arrivals, according to the Minister of Tourism and Creative Economy, Sandiaga Uno.

Bali Real Estate Market 2024

After the COVID restrictions were lifted around the world, Bali has made a comeback in its tourism sector, marked by the increase in total tourist arrivals since 2022. Hence, the Accommodation and Food Services Industry’s contribution to Bali’s Economic Growth increased by 5.83% in the first semester of 2023.

Based on last year’s report, the real estate market has continuously experienced an increase in prevailing prices from the second quarter of 2022 to the second quarter of 2023: 2.61 for the second quarter of 2022, 2.64 for the first quarter of 2023, and 2.72 for the second quarter of 2023.

Meanwhile, the actual prices during that time slightly fluctuated but still managed to increase over time for the second quarter of 2023: 1.90 for the second quarter of 2022, 1.86 for the first quarter of 2023, and 1.92 for the second quarter of 2023. Looking at the track record of the real estate sector in Bali, it appears quite promising for those interested in doing real estate business in 2024.

Indonesia’s Job Creation Law Impacts on Property Investment

With the enactment of the Omnibus Law, the government has amended various stipulations in Indonesia’s Spatial Law, Building Law, Housing Law, and Apartment Law to improve the ease of doing business, especially in the Indonesian property sector.

Previously, investors buying property in Bali had to obtain a spatial utilization permit issued by the local government, a lengthy and complex process that varied from region to region. However, the Job Creation Law has replaced this with a document called Kesesuaian Kegiatan Pemanfaatan Ruang (Space Utilization Conformity), simplifying the ownership process.

Digital Transformation in Obtaining Bali Real Estate Permits

Each local government uploads a detailed spatial plan to Indonesia’s Online Single Submission (OSS) system, a central digital system for processing business-related permits. This allows businesses to self-assess their proposed activities, streamlining the licensing process.

Another significant change is the approval for foreigners to own apartments under a Freehold Title Certificate for Apartment units built on land with a Right to Build or Right to Use permit. While this streamlines the process, certain conditions and requirements remain, particularly for foreign investors starting construction from scratch.

Building owners must appoint a group of building service providers, including a planner, manager, and supervisor, which may increase production costs.

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Can Foreigners Buy Real Estate in Bali?

Right of Use and Right to Build is ownership over a housing unit or apartment owned or possessed by a foreigner in Indonesia. However, it is not permanent; it has a validity period and needs to be extended according to the law.

Based on Government Regulation No. 18/2021, foreigners who hold a stay permit in Indonesia under the laws and regulations can own a house for residing or occupancy with the Right of Use. Foreigners can own residential houses on land with the right of use and apartments with the right of use and the right to build.

This means foreigners can actually buy real estate in Bali.

There are a few restrictions given to real estate (houses) owned by foreigners, such as:

  • Price limitation
  • 1 plot of land per person/family
  • Maximum of 2,000 m2
  • If in certain circumstances it has an extraordinarily positive impact on the economy, it can be more than 2000 m2

Things to Avoid When Buying Property in Bali

Despite promising markets and relaxed regulations, potential property buyers should be aware of eight common mistakes before investing in Indonesia, especially in Bali:

  • Verify land certificates thoroughly.
  • Ensure road access agreements.
  • Understand zoning and land aspect regulations.
  • Comply with tax regulations and avoid understating prices.
  • Conduct due diligence to mitigate risks.
  • Be aware of different property rights.
  • Seek professional assistance.
  • Understand foreign ownership regulations.

Depending on what type of activities you want to undertake, different types of property rights are available to the holder:

  • Right to Build – Entitles its holder to build property on land it is issued for.
  • Right to Use – Generally used by companies with a manufacturing activity certificate.
  • Right of Cultivation – Allows its holder to use a piece of land for agricultural and farming purposes.
  • Right of Strata Title – Allows foreigners to own a unit, an apartment, or an office in a multiple-story building without being the owner of the land on which the property is built.

Guide to Doing Business in Bali & Lombok

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Invest in Bali Real Estate For Foreigners Easily

If you’re considering buying real estate in Bali, navigating the vibrant market requires insights from experienced Bali real estate consultants and agents who possess the expertise to guide you through diverse options, from strategic investments to the acquisition of exclusive estates to the beachfront properties and luxury real estate for sale in Bali. 

While the government has relaxed regulations, purchasing real estate in Bali can still be challenging. InCorp Indonesia (formerly Cekindo) offers comprehensive services to assist with setting up your land and property investment plan securely, including due diligence and understanding foreign ownership regulations. Let us know what you need by filling out the form below.

David Susandi

Branch Manager – Bali Office at InCorp Indonesia

Holding 11 years of experience in various roles, including project manager, operational manager, and corporate strategist, David Susandi is a prominent figure for many entrepreneurial organizations expanding in Indonesia.

Get in touch with us.

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Frequent Asked Questions

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.