rental villa in bali

Running a Villa in Bali – A Detailed Guide to Get it Right and Legal

  • InCorp Editorial Team
  • 5 September 2024
  • 8 reading time

Bali is one of the most popular destinations in Southeast Asia, attracting over 6 million tourists annually. In 2023 alone, more than 5 million international visitors came to the island, all looking for a place to stay. Villa rental in Bali is a great way to tap into this demand, making it an exciting business opportunity.

Why Should You Start A Villa Rental Business in Bali

Bali’s allure extends beyond tourists; it’s also a prime location for investors eager to tap into its vibrant economy. The demand for diverse accommodation options is booming, from hostels and guesthouses catering to backpackers to luxurious villas and resorts for high-end travelers. Luxurious villa rentals in Bali are especially sought after, offering premium amenities and exceptional comfort.

The market for vacation rental in Bali is particularly strong, with visitors seeking unique and upscale experiences. Investing in this market offers lower initial costs and significant potential for appreciation over time.

With this blend of manageable investment and promising financial returns, off-plan villas in Bali present an attractive opportunity to launch a successful villa rental business and achieve long-term profitability.

Benefits of Starting A Bali Villa Rental Business

Starting villa rentals in Bali offers entrepreneurs many opportunities. This venture provides a steady income stream and allows you to capitalize on Bali’s growing popularity as a travel hotspot.

Passive Income from Rentals

Owning rental property can generate passive income with minimal effort. It’s a great way to earn extra money, provide financial security during retirement, or hedge against inflation.

Sell When the Market is Right

Renting out your Bali property allows you to wait for better market conditions before selling. This helps you avoid selling at a loss and take advantage of a more favorable position.

Strengthen Your Investment Portfolio

Ownership of rental property diversifies your portfolio if you invest in stocks or other assets. This reduces risk while generating additional income.

Benefit from Property Appreciation

Renting your property allows you to wait for the right moment to sell. Bali real estate has shown strong price increases, sometimes even double-digit growth, improving your overall return on investment.

Planning, though, is only a fraction of the entire process. A significant part of it is securing the proper building permits and licenses. This one can be challenging to navigate.

Property Rights for Villa Rental in Bali

One of your responsibilities as a businessperson is safeguarding your assets. For example, if you are building an accommodation, these assets could refer to both the land and the property.

In Bali and elsewhere in Indonesia, foreign nationals have several land restrictions. Non-Indonesian citizens cannot own any of these assets as individuals. It doesn’t mean. However, you won’t have access to land. There are certain property rights you can explore.

You can own the following, but if you want to know more, check out our in-depth overview of Property Rights for Foreigners in Bali.

Right to Build (Hak Guna Bangunan)

One of the first rights you can explore is the right to build. An HGB certificate allows you to build structures on certain kinds of land. These include a freehold title, which is limited to Indonesians only, and state-owned land.

With this certificate, you can use the land for as long as 80 years. Upon approval, you can build and operate for 30 years. After that, you can request an extension for 20 years. You can also renew it for another 30 years, which can be great for Bali long-term rentals.

However, the certificate is valid for 30 years only if the land is freehold. Subsequently, you need to negotiate a new agreement with the Indonesian owner.

This title offers many advantages besides the length of its validity. You can also use the title to secure a bank debt since you can use it as collateral. You can sell, exchange, or bequeath the land as an Indonesian legal entity.

The HGB certificate, though, is only for some. It can only be for Indonesian citizens and Indonesian-based corporate entities such as PT PMA. InCorp Indonesia can help you with the company registration process.

Right to Use (Hak Pakai)

Setting up a PT PMA is one of the best ways to access Bali land. However, not everyone can do it.

Expats who cannot open a PT PMA can still use Indonesian land using the “right to use” title. With Hak Pakai, you can rent it for no more than 25 years. Depending on the agreement between the lessor and the lessee, it can extend up to 80 years.

The primary benefit of this setup is it is open to foreign individuals as long as they hold a KITAP or a KITAS.

Requirements to Starting Your Bali Villa Rentals Business

Villa Rental in Bali: A Detailed Guide to Get it Right and Legal

At InCorp Indonesia, we can help you navigate the regulations that govern the hotel industry in Bali or Bali Villa Resort.

Whether you’re interested in cheap villa rentals in Bali, Bali villas for rent yearly, or Bali villas for rent monthly, understanding the necessary accommodations license and Ijin Mendirikan Bangunan (IMB) is crucial.

The number of rooms and the type of housing you choose will determine your licensing options.

READ MORE:

Homestay License

Take, for example, a homestay. It allows a tourist to stay with a local family for a fee. The rooms are usually basic or cheaper than other forms of accommodation.

To do this, you need to acquire a Pondok Wisata license. This homestay license to operate a villa as a vacation rental applies to properties with between 3 and 5 rooms. The date you obtain the permit depends on the situation.

Hotel License

If your property aims to provide more than five rooms, you must have a full hotel license, also known as a Melati license. This one is not easy to obtain due to the many requirements. For example, the hotel must be within a tourism zone and around 500 meters from the beach.

Building License

In addition to the license, you also need to secure a building license or the IMB. This document states that you can construct a building and outlines its purpose.

Who gets the IMB depends on the structure’s owner. If it is under your name, then it becomes your responsibility. If you’re leasing the property, your landlord must obtain it on your behalf. This process takes about three months to complete.

Positive Investment List

Note that other regulations may also impact your license and ability to operate in Bali. Here are the considerations you should be aware of.

Category Considerations Details
Foreign Ownership Hotels Foreign entities can wholly own 5-star hotels, providing opportunities for international hotel chains.
Homestays Foreigners can own homestays under certain conditions, including establishing a PT and complying with local regulations.
Non-star Accommodation Foreign ownership is limited to 67%.
Local Government Guidelines Hotel Permits Local governments may impose guidelines on hotel permits, including minimum plot sizes and zoning restrictions, varying by area.
Minimum Plot Sizes Plot size requirements, especially villas and hotels, can vary depending on the location and the specific project.
Others Environmental Regulations Strict environmental regulations apply, requiring Environmental Impact Assessments (EIA) for specific projects.
Labor Laws Compliance with labor laws, including fair wages, working conditions, and employee benefits, is essential.
Tax Regulations Understanding and adhering to Bali’s tax laws is crucial for financial planning; consulting a tax professional is recommended.

Villa Rental in Bali: Foreigner Police Report

The exciting thing about operating an accommodation in Bali is the foreigner police report letter. Also known as Surat Tanda Melapor (STM), it is an A4-sized document that provides proof that the foreigner is staying or registered in the accommodation.

STM Requirement

  • While the STM was previously mandatory for foreigners staying in accommodations, the requirement has been relaxed in recent years.
  • However, there are still instances where an STM may be required, such as:
    • Police Request: The police may request an STM for specific purposes, such as investigations or security checks.
    • Lessor’s Requirement: Some lessors may prefer an STM for their records or peace of mind.
    • Civil Registry Papers: Individuals who need to obtain civil registry papers may still require an STM.

Responsibility for Obtaining STM

  • Accommodations: Accommodations are no longer required to process STMs for all foreign guests, but as mentioned above, they may still need to do so in some instances.
    • Required Documents: KITAS/KITAP, accommodation license, and a copy of the guest’s passport.
  • Homestays: Homestays are also not required to process STMs for all foreign guests, but they may need to do so under the same circumstances as accommodations.

Guide to Doing Business in Bali & Lombok

Mailchimp Free eBook Bali & Lombok

Start Your Villa Business Rental in Bali with InCorp

A PT PMA (Limited Liability Company for Foreign Investment) is the most secure and reliable legal structure for establishing a guesthouse or villa in Bali.

By registering a PT PMA, you’re creating an Indonesian legal entity that enjoys numerous benefits, including:

  • Limited Liability: Your assets are protected from business risks.
  • Foreign Ownership: You can own up to 100% of the company.
  • Permits and Licenses: A PT PMA simplifies obtaining necessary permits and licenses.
  • Tax Incentives: Enjoy potential tax benefits and incentives.

InCorp can guide you through setting up your villa in Bali, from company registration to obtaining permits and licenses.

Our services include:

Fill out the form below to start your Bali villa rental venture.

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

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.

It depends on the type of company you decide to establish.
  • In a local (PT) company, a foreigner cannot become a commissioner. It is possible to have a foreign director, but there has to be at least one local Director in PT.
  • In a foreign-owned (PT PMA) company, a foreigner can be a director or a commissioner.

Foreign citizens can expand to Indonesia and establish a foreign-owned company (PT PMA). Depending on the business line you want to pursue, there are regulations for foreigners to follow when setting up a company in Indonesia. One of the most important is the so-called Positive Investment List, which is updated frequently and with other Indonesian regulations.