Many foreigners want to build a villa in Bali but it’s not a straightforward process and it’s easy to lose a lot of money if you don’t understand the local market and regulations.
While this may be time-consuming it ensures that your villa in Bali becomes more than a pipedream and you can live in it without worrying about losing it or the safety standards it was built under.
We’ve got a simple step-by-step guide to help you build your villa in Bali as a foreigner without running afoul of any of the pitfalls of local property ownership.
We should note that this does not apply to Indonesian nationals and those nationals will need a different guide as they have very different rights under the law when compared to foreigners.
A Step-By-Step Process To Building Your Dream Villa Under Foreign Ownership
There are several areas that you need to do research in before you can build your own villa here in Bali.
Firstly you need to learn about land ownership types and land zoning. You need to understand why freehold ownership is off the table and why a lease agreement is going to be your only way to build your villa.
Secondly, you should be looking at things like the law, building codes, the kind of building permit you need, etc.
And finally, assuming you need finance, you need to spend some time figuring out how you can arrange it – working with local banks isn’t always easy when it comes to mortgages, etc. even if a loan is secured against your property.
There are architects that can carry out this research for you, but we’d be wary of placing too much trust into any other entity when you start out – the more you know, the less chance of things going wrong.
The Legal Structure For Land Ownership For Foreign Investors
There are legal obligations on foreigners who want to own land in Indonesia and this applies to Bali too.
You can only own property based on a leasehold agreement and there are two different kinds of lease.
A Hak Pakai gives you the right to use the land but it doesn’t give you any right to build on that land. This is very important for building villas.
So, you need a Hak Guna which provides the right to build on the land you lease and you must have the correct legal structure (a foreign-owned company or PT PMA) that allows you to take advantage of the right to build.
Leases can be for 30 years and include the right to extend for a further 50 years. After 80 years, no matter what, the leased land returns to the original owner.
So, you should be aware that your lease is a depreciating asset and that your grandchildren are unlikely to be living in your villa in a hundred years time.
Buying Your Land – Due Diligence
Where to buy your land is important and you will want to spend a lot of time deciding a.) where you want to live and b.) where you can afford to live.
Premium spots like Canggu and Ubud can command huge prices per square metre. Whereas places like Lovina and Amed which are less popular towns, for now, are much cheaper.
You can expect to pay, at least, 5,000,000 IDR for 100 square meters, per year of lease, and potentially, you could pay much more than that.
So, for a 1,000-square-meter leasehold ownership, the lease on the land is going to be roughly 50,000,000 IDR which si around $3,500 USD ($5,250 AUD) per year for 30 years, all payable in advance.
If you want to renew in 30 years, the terms for the renewal should be fixed in the lease, or you may find that the market conditions are not so favourable when you come to renew and you have to pay a lot more than you have been paying.
Choosing An Architect
There are a lot of architects operating out of Bali but they’re not all equal.
We recommend conducting a thorough background check on any architect under your consideration and asking for access to previous projects and taking references from former clients.
If you’re lucky, an experienced architect may also be able to help with finding contractors for building your villa.
Obtaining A Building Permit
You will need a permit for building villas this will be either a Persetujuan Bangunan Gedung (PBG) or Izin Mendirikan Bangunan (IMB) depending on the scale of the construction.
You cannot break ground without this permit and during the application period, you should also be ensuring that all the tax affairs relating to the property as well as any zoning issues have been resolved.
It can take 3-6 months to get a permit from the moment of application to the issuance. So, the earlier you start applying for the permit, the faster you can move to building your villa.
Choose A Contractor To Manage The Construction Process
We think it’s a good idea to use a contractor that is recommended by the architect as they will usually be able too influence things during the construction process.
However, we should note that you can run this process out to tender via your architect and you’re not bound to use any given company.
If an architect can’t help you access a range of companies, you might want to work with a different architect as they may not have enough experience in Bali to deliver what you want.
The Handover Process For Your Villa In Bali
You will need to work with the architect to oversee all aspects of construction until the villa is complete.
Once you sign off the project with the construction crew, it’s yours to move into.
Just make sure that all the small details have been attended to, as once you sign off, it’s also your problem if things goo wrong and you will have to pay to put them right.
We’d even suggest using a surveyor to audit the property before handover if you can.
Why Not Consider A Pre-Built Property?
Much of the hassle of buying property here in Bali can be circumvented by buying a building that is already on pre-existing land.
There are many developments here that are aimed at foreigners and which are easy to buy into.
However, you should
Tips For The Building Process In Bali
Get It In Writing
You cannot raise any legal objection or objection with any authority if you don’t get things in writing.
If you get advice over the phone, ask the person you’re speaking to if they can put it in writing after the call, until you have that, don’t progress anything.
You don’t want to lose your villa in Bali because you’ve agreed to something that nobody has documented. And you need your own set of copies for all these agreements.
You need to check everything from ownership types to land measurements, the borders of your property, etc.
Most of all, you need to be certain of the zoning and a copy of all taxes, mortgages, ownership certificates, etc. it is entirely possible to build a villa here and after construction to find that the land you’re using is forfeit because of existing loans and taxes.
Wait To Sign The Lease Agreement
Seriously, do all your research before you build a villa in Bali or you may end up paying the highest prices per square metre or worse.
Talk To Foreigners And Indonesian Citizens In The Area You Want To Buy Land
Online research isn’t enough go to the place where you want to build a villa in Bali and talk to people.
It’s much better to spend some time in Bali finding out what potential problems there are than to trust a local agent with your purchase.
Too many people buy and build property only to find that the mosque next door, which they didn’t know about, starts a loud call to prayer at dawn every day and there’s nothing you can do about it.
Never Buy Anything From A Real Estate Agent Or A Private Citizen Without Seeing It First
We can’t stress this highly enough, never buy land, a building, a villa or any other construction in Bali without seeing it first.
Much of the material online is hugely misleading and many people have been conned into taking long-term leases on a villa that’s entirely unfit for human habitation or bought land that they can’t build on, etc.
Only Work With An Official Real Estate Agent
You can find freelance agents but they are not recognized by the big banks or by Indonesia’s official association for agents and that means you will find it hard to secure finance or to get professional advice from a freelancer.
They will tell you that you’re going to save money by going off the books, but the reality is that it’s your land and properties at risk if you do and they’re going to be worth hundreds of thousands of dollars.
Cutting corners makes no sense to save a few measly dollars as this stage.
Local Nominees Are Not A Substitute For Buying Property With A Foreign Owned Company
It’s tempting for foreigners to use a local nominee to secure the freehold ownership of a property.
We just need to note that this is completely illegal and a recipe for losing your land, properties and everything else you have here in Indonesia.
Get a lawyer, a decent agent, and a notary and make sure that every step of construction until the final step is done according to the law and it’s possible to use company structures to safeguard your interesting when building in Bali.
Negotiate, Always
If you’re not haggling when you buy property in Bali you’re losing money (you could easily drop a thousand dollars or more by skipping this step). It’s expected that you will negotiate and nobody will be offended when you do.
It’s your villa in Bali, but you don’t need to overpay for it.
FAQs
How Much Would It Cost To Buy A House In Bali?
It depends on where you want to buy your home and how big it is. In the current market, a villa in popular locations such as Canggu and Seminyak can go from $180,000-$250,000 USD (that’s $270,000 – $375,000 AUD) for a one-bedroom set-up.
However, if you were going to buy in Amed or Lovina, you might find you get a much lower price as it’s cheaper to buy property in those areas as there’s much less demand, for now, for property ownership there.
Can An Australian Buy A House In Bali?
Yes, but property transactions as a foreigner in Bali are complicated even for foreign-owned companies registered with the Indonesian government.
You must do your due diligence before entering into any agreement and you should know that freehold ownership rights are restricted to citizens, the only path for most foreigners to own their dream property is on a leasehold ownership basis.
And that means you need to pay very careful attention to the kind of leasehold arrangement you take on, or you could find that you go through the entire process only to end up kicked out of your property in Bali when the lease expires.
How Long Does It Take To Build A House In Bali?
This will vary a bit from area to area and the construction company that you choose, however, most property investors can expect their luxury villas to be completed between 6 and 12 months after the construction process begins.
This assumes that you’re in compliance with all local land zoning laws and other regulations as required. Otherwise, you may be subject to extreme delays.
Can You Own A House In Indonesia As A Foreigner?
Yes, it’s possible to own property in Indonesia as a foreigner. However, you need to do your due diligence and ensure that all the local regulations set by local authorities and the national authorities are complied with and that you have the right kind of lease for the grounds.
Would You Recommend Buying Property In Bali As A Foreigner?
We are not property investment consultants here at FINNS, we’re the world’s best beach club. We don’t give investment advice.
However, before you undertake any development on a villa in Bali, we strongly urge you to spend some time researching what’s needed to build here or own any existing property.
Thorough research can ensure you understand the legal restrictions, are up-to-date with Indonesian law, and know whether the terms for your ownership for residential purposes are acceptable for your circumstances.
Tropical living isn’t as easy as it first seems and professional advice can really help when building villas from securing the building permit to zoning approval to paying your property taxes and any other aspect of buying land and the sales process, it can all be easier with the right assistance.
FINNS does not endorse any particular developer, architect, contractor, etc. and you must ensure that you evaluate suppliers carefully for your new villa.
Final Thoughts On Property Development In The Booming Bali Property Market
Buying property in Bali isn’t impossible and many international investors have entered the local property market and are building villas, and even properties for commercial activities (though commercial properties are outside of the scope of our article above).
However, if you want your villa in Bali to be a success, it all comes down to due diligence and ensuring you hire the right people to help you navigate the process.
Living on this island of natural beauty is much easier when somebody who knows how land titles, etc. work gives their advice before you commit to anything.
