Buying a villa in Bali is a fantastic dream, but there are several important things to consider before making the leap.
Here are some key factors to keep in mind.
1. Legality
Land Ownership
Foreigners cannot directly own land in Indonesia. The most common options are leasehold agreements for up to 70 years (potentially renewable) or setting up a foreign-owned company (PT PMA). Understand the implications of each option and seek legal advice.
Leasehold Agreements:
Term: The right is valid for 25 years and can be extended for another 35 years, and it must be registered with Indonesian National Land Agency (Badan Pertanahan Nasional), which is responsible for land measuring, registration of the extent of land rights, and issue of certificates to lenders.
Types:
Hak Sewa: Gives you the right to use the land and building for a specific period. You cannot own the land but can sell your leasehold rights.
Hak Pakai: Similar to Hak Sewa, but typically granted for residential purposes.
Limitations: You don’t own the land under leasehold, so its value might depreciate over time. Modifications may require the landowner’s permission.
Benefits: Easier and faster to set up than forming a company. No minimum investment required.
Foreign-Owned Company (PT PMA):
Ownership: Your company, not you as an individual, owns the land and building through a Hak Guna Bangunan (HGB) right, valid for up to 80 years.
Process: Setting up a company involves more paperwork and legal fees. Requires a minimum investment of IDR 10 billion (approximately USD 690,000).
Benefits: Offers true ownership of the land and building within the company’s name. More flexibility for long-term investment and inheritance.
Limitations: More complex and expensive than leasehold. Involves ongoing company maintenance and reporting requirements.
Permit and Regulations
Zoning regulations and building permits can be complex. Ensure your chosen property has all necessary permits and understands potential restrictions on renovations or construction.
Zoning and Land Use
Zoning regulations dictate what type of “painting” (residential, commercial, etc.) is allowed in each zone.
Before choosing your dream villa, ensure it’s located in a zone that permits foreign ownership and your desired use (e.g., private residence, rental villa).
Building Permits and Licenses
Think of permits as your artistic license to “build your masterpiece.” The main permit, Kesesuaian Kegiatan Pemanfaatan Ruang (KKPR), confirms your project aligns with the zoning plan.
Additional permits like Izin Mendirikan Bangunan (IMB) for construction and SLF (Sertifikat Laik Fungsi) for building safety might be required depending on the project scope.
Environmental Regulations
Bali’s stunning natural beauty is a masterpiece in itself, and environmental regulations exist to protect it. Be mindful of waste disposal, water conservation, and responsible construction practices.
Certain areas might have stricter regulations regarding protected areas or sensitive ecosystems. Choose eco-friendly materials and construction methods wherever possible.
2. Location
Each area of Bali offers a unique vibe and caters to different lifestyles. Start to consider these areas:
Canggu & Berawa
Tucked away on Bali’s southwest coast, Canggu and Berawa has become a popular spot for tourists and expats due to its beautiful beaches, vibrant nightlife, and top-notch dining.
Read more why you should invest in Canggu and Berawa’s property.
Uluwatu
Luxurious resorts with pristine beaches and breathtaking cliff top views. Ideal for those seeking a high-end getaway or investment in luxury rentals.
Dive in to learn more about Uluwatu’s property investment potential.
Ubud
Ubud can be the place where your financial goals meet the tranquility of Bali’s landscapes. Explore how investing in a property in Ubud can be both financially rewarding and personally enriching.
Uncover the reasons why owning a property in Ubud will be your key to profitable investment.
See another opportunity from another area in these guides.
Seminyak
Seminyak and its satellite areas like Umalas and Kerobokan, are still considered by many people as favorite areas for short-term property investment. As one of the most hype and trendy areas in Bali, Seminyak enriched by, not only various short-term rental properties, but also with trendy restaurants, night clubs, and nature attractions.
Learn more about opportunities of investment property in Seminyak.
3. Financial
While the initial purchase price might capture your attention, remember it’s just the tip of the financial iceberg.
Be prepared for a cascade of additional costs that will be your ongoing companions in villa ownership.
Budget
Determine your budget for the purchase, including legal fees, taxes, renovations, and ongoing maintenance. Consider potential fluctuations in rental income if planning to rent out the villa.
Cost
If opting for a leasehold agreement, you’ll pay an upfront fee to the landowner, often calculated per square meter of land leased. When you form a PT PMA company, expect legal fees, minimum investment (IDR 10 billion), and ongoing company maintenance costs.
Taxes and fees
These come in two flavors: land tax and building tax. Both are calculated based on the property’s appraised value and can change annually.
Additionally, be prepared for property transfer fees and notary fees associated with finalizing the purchase.
Maintenance
Owning a villa is like adopting a living, breathing entity with insatiable needs for upkeep.
Lush gardens crave regular landscaping, sparkling pools demand chemical balancing and cleaning, and general wear and tear will inevitably whisper for repairs.
Factor in these ongoing costs to ensure your financial well-being isn’t surprised by unexpected maintenance bills.
Staffing
Depending on your villa’s size and your desired level of luxury, consider the potential need for a dedicated staff.
Housekeeping ensures a spotless haven, security guards provide peace of mind, and pool maintenance keeps your watery oasis crystal clear.
Weigh the costs of salaries and potential benefits before deciding if this symphony of service suits your budget and lifestyle.
Care to seek a first-class service from a first-class property management? Learn more about these services
4. Consider the Rental Potential
If you plan to rent out your villa, you can research about these points:
Rental Demand:
High Season: Peak season boasts high occupancy rates and premium rental prices. Ideal for maximizing income but expect increased competition.
Shoulder Seasons: Moderate demand with balanced rates and occupancy. Good option for a consistent income stream without peak season pressure.
Low Season: Lower demand and rates, but can still attract budget-conscious travelers. Consider offering discounts or special packages to maintain bookings.
Pricing Strategy:
Research competitor rates: Understand the price range for similar villas in your area and season.
Dynamic pricing: Adjust your rates based on demand, occupancy, and special events.
Minimum stay requirements: Implement longer minimum stays during peak season or for larger groups.
Seasonal and promotional discounts: Offer attractive deals during the low season or for extended stays.
Potential ROI and Profitability:
Varies greatly based on several factors: location, property type, rental strategy, management costs, and occupancy rates.
High rental potential in Bali: Some villas can achieve 40-80% annual occupancy with good investment planning and management.
5. Visas and Residential
When you purchase a villa in Bali, your desired length of stay and involvement with the property influence the type of visa or residency option you should pursue. Here’s a breakdown of the main possibilities:
Short-Term Stays (up to 6 months):
Visa on Arrival (VOA): Upon arrival in Bali, you can obtain a VOA for 30 days, extendable once for an additional 30 days. This is suitable for short vacations or property inspections.
Social Visa (SosBud): Valid for 6 months, this visa requires an Indonesian sponsor and is meant for social visits, not business activities. You cannot work or generate income in Bali with this visa.
Medium-Term Stays (6 months to 2 years):
Business Visa (KITAS): For business ventures or investments, a KITAS allows stays of up to 2 years with multiple extensions possible. You can’t own property directly but can manage a business or work for an Indonesian company.
Limited Stay Visa (KITAS Sosial Budaya): Similar to the SosBud visa but valid for 1 year with possible extensions. You can stay with family or friends in Bali but cannot work or generate income.
Long-Term Stays (over 2 years):
Retirement Visa (KITAP): Available to individuals aged 55 and above with a guaranteed monthly income of at least IDR 1.5 billion (approximately USD 100,000). This visa grants long-term residency and limited work permits.
Investor Visa (KITAP Investor): Requires investing IDR 2 billion (approximately USD 130,000) in an Indonesian business or property. Offers long-term residency and work permits related to your investment.
Second Home Visa: This relatively new visa grants 5-year residency to foreigners who invest at least IDR 5 billion (approximately USD 325,000) in luxury property in Indonesia. You cannot work or own a business with this visa but can enjoy extended stays in Bali.
6. Design & Features
The property type and features play a crucial role in shaping your living experience and fulfilling your desired lifestyle.
Here’s a refreshed breakdown:
Property Design:
Traditional Balinese: Immerse yourself in cultural beauty with thatched roofs, open pavilions, and private courtyards.
Modern Luxurious: Opt for sleek lines, infinity pools, and sophisticated amenities for a high-end oasis.
Beachfront Paradise: Wake up to stunning ocean views and direct access to the water. Ideal for surfers and water enthusiasts.
Jungle Retreat: Nestled amidst lush greenery with serene waterfalls and wildlife encounters. Perfect for nature lovers and peace seekers.
Family-Friendly Villa: Spacious layouts, dedicated play areas, and private pools cater to families with children.
Important Features:
Number of bedrooms and bathrooms: Consider your typical group size and need for separate spaces.
Private pool: A must-have for many, especially families, offering relaxation and fun.
Outdoor areas: Lush gardens, balconies, and terraces enhance the connection with nature and provide additional living space.
Staff and services: Some villas offer housekeeping, cooking, and security services for added convenience.
Distance to amenities: Access to restaurants, shops, and attractions can be important depending on your preferences.
Sustainability features: Eco-friendly materials, energy-efficient systems, and responsible waste management demonstrate commitment to preserving Bali’s beauty.
Consult with a local property agent or rental agency familiar with different areas and property types. They can help you match your needs and budget with the perfect villa.
7. Find the Right Team
Surround yourself with reliable professionals:
Real estate agent: Choose an agent with experience in the Bali property market.
Architect or builder: If planning to build, find someone familiar with local regulations and construction methods.
Financial advisor: Discuss the financial implications of buying and owning a property in Bali.
Buying a villa in Bali can be a dream come true, but it’s crucial to do your research and make informed decisions.
By understanding the legalities, costs, and cultural nuances, you can avoid pitfalls and ensure your Bali villa investment is a success.
With over 10 years of hands-on experience, Oniriq Property has been right here in the thick of villa management in Bali. That’s a lot of time spent understanding the ins and outs of this market, and we’ve got the know-how to prove it.
When it comes to financial returns, we’re not just throwing around numbers – we’re here to provide you with clear, accurate, and practical information that you can count on.
Do you want to sell your property with us? Arrange a meeting with us.
