Having your villa in Bali sounds like a dream right? The beautiful and diverse Indonesian island offers so much variety for tourists and expats. With plenty of beautiful beaches, waterfalls, volcanos to hike, and green rice terraces, Bali offers not only unlimited nature activities. But also a wide range of western restaurants, hip and vibrant expat communities, and lively nightlife. Perfect ingredients for Digital Nomads and expats to buy a house in Bali. Either to be based in Bali or to rent the villa and have the property as an investment. But there are a lot of legal things you have to take into account before investing in Bali real estate. We bought our first newly constructed villa in Bali in 2022 and learned a lot along the way. So that’s why we share in this complete guide everything you need to know about buying a villa in Bali. How it works with leasehold land, what type of document you need as a foreigner to invest in Bali, general prices, and much more!
Short introduction about us
Happy to have you here and to share a bit of the knowledge we gained through buying a villa in Bali. We are Ilse and Atiba, registered in Bali since 2021 but visited this beautiful island many times before as tourists. In 2018 we decided to sell everything (including our house) in the Netherlands to start a life as Digital Nomads. Thanks to our blog and the video and photo content we license, we earn monthly passive income. But besides that, we also make photos and videos for Luxury Resorts and Luxury Real Estate. In 2022 we decided to buy a villa in Bali to have a home base again from where we can continue to travel the world.
We chose to build our 2 bedroom villa near Canggu and invested in an off-plan villa project. This means that the villa still needs to be constructed, but that all the plans are already there. So we don’t have to think about design, interior, furniture, etc. Everything is included in the price of our villa. This takes away a lot of stress and means that once the villa is finished, we only have to bring our bags and can start living in it. Read more about our process of buying property in Bali in our latest article; Buying property in Bali as a foreigner.
Now let’s dive into the most asked questions!
- Can foreigners buy a villa in Bali?
- Can you own a villa in Bali?
- Is buying a villa in Bali a good investment?
- How to buy a villa in Bali?
- How much money do I need to buy or build a villa in Bali?
Can foreigners buy a villa in Bali?
The first and foremost asked question is, “How can foreigners buy a villa in Bali legally?”. If you are completely new to investing in Bali real estate, then you first have to know that there are different forms of property ownership in Bali. Which type of ownership you can or have to choose depends on several factors.
The main question is ‘What is your goal with buying property in Bali?’. Is it to have your residence in Bali? Do you want to step into the full-time villa rental business in Bali? Or do you want to live in the villa for a few months per year and rent it out when you’re away? It is important to have the purpose of buying a villa in Bali clear so you can make better decisions regarding the type of ownership.
The most commonly used forms of ownership in Bali are Leasehold and Freehold. Both have different rights and regulations. However there are more ownership titles available for foreigners, so let’s dive into the different forms of property ownership in Bali to learn more.
Leasehold (Hak Sewa)
Most of the land and villas for sale in Bali are being advertised as leasehold property. This is the easiest way for foreigners to buy a villa in Bali. Leasehold means that you are renting the land for a certain amount of years from the landlord, a local and that you have the rights to use the land to build a villa. You can also purchase an existing lease contract of a land including the building, so you take over the lease for the remaining amount of years in the contract.
Newly developed leasehold properties are usually advertised around 20-30 years. Second-hand leasehold villas can vary from 5 years up to 20 years or longer depending on the years that have already passed. But mostly there is an option for extension after the leasehold ends for an additional amount of years. It is very important to discuss this with the landlord upfront and put this very clearly in the contract by your notary. This will give you as the leaseholder the priority to extend the land lease for market price.
This not only allows you to enjoy your villa in Bali longer than the initial amount of leasehold years. But it is also from an investment point of view very valuable. Because if you decide to sell your villa after, let’s say 5 years. And you have a leasehold of 30 years, then you can still resell your villa with the remaining leasehold of 25 years + priority to extend the land lease for a fair market price. This will be positive for the price you can ask.
Freehold (Hak Milik)
The highest land title in Indonesia is called Hak Milik and is only given to citizens of Indonesia. As a foreigner, you can’t purchase a Freehold title under your name. The only way you can 100% own land in Indonesia as a foreigner is if you are married to an Indonesian citizen.
Even if you set up a PT PMA as a foreigner (an Indonesian company) you can not buy a Freehold villa or Freehold land. Other forms of ownership apply for either leasing the land or an already constructed villa under your Indonesian company or as a foreigner living in Bali.
The differences in types of ownership are as follows. For Indonesian citizens, the right to own land is called Hak Milik (right of ownership). For foreigners that have an Indonesian company (PT PMA) the title is Hak Guna Bangunan which means the right to build. There is also the ownership form of Hak Pakai which means ‘right to use’. Let’s explain these different titles below.
Hak Pakai (Right of use)
This ownership form means the ‘right of use’ from government land. It is generally one of the best options for a foreigner looking at living full or part-time in Indonesia, Bali. The validity of Hak Pakai is initially 30 years and can be extended for 20 years and renewed for another 30 years. At every extension, 0,2% tax must be paid on the government property value. As a foreigner, you do need KITAS or a retirement VISA (KITAP) at all times for Hak Pakai. The minimum investment for a Hak Pakai property is 6,5 billion IDR (around $440,000 depending on the currency exchange).
Hak Guna Bangunan for PT PMA (Right to build)
For foreigners and Indonesian companies that want to buy, sell, or manage villas for commercial purposes the title HGB applies. As a foreigner, you will need to set up your PT PMA company before you can opt for the Hak Guna Bangunan title. This land title means ‘right to build’ and is initially valid for 30 years. Then extendable for 20 years and renewable for another 30 years which you have to file two years in advance of the initial expiration of the the HGB. So in total HGB is valid for 80 years.
The land is owned by the state or an Indonesian citizen (Hak Milik) but with the HGB title you will have the right to build as a foreigner under your PT PMA company. However, you can convert the HGB title into a Hak Milik title which means you can hold a Freehold certificate in your company’s name which is an advantage of having an HGB title.
Which land title is best for a foreigner; Leasehold, Hak Pakai or Hak Guna Bangunan?
Which type of land certificate you should buy depends on your personal preference and some other factors. Below are some factors you should take into account before buying a villa in Bali.
- Leasehold is much easier to purchase without any company set up and protected by Indonesian law
- Leasehold is a faster return on investment than freehold when renting out because you pay less for the land upon purchase
- You can use leasehold land for whatever the zoning of the land permits. Whether it is a holiday rental, commercial business, or your private residence
- Hak Pakai or Hak Guna Bangunan is for bigger investments. You will need to invest about $500.000 upwards to start a business in Indonesia
Is buying a villa in Bali a good investment?
To answer this question it is important to ask yourself what your goal is when investing in Bali property. If you see it as a short-term investment of keeping the property for let’s say, 5 years maximum, then a leasehold is great if you buy it with at least 20-25 years. It means you can resell the leasehold with a great amount of remaining years which is interesting for the market.
Also, property prices have continued to go up in the last few years and are most likely to continue to do so. So the value of your leasehold will most likely increase over the years, adding value to your initial investment.
In the 5 years that you have the villa, you can live in it yourself, or rent it out to create passive income. It is important to know that there are legal rules as well for renting out property in Bali. It depends if you want to rent out short term or long term. This also totally depends on the area where your villa is located.
Freehold is only interesting if you are planning on living for a very long time in the villa. But take into account that your potential group of buyers is a bit smaller as you can sell Freehold only to Indonesian citizens or PT PMAs. Leasehold is attainable for everyone and more affordable.
A good investment in Bali Real Estate will give you a return on investment in 5-8 years when renting out. Depending on occupancy and rental price.
Measurements of land size and land price in Bali
The measurements used in Bali for land are called ‘Are’. One Are is equal to 100m2. The land price is completely dependent on location and land size. The closer to the ‘hot’ areas, the higher the price will be. So, if you want to pay less for more land, then you should look outside of the popular tourism zones. The type of land zoning also influences the price of land a lot.
Land leases start from around 4.000.000 IDR per year per are (equivalent of $265) up to even 35.000.000 IDR per year per are ($2300). These types of land are within reasonable distance of tourism. And residential infrastructure such as grocery stores, restaurants, beaches and beach clubs, and other popular tourist areas. But if you want to lease very cheap land in Bali you should go up North (way past Ubud). There you can find prices for 500.000 IDR per year per are ($30). However, these plots of land are far away from tourism zones and daily infrastructure such as modern grocery stores, restaurants, etc.
How to pay for a villa in Bali
A foreign property investor in Bali can’t take a loan. This means you will have to have the funds available. You have to pay the complete amount for purchasing your Bali villa upfront. However, with newly constructed villas there is a payment plan depending on the stage of construction. The percentages depend on the contractor.
How much money do I need to buy or build a villa in Bali?
It’s hard to give a specific number on how much money you need to build or buy a villa in Bali. The final price depends on so many things. First of all the location of the land. If you lease ‘expensive’ land in the tourism zone your whole investment will be higher than renting land outside of the ‘hot’ areas. Second, title of ownership. Leasehold is more affordable and the shorter the lease, the more affordable the villa is. Also, the land size, size of the villa, building materials, and furniture you choose influences the final investment of a newly built villa in Bali a lot. Roughly you can count on building costs between $500 – $1000 per square meter for a new construction.
However, keep in mind that building costs fluctuate. For example, in the last 2 years, the costs of building materials such as wood and steel have increased by roughly 20%! Labor costs are relatively stable. The general turnaround time to build a 2 bedroom villa in Bali is anywhere between 9 and 12 months depending on the type of construction and building size. This turnaround time includes finishing, furniture etc.
Leasehold and Freehold villas are hard to compare in terms of pricing. The number of years left on the land lease, condition of the property and many other factors will influence the price. Also, if you are planning to build or buy a wooden Joglo / bungalow without a swimming pool or a luxury villa with a swimming pool will make a lot of difference. You can make your Bali dream home as cheap or expensive as you want.
Why invest in Bali property?
Besides being an incredible tropical island with a high standard of living, the increasing influx of tourists, expats, and Digital Nomads creates great opportunities for real estate investors. The prices of land and rental prices have gone up significantly in the last few years. And with rumors of the Digital Nomad VISA, the future looks bright for real estate investors in Bali. The more expats that will stay long-term in Bali, the more demand there is for quality villas. So buying a villa in Bali is an interesting investment.
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* Disclaimer: This blog post is written with lots of passion and research about the Bali real estate market. However, prices and rules can change. We will do our best to update this blog post regularly. But as with everything in life: Do Your own Research. This is not financial or real estate investment advice.
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