Buying property in Bali as a foreigner
Buying property in Bali is a hot topic these days. Especially for a lot of foreigners. It’s incredible to witness how many people from different countries take the opportunity to live in Bali and invest in Bali Property. Together with my girlfriend Ilse, I moved to Bali in 2018. After living several years in paradise we decided to buy a villa in Bali.
There are two main reasons for us to own property in Bali. ROI (return on investment) and a home base to return to. Leaving our savings in the bank was not an option at this time. It didn’t result in enough growth, especially with the high inflation. Since 2018 we always rented different accommodations for a few weeks or months. But moving every time to find another suitable place can be tiring. It offers insecurity in finding the right place. Add to that the increase in rental prices which made us realise it was the right time to buy property in Bali.
Mid 2022 we bought our villa in Bali and we moved in at the end of that year. Since the moment we decided to invest here in property we went through a whole process and learned a lot. Not only we learned a lot about the buying process, but also about owning a villa after living in it for a year now. Many people we know also bought a property in Bali as well. It’s very interesting to hear from them how they experienced the process. In this blog, I love to share our experience with you. Hopefully, this will answer most questions you have when you decide to buy property in Bali yourself.
Frequent questions we receive about buying property in Bali
Before I dive deeper into how buying property in Bali works, here is an overview of the most frequent questions we receive regularly.
How can a foreigner buy property in Bali?
The common way to buy property in Bali as a foreigner is by setting up a local company called PT PMA. This is a limited liability company with foreign ownership. If you are planning to rent out your property this is the best way. The legal owner of the property in this case will be the PT PMA. With a PT PMA you can buy both freehold (Hak Milik) and leasehold (Hak Sewa) property.
Another way is to acquire property without a PT PMA through LeaseHold in your name. This way you are renting the land for a certain amount of years from the landlord and you’ll have the rights to use the land to build a villa. But please realize you don’t own the property this way. In most cases, leasehold agreements last for 25 – 30 years and can be extended for another 25 and 30 years until a maximum of 80 years. We recommend always having an agreement in the lease contract regarding the rental price for the lease back/rental extension. This should describe the following. The rental price will be determined later by both parties based on the market price at that time.
Is buying property in Bali a good investment?
At the time of writing, we can confirm buying property in Bali is a good investment. Through our sources, the annual ROI can vary between 8-20%. This all depends on the location, property design, size of land, and quality of the building.
Where should I buy property in Bali?
This all depends on the purpose you have for buying property in Bali. Do you want to buy a property for yourself to fully live in, for an investment, or a combination of both? It can be very personal in case you buy property for your private residence. In case this is the priority I assume you already spent some time in Bali before and explored the island. Most foreigners buy property these days around the Canggu area, Uluwatu, or Ubud. These areas are very popular for expats because it offers a lot of conveniences.
We chose to buy our villa in Cepaka which is very close to Canggu. We love to be surrounded by local culture and nature but still like to be close to all the amenities Canggu offers and of course the beach! Cepaka offers all this for us and also the neighboring village Kaba Kaba is a great place for all these ingredients. We have green open views and the land prices in Cepaka are at the moment much lower compared to Canggu, Pererenan, or Seminyak. As the popularity of Cepaka has risen a lot in the last 1,5 years this offers a great potential for a high ROI of our investment.
In case your purpose is leaning more toward investment the mentioned areas Canggu, Uluwatu, or Ubud are your best picks. Currently, these areas have proven to result in a high ROI as many tourists visit these areas and are looking for a villa to rent.
What is off-plan property in Bali?
An off-plan property is a type of property that developers sell before the construction is completed or even gets started. This means you will purchase a property based on the developer’s plan, render design, and material list. We strongly recommend to only purchase a property from an experienced developer with a good track record. These days we feel off-plan properties are getting offered by all kinds of people who want to make money with this concept. Also, it’s very important to buy off-plan based on a finished unit so you can view and judge the quality in real life instead of rendering images. This was the case for us as our developer already finished one unit. We took the time to judge the design and quality of this unit and this took away all the doubts we had before seeing it.
For an off-plan property, you’ll pay the agreed fixed price in stages according to the progress of the build. An absolute red flag can be if an off-plan developer requests more than 50% downpayment as this is a huge risk for you when the build isn’t even started!
We paid for example in the following stages:
Downpayment (non-refundable): 15%
First payment (Progress 20%): 20%
Second payment (Progress 50%): 20%
Third payment (Progress 70%): 20%
Fourth payment (Progress 85%): 15%
Fifth payment (Progress 100%): 10%
In this case, you protect yourself from developers who might run away with your money!
Our Villa in Bali is For Sale!
We loved living in Bali but after 6 years on the Island, our plans for the future have changed and we’re going back to Europe for a one-year camper trip!
Price: 279,500 USD / 4.400.000.000 IDR
Are you looking for a villa located in a local authentic and quiet village, surrounded by nature, with only a few minutes drive from Pererenan Beach and Canggu, the latest hotspot for surfers, families, and digital nomads? Cepaka is emerging as the next upcoming village, marked by the recent opening of its first restaurant/café. This trend is expected to continue, further enhancing the village’s appeal which makes it even more convenient to find all necessities close by.
The compound is tucked away from the road which guarantees a quiet and peaceful atmosphere with scenic views, overlooking the lush evergreen Pandan leaves. This 2 level Villa is tastefully furnished, boasting a beautiful infinity pool (7 m x 3.50 m), looking into the green Pandan fields, an amazing office with blinds and comfy office chairs to work, and its unique and stylish interior makes this place a true home away from home.
The property features 2 bedrooms and both come with bright and breezy en-suite bathrooms. The modern kitchen, dining, and sunken living area are combined, with the option to open the doors to the outside area or fully enclose the air-conditioned space. The different levels throughout the building, with up to seven-meter-high ceilings will give you the feeling of spaciousness. The property is fully furnished as shown in the pictures, ensuring a hassle-free move-in experience. Ideal as a private residence and/or as an investment property guaranteeing great occupancy rates.
FEATURES
Land title: Leasehold, 29 years (28/02/2053)
Land size: 2.6 are / 260 m2
Building size: 120 m2
Building style: Loft-style villa
Year built: 2022
Furniture: Fully-furnished
2 Bedrooms, 2 Bathrooms
Living & Dining Room with Enclosed Kitchen
Swimming-Pool: 7m x 3.5m
Open parking for 1 car & bikes
Should I buy an Off-Plan property or build it myself?
The first question I’d like to ask is to think about how much time and effort you are willing to spend when buying property in Bali. For us, this was the main reason to go for an off-plan project. Our time is very valuable as we manage our business ourselves and we realize every hour we’d spend building a villa ourselves we can’t spend on our business.
Often we hear building a villa yourself is cheaper but we realize this is based on one perspective. Namely the simple comparison between the purchase price of an off-plan villa vs the construction costs of building a villa yourself. In the ideal situation where everything goes smoothly, building yourself will result in lower costs. But, with this, I already mentioned a grey area called “in the ideal situation”. Not to mention the time and effort you have to spend to find land and build a villa yourself. As mentioned before, having a stress-free experience without losing our valuable time is a huge factor for us to purchase an off-plan project. Every hour we would’ve spent in finding land and building a villa ourselves we wouldn’t be able to spend to our business and potentially lose income during this time.
Construction costs
Another BIG pro with an off-plan property is the fixed price. The base price you agree on in the contract will not change. When building yourself there will be a lot of variable costs which can result in a risk of overspending your budget. I’m not here to scare you, but from quite some people we know they were confronted with a lot of extra costs during the construction but also uncertainty of finishing the build.
This is because the constructor’s BOQ (bill of quantities) is an indication of the costs based on the design you have for your villa. But during the build (which can take at least one year), prices of materials can increase. Or due to mistakes or design issues, things need to be changed to continue the build. Of course, it depends on the agreement you have with your constructor but in most cases, the extra costs will be for you.
There are pros and cons for both options:
Pros Off Plan
Land and design ready: The land is in most cases already purchased by the developer and you don’t have to think about the design which saves you a lot of time. Finding land + getting the right (building) permits in place can easily take around one year before you even can start building.
Turn key: When the villa is finished you can move in directly. Often, 95% of all furniture is included so you can enjoy the property by yourself or start renting it out directly which means a quicker return on your investment.
Lower price than completed properties: Upon the completion of the property, its value might have increased. This appreciation can be attributed to various factors, including the overall development of the surrounding area and increased demand. You can sell the villa when finished and make a direct profit as a result of these factors.
Customization: Although the overall design will be fixed you will still be able to customize the materials and interior.
Save time and stress: As the developer’s responsibility is to manage the project you don’t need to spend the time and effort for this yourself. You can continue focussing on your job or business. This is without having the risk of stress which can occur when organising the build yourself. With a trusted developer, like ours, you can even purchase a property from abroad!
Construction time: In most cases, the constructor starts building the villa from the notary signing. Depending on the design, the average construction time for a two-bedroom villa is 10-12 months. This way you can receive a return on investment way quicker compared to building yourself. The full process of building yourself can easily take up to 2 years.
Cons off plan
Fixed design: Although you will have some flexibility to customize the design, you won’t be able to make big changes. So make sure you will love the design, especially in the case of private residences.
Deviation: In case the developer doesn’t have a show unit, you won’t be able to see the final product at the point of purchase. As mentioned before, your decision to invest is driven by the developer’s construction plans, designs, and installment plans associated. This can result in a deviation between the design plan and the actual build in a negative way.
People: Please be aware you’re not only investing in materials and land but also people. In the end, the developer and the constructor are responsible for managing your investment. Try to get to know the developer and constructor pretty well before you decide to invest. What is their experience? What are their values and background? Try to speak with other people who already bought or even better, already live in constructions finished by the developer.
You trust the developer with your money, so it’s incredibly important that they are fully transparent during the whole process. This is because during the construction they are the ones updating you on the progress of the build. In our case when we were traveling outside Bali, we regularly received video updates on the progress. Also, we frequently had meetings with our constructor on-site to discuss any concerns and see the progress with our own eyes.
Pros building yourself
Build your own dream house: The best thing about building yourself vs off plan is the chance to fully customize the design of the house you’ve always dreamed of. Finding the right land size and location can be challenging for sure, but with a lot of determination, you’ll hopefully succeed in this. When you build a villa from scratch, you’re involved in every step of the design and construction. This means every decision is controlled by you. From the floorplan and number of rooms to the interior fixtures and finishes. You can be confident that the architects and contractors are doing exactly what you want, as you have control over any changes that need to be made. Despite you may be limited by budget and have to wait longer for completion, the result will be perfect to your taste.
Cheaper: In general the costs of the construction will be lower compared to building the same design off plan. This is because developers put a profit margin on the construction price to earn of course some money. However, take in mind this will only be the case if the building costs in practice won’t deviate too much from the BOQ you agreed on in advance.
Paying for exactly what you want: In case you choose off plan, the villa design should be as much in line with your desires. But there is a chance you have to accept some features that you don’t like and are not customizable. Instead of paying for these features you don’t like, building your own gives you full control over the features you want.
Cons building yourself
Insecurity: The process of finding the land, getting all necessary permits in place, designing, and eventually building your property can result in a lot of insecurity. Many steps in this process can lead to problems when executed in the wrong way or order.
Land size: Besides the villa we currently live in, we tried to find a small plot of land of around 2 Are (200 sqm) for a small project we had in mind. Finding a “small” plot of land with this size in the desired location is very challenging. The plots of land that were in the right location ended up way too big and expensive for us. In most cases, the plots of land for sale have a lot of Sqm (from 15 are/1500 sqm). This makes it very challenging compared to off-plan where most projects exist of multiple villas which will be built on a big size of land divided by smaller plots.
More responsibilities: Be prepared, it takes a lot of effort to build your own house. Even if you have the budget to outsource as much work as possible, you’ll still be responsible for everything. You have to decide on every final detail, and there will be a lot of decisions you need to make. Even before construction begins. When you buy a plot of land, you’ll be responsible for all the landscaping and maintenance of that land. Also, you have to get the right electricity installed and dig a well for water supply. This will depend on its state when you purchase it. But this could cost even more time and money to manage. The financial management of such a project can be very stressful too.
More cons to consider:
Rising hidden costs: There is so much to do when designing and building a bespoke home that the costs quickly add up. From plans and drawings to builders and materials, plumbing and wiring to landscaping, there’s a lot to pay for and even more importantly, it will cost you a lot of time.Â
Long Construction time:Â Building your own villa takes much more time than buying an off-plan project which is set to start with the construction, or even in some cases, the construction is already started. The longer the timeline your project needs for completion, the more pressure on you with the possibility of unforeseen delays due to factors out of your control.
How buying property in Bali works
With the following steps, I describe the outline of the steps to take to buy property in Bali. Please be aware these steps may differ in content for purchasing land only/an existing property or an off-plan project. Broadly speaking, the following steps should be performed in this order.
Preparation: Research and decide the location, your budget, and the type of property you want.
Set up a PT PMA: If you’re planning to buy through a PT PMA you’ll need to set one up. This has to be done through the Indonesian Investment Coordinating Board. You can do this yourself or with an experienced agency.
Shortlist: Make a shortlist of properties/land/off-plan projects you’re interested in and plan the viewings.
Due diligence: Once you’ve decided on a property, land, or off-plan project, complete your due diligence with a notary. Verify that the seller has all necessary documents and permits. Such as the certificate of Property and the building approval (PBG- Persetujuan Bangunan Gedung). When conducting due diligence, in general, you should get an answer to the following questions:
- Who is the owner?
- Is the owner married, and do they have their spouse’s consent?
- Was the property inherited, and are all beneficiaries willing to sell?
- Is there an agreement extension signed with the landlord?
- Is a certificate (Sertifikat Laik Fungsi (SLF)) granted by the local government or central government to declare the proper function of the building before the building is used?
- Is a check of NIB (Nomor Induk Berusaha) performed?
- Are the documents with the owner or at a bank?
- What are the local zoning laws?
- Is there an open tax that must be paid before signing?
- How much tax is required to pay for the property?
Signing & Payment
Legal purchase agreement: Sign a legal purchase agreement in front of an authorized public notary and pay the agreed deposit. The Sales Purchase Agreement (SPA) is a legal document that outlines the responsibilities of both the buyer and seller in a property transaction. It must be signed in the presence of a public notary authorized for the area (PPAT). Typically, the buyer is required to make an upfront payment of 10-15% of the total purchase price. It is recommended to transfer the deposit in the escrow account from the notary and not directly to the seller. This way you are protected and the deposit will be released after completion of the due diligence and signing of the SPA and lease agreement.
Pay the transfer taxes: Before transferring ownership of an existing property, both parties must pay the transfer tax which conducts a Land Acquisition Tax of 5% for the seller and a Transfer Tax of 5% for the buyer.
Complete the final transfer or first payment term in the case with off-plan: Sign the buy and sell deeds in front of a notary. The public notary will then submit the documents to the National Land Agency. After that, you’ll receive the licenses and certificates for the property and the final SPA.
Would you like to buy our villa?
Are you in Bali and interested to see the design and build quality of our villa? We’re happy to get in contact with you to plan a viewing. Or feel free to send me an email if you have a specific question this article didn’t cover. I’ll try my best to reply to you with the right info!
* Disclaimer: This blog post about buying property in Bali 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 Research. This is not financial or real estate investment advice.
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