Buying land and houses in Bali
Building a house in Bali can be a dream come true
Captivating Bali has been seducing visitors with its exotic charms and tropical sunny climate for generations. Even today an increasing number of travellers want their very own piece of paradise and the property market is buoyant. Over 10,000 expats have made the leap and are proud owners of a Balinese home or business. There is an incredibly vibrant expat scene on the island, especially in the busy tourist areas of the south.
The dream of owning a tropical beachfront villa has become a reality for many people but you will also find a significant number of foreigners based in the smaller towns and villages, attracted by much cheaper land prices. Housing stock in Bali generally consists of well to do villa developments aimed at foreign buyers, traditional Balinese homes and holiday apartments and condos. A high proportion of buyers prefer to buy vacant land in order to build their dream home to their own specifications.
Regardless of location, buying real estate is not to be taken lightly. Many people have been seduced by the Bali lifestyle and have jumped in head first without proper thought and planning. For some it has become an expensive mistake. The real estate business is professional but there is little official regulation. It is a very competitive market and shortcuts, misleading advice and sharp practices do sometimes occur. There are however many professional expat-owned architects, property consultants and agents. Buying property in Bali is also a complex and bureaucratic procedure with very stringent laws in place for foreign owners.
Indonesia law explicitly forbids foreigners from owning freehold land outright, however it is permissible to own leasehold apartments or condos. When buying an existing property, you will be effectively given the right of ‘use’ on a long term renewable leasehold agreement which generally lasts for 25 years. It is less complicated than it sounds whilst being common practice and a reasonably straightforward procedure.
The most popular route to outright home ownership is to partner with an Indonesian national. This local person will have their name on all official documents. There are strict legal safeguards in the form of three contracts which are the Legal Agreement, stating that the cost of purchase of the land is borne solely by the foreigner. The Irrevocable Power of Attorney gives the foreign investor full authority to sell, lease or extend the property at any time and the Permanent Right of Use Agreement allows you full rights to occupy and use the land indefinitely as you see fit. The Indonesian is essentially a ‘sleeping partner’ with no legal claim on the property.
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This process is used for the majority of private house and land purchases and as long as professional legal advice is sought, is rarely problematic. Expats married to Indonesians are permitted to use spouses as partners and most property agents can arrange an Indonesian partner for the signing of papers. There is a property sales tax of ten per cent to pay on completion which is split evenly between buyer and seller.
Throughout south Bali there are numerous upmarket developments offering apartments and private villas for sale with the option of guaranteed rental returns and full service management. This is a safe option for people who do not wish to spend all year in Bali, although prices tend to be at the top end of the market. If buying off plan always double check what is actually included in the purchase price such as taxes, legal fees, furnishings and whether a service and management charge is included for a period of time.
Some areas of Bali are no longer quite the bargain there once were. The Kuta and Seminyak regions are prime real estate territory and beachfront land here can command up to US$100,000 per 100 square metres. Expensive it may be, but the market is resilient and seems to be recession proof. Elsewhere Ubud, Sanur and the emerging area of Jimbaran offers slightly better value but still expensive for Bali standards. Here you can expect to pay upwards of US$200,000 for a comfortable two bedroom villa although the very grandest beachfront properties can sell for US$2 million or more.
The surfing mecca of Canggu (just north of Seminyak), Medewi, Amed and Padang Bai are the up and coming areas that speculators are moving in to. It is possible to become a proud owner of a two bedroom home here for around US$70,000. In these areas the last couple of years have seen annual increases in house prices of over 20 per cent.
