A Foreign Investor’s Guide to Buying Property in Bali

A Foreign Investor’s Guide to Buying Property in Bali: Key Steps for a Smooth Journey

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With more off-plan property projects springing up across Bali, it’s more important than ever for foreign investors to understand the local real estate landscape. Buying property in Bali can feel like living out a tropical dream—lush scenery, vibrant culture, and promising returns. But for international buyers, the process can be complicated, especially when dealing with properties that are still under development.

This guide distills insights from investor Q&A sessions and real-world experiences to walk you through the essential steps to buying property in Bali—whether you’re eyeing an off-plan project or a completed home.

Step 1: Don’t Just Sign—Understand the Contract

One of the most common missteps investors make is blindly relying on a lawyer to review their contract without engaging in the process themselves. Legal counsel is critical, but you should also take the time to understand what you’re signing.

Sit down with your team—this could include a lawyer, property consultant, or trusted advisor—and go through the contract line by line. For off-plan projects, where the property hasn’t been built yet, it’s even more important to scrutinize the fine print.

Key areas to review include:

Mutual Obligations: What exactly are you paying for? What are the developer’s obligations, and what happens if they miss deadlines or fail to deliver? Be sure the contract spells out timelines, payment stages, and required documentation upon completion.
Penalties for Delays or Breaches: Look for balanced clauses. The developer should face penalties for construction delays or failing to provide documentation, just as you may face penalties for late payments.
Exit Strategy: If life throws you a curveball, can you exit the deal? Some contracts allow you to back out with a penalty, but the terms need to be clear—especially if the project hasn’t broken ground yet.
Legal Compliance: Make sure the agreement aligns with Indonesian law, including notarial procedures, property handover requirements, and who covers associated fees like notary costs.

Step 2: Verify the Property Title

Whether you’re buying an existing home or an off-plan unit, checking the title is non-negotiable. In Bali, developers usually offer property under two main schemes: leasehold or HGB (Hak Guna Bangunan, or Right to Build).

For Leasehold Properties: The title takes the form of a notarized lease agreement.
For HGB Properties: You’ll need to verify the land certificate and a formal sale-and-purchase deed.

In both cases, involve a trusted local notary to verify the documents and confirm the developer’s legal right to sell or develop the property. Especially in off-plan projects, the risk of disputes increases if the developer hasn’t fully secured the land title—potentially delaying or even halting construction.

Step 3: Know the Difference Between Leasehold and HGB

Foreign buyers often ask about “freehold” in Bali, but true freehold (Hak Milik) is off-limits to non-Indonesians. Instead, you’ll likely deal with:

Leasehold: The most common option for foreign buyers. It’s a long-term lease (typically 25–30 years), legally binding, and doesn’t require you to set up a local company. For most foreign investors, especially those buying off-plan, leasehold is the go-to.
HGB (Right to Build): This is often marketed as “freehold” but technically isn’t. It allows a company registered in Indonesia (usually a PT PMA) to build and use land for up to 80 years. It offers more control but also comes with added complexity.

Choosing between these depends on your budget, goals, and long-term plans. Leasehold is generally more straightforward, while HGB can be a better fit for investors planning large-scale or long-term developments.

Step 4: Should You Set Up a Company?

To buy land under HGB, you’ll need to register a foreign-owned company (PT PMA) in Indonesia. This step comes with benefits but also responsibilities.

Consider:

Capital Requirements: A PT PMA requires a minimum share capital of 10 billion IDR (around USD 600,000). While this doesn’t need to be fully paid up front, authorities expect to see progress within 3–5 years.
When It Makes Sense: If your total investment is under USD 200,000, forming a PT PMA probably isn’t worth the hassle. You risk being non-compliant with the capital requirements. For smaller-scale investors, leasehold is usually the smarter, safer option.

Step 5: Get Clear on Taxes

Indonesia’s tax landscape can be tricky to navigate, especially for foreigners.

Here are the basics:

Rental Income: Non-resident foreigners typically pay a flat 20% tax on rental income. If you work with a property management company, they may act as a withholding agent, deducting and paying your tax before disbursing income.
Optimizing Legally: Good tax planning isn’t about evasion—it’s about efficiency. For example, opening an Indonesian bank account can help simplify income flows and improve tax reporting. Work with a local tax consultant to ensure your investment is set up properly from the start.

Step 6: Vet the Developer—Don’t Just Trust the Branding

The developer you choose can make or break your investment, especially for off-plan purchases. A glossy website doesn’t mean the land is secured or the project will finish on time.

Your checklist should include:

Land Ownership: Has the developer fully paid for the land? Is the title secured? If not, you risk construction delays or even project cancellation.
Past Projects: Has the developer completed similar projects? Ask your broker or legal advisor for references—they often have insights that aren’t publicly available.
Legal Due Diligence: Have all permits been issued? Are construction timelines and financials realistic? A solid developer will provide transparency on these fronts.

Step 7: Work with a Local Legal Team

Bali’s property market operates under a unique set of rules, blending Indonesian law with regional nuances. This is especially true for off-plan deals, where regulatory oversight is still evolving.

A local lawyer familiar with real estate and foreign investment regulations can guide you through each step—ensuring the contract is sound, the title is clean, and the structure is legal. That peace of mind is worth every penny.

Final Thoughts

Investing in property in Bali doesn’t have to be overwhelming. With the right preparation, a reliable team, and a clear understanding of the local landscape, foreign investors can successfully navigate the market—whether buying an off-plan villa or a turnkey home.

Bali offers unique lifestyle and investment opportunities. By doing your homework and following these steps, you’ll be well on your way to turning your tropical vision into a rewarding reality.