Bali is a glittering jewel in the crown of Indonesia. Almost 4 million people call it home, whilst around 2.5 million tourists a year come to enjoy the island’s sandy beaches and tranquil temples. For investors, there has never been a better time to consider buying a villa in Bali. Security has been stabilized across this once troubled region, and the island is now well on its way to becoming one of the most popular tourist hotspots in the whole of Asia.
That isn’t to say that buying a villa in Bali will necessarily be cheap or easy. There are local laws that you need to be aware of, as well as the fact that owning and maintaining a foreign holiday home can be very expensive if you haven’t adequately planned for it. Don’t worry though, as long as your willing to spend a little time on your investment, you should still be able to get yourself a great deal.
Legal Constraints when Buying a Villa in Bali
The first major hurdle for people looking to invest in property in Bali is that foreigners are not permitted to own land, nor are they allowed to own freehold rights to a building. Instead foreigners are currently restricted to purchasing something called a ‘Hak Pakai’, which is essentially nothing more than a 25 year lease.
Obviously a 25 year lease is not much good to most investors. You can’t get a mortgage against such an arrangement, and even worse, you won’t be permitted to rent out the villa to holiday makers when you aren’t there. Luckily there are several solutions to this problem. The most common being to either make use of a native Indonesian nominee (who will essentially hold the building in trust), or to form a PMA (a type of foreign investment company) and apply for a license to build a new villa (which will then be owned by the PMA).
These solutions can be a little complicated, but they work well for those investors that take the time to make sure they fully understand the system. There are companies that can help deal with these issues for people interested in buying a villa in Bali, so don’t worry, there is no need to struggle through the process on your own.
Local Experience is Priceless when Buying a Villa in Bali
The most important bit of advise you will ever get about investing in property in Bali, is that you must visit the island before you do. Just as with most other tourist hotspots, choosing the correct location for your investment is everything, so make sure to try before you buy. Take time to speak with your new intended neighbours, particularly any local ex-pat’s you can find (who will have invaluable advice about buying property and about the reliable property management companies in the area).
Realistically, you should spend at least a month exploring the island, trying out rentals and talking to locals before making a final decision about buying a villa in Bali.