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Legal aspects of buying real estate in Bali for foreigners
Real Estate Specialist
Date: 09.12.2024
Reading time: 9 min.
Views: 144Bali, with its picturesque beaches and unique culture, is attracting more and more foreign investors who dream of owning their own corner of this paradise island. But before diving into the world of real estate in Bali, it is important to understand the legal nuances. After all, knowledge of legal aspects will help to avoid unpleasant surprises and make the purchase safe and successful.
Peculiarities of the legal status of foreigners in Indonesia
When it comes to buying real estate in Bali, it is important to understand that Indonesian law has its own peculiarities, especially for foreign nationals. The basic rule states that foreigners cannot own land directly. It may seem difficult, but don't despair - there are alternative ways to help you become a property owner on this beautiful island.
Restrictions on land ownership
So, let's understand why foreigners can't just buy a piece of land. This is due to local laws that protect the land rights of Indonesian citizens. However, that doesn't mean you don't have a chance. You may want to consider options such as buying property in condominiums or using rental rights. For example, purchase through Hak Pakai (right of use) allows foreigners to legally use the land for up to 80 years, which provides some stability.
Types of real estate for foreigners
In Bali, foreigners can purchase various types of real estate, including villas and condominium apartments. For example, many investors choose condominiums because they can be registered to a foreignerIf they do not exceed 50% of the total number of apartments in the building. This gives you the opportunity to not only enjoy life in Bali, but also to rental income.
It is important to note that when choosing a property, it is worth considering not only its location and price, but also the legal aspects associated with the rights to it. Working with experienced lawyers and real estate agents can help you avoid many pitfalls.
Main forms of real estate ownership
Now let's take a closer look at the forms of ownership available to foreigners.
- Hak Pakai (Right of Use): This is one of the most popular ways for foreigners. It allows you to lease land and real estate for up to 80 years. Advantages? You get long-term stability. But there are disadvantages: at the end of the lease, you will need to renew the contract, which can cause some difficulties.
- Hak Guna Bangunan (Right to Build): This option allows you to own the building but not the land beneath it. This is useful if you are planning to build something new. However, there are conditions here too - the term of this right is 30 years with an option to extend it for 20 years.
- Nominee Ownership (Nominee Ownership): It is a fairly common practice for a local resident to act as a nominal landowner. This may sound attractive, but it is important to keep in mind the risks. For example, if the local decides to renege on the agreement, you could lose your investment.
The process of buying real estate in Bali
Now that we've dealt with the basic forms of ownership, let's move on to the real estate buying process. It involves a few key steps that will help you avoid trouble.
- Object selection: Start by looking for a suitable property. This can be either a villa or an apartment in a condominium. It is best to contact local agents who know the market and can offer you the best options.
- Document verification: Before you make any moves, make sure that all documents are in order. This is important for your safety. Check ownership, debts and other legal aspects.
- Conclusion of a purchase and sale agreement: When you have found the perfect property, it is time to move on to signing the contract. Here it is important that all the terms and conditions are clearly spelled out to avoid misunderstandings in the future.
- Registration of the right of use: After signing the contract, do not forget to register your right of use with the local authorities. This will protect your interests and avoid problems in the future.
- The role of the notary and legal advisors: Finally, do not underestimate the importance of professional assistance. A notary and a lawyer will help you deal with all the nuances and protect your interests.
The importance of due diligence
Don't forget about due diligence - checking the rights to the object and the cleanliness of the transaction. This is a key part of the process that will help you avoid fraud and other troubles.
Thus, buying real estate in Bali is an exciting but responsible process. If you follow these recommendations and thoroughly research all aspects, your investment can become not only safe but also profitable.
Additional expenses and taxes
When buying real estate in Bali, it is important to consider not only the cost of the property itself, but also the additional costs that can have a significant impact on your budget. Let's take a look at the main taxes and other costs you are likely to face.
| Flow type | Description | Approximate cost |
|---|---|---|
| Property transfer tax | This tax is about 5% of the value of the property. It is paid at the time of the transaction. | When buying a villa for $200,000 - $10,000 |
| Tax on gain on sale | If you decide to sell your property, the tax is approximately 10% of the difference between the purchase and sale price. | When selling a villa for $250,000 bought for $200,000 - $5,000 |
| Notary and lawyer services | These services can cost anywhere from $1,500 to $3,000 depending on the complexity of the transaction. | $1,500 to $3,000 |
| Administrative fees | Fees for registration of the right of use and other processes. | May vary, check in advance |
| Annual real estate taxes | Taxes depend on the value of the property and may not be significant, but they are worth considering. | Typically $100 to $500 per year |
Notes:
- Property transfer tax - is a mandatory payment that must be considered when planning the budget.
- Tax on gain on sale can significantly reduce your profit on resale, so it's important to assess possible risks beforehand.
- Notary and lawyer services - is an investment in your safety. Having an experienced lawyer can make the process much easier and protect your interests.
- Administrative fees can vary between local authorities, so it's best to check in advance to avoid unexpected costs.
- Annual real estate taxes - are regular expenses that are also worth including in your budget to maintain the property.
So, understanding all these costs will help you to more accurately estimate the total cost of buying real estate in Bali and avoid unpleasant surprises in the future.
Risks and pitfalls
As with any other business, buying real estate in Bali comes with certain risks. Let's take a look at the most common pitfalls and how to avoid them.
Possible fraudulent schemes
Unfortunately, in the real estate market, sometimes there are crookswho try to defraud foreign buyers. To avoid this, always check the reputation of the agent or companyThe company you are working with. Read reviews, pay attention to references and don't hesitate to ask questions. Ideal option - Is to work with agents who are licensed and have positive reviews from previous clients.
Risks of using a nominee owner
Using a local resident as a nominee may seem convenient, but it comes with high risks. For example, if your nominee decides to cancel the agreement, you could lose everything you have invested in the property. To minimize these risks, it is best to enter into a clear legal contract and work with reliable lawyers. Make sure the contract spells out all the terms and conditions, including the parties' responsibilities and how disputes will be resolved.
Risks of buying unregistered real estate
Another important point is that purchase of unregistered real estate. Always check the paperwork and make sure the property has all the necessary permits. If you buy an unregistered property, it can lead to serious problems in the future, including the possibility of forfeiture.
Tip: Before purchasing, be sure to check due diligence - verifying the title to the property and the cleanliness of the transaction. This may include checking property history, debts and legal restrictions.
Real estate market prospects in Bali
Now let's take a look at the real estate market in Bali and its prospects. This island continues to be attractive to investors, and here's why.
Why Bali remains attractive to investors
Bali is not just a beautiful vacation spot, but also one of the most popular tourist destinations in the world. Every year people come here millions of touristswhich creates high demand for rental real estate. This means that if you plan to invest in a villa or apartment to rent out, your chances of earning a steady income are very high. For example, many villa owners earn between 20% and 30% per annum on their investments.
In addition, Bali's popularity as a tourist destination continues to grow thanks to active marketing campaigns and infrastructure improvements. This makes investing in real estate on this island particularly attractive.
Impact of tourism and infrastructure on real estate values
Infrastructure development also plays an important role in the growth of real estate prices. New roads, airports and amenities attract more tourists and investors, which in turn increases the value of properties. For example, in recent years there has been an active construction of new hotels and resortswhich contributes to the rising prices of nearby real estate.
Example: In 2022, property values in popular areas such as Seminyak and Changgu increased by 15-20% year-on-year, making these areas particularly attractive to investors.
Price forecasts for the coming years
Experts predict that prices for Bali real estate will continue to grow in the coming years. This is due to the increase in the number of foreign investors and the constant growth of tourist flow.
Forecast: It is expected that real estate prices could increase by 10-15% annually over the next 3-5 years, making the current moment particularly favorable for buying. If you are planning to invest, now is a great time to buy.
Thus, the real estate market in Bali offers many opportunities for investors, and understanding the current trends will help you make the right choice. Don't miss the chance to be part of this thriving market!
Conclusions and recommendations
In conclusion, buying real estate in Bali can be a great investment if you approach the process carefully and consider all legal aspects. Remember that it is important to work with reliable professionals and check all documents thoroughly.
If you want to invest in Bali real estate safely and with minimal risks, don't hesitate to seek advice from our experts. We are ready to help you every step of the way on this exciting journey.
Yes, foreigners can purchase a villa in Bali, but only through right of use (Hak Pakai) or other alternative schemes. It is important to understand the legal aspects of each form of ownership.
The right to use (Hak Pakai) can be extended by contacting the local authorities with the necessary documents. The extension process is usually quite simple if done correctly.
Resale of real estate in Bali is possible, but is subject to certain rules. If you have purchased a property through a nominee owner, it is important to make sure that all the terms of the transaction are clearly spelled out to avoid problems in the future.
Major taxes include property transfer tax (about 5% on the value) and sales income tax (about 10% on the difference between the purchase and sale price).
Hak Pakai is the right to use land for up to 80 years, while Hak Guna Bangunan allows you to own the building but not the land underneath. These forms of ownership are the main ones for foreign investors.
When choosing an agent, pay attention to their reputation and experience in working with foreign buyers. Read reviews and ask other investors for recommendations.
In addition to taxes, consider notary and attorney services, administrative fees, and annual property taxes. These costs can have a significant impact on your budget.
Always check the reputation of the agent or company you are working with. Read reviews, look for references and don't hesitate to ask questions about previous transactions.
A lawyer helps you understand all the legal aspects of the transaction, protecting your interests. This is especially important if you are not familiar with local laws and regulations.
Real estate prices in Bali are expected to continue to rise due to the increasing number of foreign investors and the continuous growth in tourist traffic. Investing now can be a profitable decision.
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