Mortgage to buy real estate in Bali in 2024

Author of the article:

Artem

Indonesia
Real Estate Specialist

Date:  17.07.2024

Updated: 10/14/2024

Reading time: 7 min.

Views:  1,634

Bali is not just a paradise with stunning beaches and incredible culture, it is also a promising place for investment. Foreigners dreaming of their own corner of this picturesque island should learn about the nuances of the mortgage and how to buy real estate. In this article, I will tell you about the key points related to mortgages in Bali in 2024.

Historical context

Bali, part of Indonesia, has a rich history dating back to ancient times. Travelers and traders have been visiting the island for centuries, which has shaped its unique culture and incredible architectural heritage. However, the development of Bali by foreigners is relatively recent, and this has had a significant impact on local legislation and the real estate market.

After Indonesia's independence in 1945, the country's laws began to gradually adapt to the new reality. In other words, Indonesia has become more and more open to foreign investors and entrepreneurs than it used to be. But at the same time, the government is trying to protect its national interests, which causes certain restrictions for foreign buyers in the real estate market.

Legal framework for mortgages in Bali

Let's talk about the most important laws that govern mortgage loans and in general real estate in Bali by foreigners. The main players in this legal field are Land Law (UUPA) and the Law on Foreigners Owning Real Estate (Peraturan Menteri Agraria No. 7 1996).

Essentially, foreigners are only allowed to own real estate under certain schemes such as:

1. Hak Pakai (Right of Use) - allows foreigners to lease land plots for up to 25 years with the possibility of renewal.
2. Hak Guna Bangunan (Building Right) - The right to construct buildings with the option to lease the land for up to 30 years.
3. Purchase through PMA companies - foreigners can own land through a foreign investment capital company (PMA).

In 2024, these schemes can be expected to remain relevant. Mortgages for foreign nationals in Bali are possible, but with a number of restrictions. First, interest rates can be higher than for locals. In addition, banks require a substantial down payment, usually at least 40% of the value of the property.

Mortgage options and nuances in Bali

If you are seriously considering purchasing real estate in BaliIf you are looking for a mortgage in Bali, you will need to explore the different mortgage options and their nuances. A mortgage in Bali is available to foreigners, but it has its own peculiarities and complexities. The main mortgage options include:

1. Mortgage in Indonesian banks: Suitable for those permanently residing in Bali. Requires a substantial down payment - usually at least 40%.
2. International mortgage loans: Some international banks offer mortgages for purchase real estate in Indonesia. Terms often vary from country to country and financial institution to financial institution.
3. Financing through local PMA companies (Foreign Investment Agencies): Ability to use local financial structures to obtain a loan.

Features

• Interest rates: Usually higher than in the West.
• Credit History Requirements: Banks require proof of income and credit history, which may be difficult to obtain.
• Bureaucratic procedures: Multi-layered and rigorous, incorporating checks and confirmations.

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Comparison of mortgages and installments from developers

To better understand which option suits you better, let's look at the main differences between mortgages and installment loans from developers.

Our cases

Example 1: Successful purchase through a mortgage

Mia from Sydney has been living in Bali for several years and decided to buy an apartment. With the help of our agency, she applied to a local bank. Despite some red tape, Mia successfully obtained a mortgage loan with a down payment of 50%. She is now paying off the mortgage with a comfortable monthly payment while enjoying the ocean view from her windows.

Example 2: Installment payment from the developer

Andrei and Olga from St. Petersburg decided to buy a villa in Seminyak. They chose a developer with a good reputation and signed an installment contract. The initial installment amounted to 15%, and they will pay the remaining amount over three years. No interest is charged and the couple is already enjoying their new villa.

Example 3: Difficulties in purchasing

John, a former UK resident, was unable to get a mortgage because of his poor credit history and high bank requirements. He decided to rent a home and save up in case there was an opportunity for a favorable installment plan from the developer. Fortunately, we have found such an option: the first payment is only 10%, the rest without % within 5 years. Want to know about favorable offers from developers? Fill out the form on the website, we will send you current offers from the most reliable developers.

The process of obtaining a mortgage from Indonesian banks

1. Verification of requirements: Make sure you meet the bank's income and credit history requirements.
2. Collecting documents: Prepare your passport, tax returns, bank statements, income documents.
3. Preliminary approval of the application: Some banks allow you to apply online to quickly find out if you can expect to be approved for a mortgage.
4. Real estate appraisal: The bank conducts an appraisal of the real estate to be purchased.
5. Contract signing: Once the loan is approved and the property is appraised, a mortgage agreement is signed.
6. Registration of documents: Certifying the necessary documents at the notary and registration of real estate with state authorities.
7. Submission of final application: Restarting the process based on documents provided and mortgage loan approval.

Installment payment as an alternative to mortgage

If a mortgage in Bali seems complicated or an unacceptable option, there is an alternative - installments from developers. Here the terms are often much more flexible and attractive.

Terms and benefits of installment payments

1. Low down payment - It is often as little as 10-20% of the value of the entire property.
2. Flexible payment terms - Most real estate developers offer payment plans for 1-5 years.
3. No bank fees and interest - Which makes the cost ultimately lower than with a mortgage.

Recently one of my clients, Lucas from Amsterdam, decided to purchase a villa in the Changgu area. He entered into a contract with a developer who offered the following terms: 15% down payment and he would pay the remaining amount in equal installments over three years. This allowed Lucas to avoid complicated banking procedures and save on loan interest.

Advice on buying real estate in Bali for foreigners

So, you've decided to take a step towards your dream and purchase a Bali real estate. Congratulations! But before you proceed with your purchase, there are a few important guidelines to consider.

Real Estate in Bali

NYAMAN

from $225,000

Indonesia, Bali, Ubud

SAYAN COMPLEX

from $91,000

Indonesia, Bali, Ubud

SUWETA COMPLEX

from $105,000

Indonesia, Bali, Ubud

BAMBULINA VILLA

from $545,000

Indonesia, Bali, Ubud

GREEN VIEW VILLAGE

from $250,000

Indonesia, Bali, Ubud

VILLA CAPELLA

from $415,000

Indonesia, Bali, Ubud

Required documents and purchase process

You will need the following documents to successfully complete the transaction:

• Passport and its notarized translation;
• Lease agreement (if buying through the Hak Pakai scheme);
• Company incorporation documents (if using PMA);
• Financial Statements.

The buying process may seem complicated, but with an experienced real estate agent everything will go smoothly. We at our agency accompany our clients from the selection of the property to obtaining all necessary permits.

Tips on choosing real estate and interacting with developers

1. Check the reputation of the developer. Make sure the project with all permits and the builder is clearly following building codes.
2. Note the location. Bali is an island with a variety of neighborhoods. Think about what is more important to you: proximity to the ocean, tranquility, infrastructure.
3. Feel free to haggle. The Indonesian real estate market is quite flexible and it is often possible to get a discount or better payment terms.

Post-purchase property management options

Many buyers want the property they purchase to generate income. Renting out is a great way to achieve this goal. You can either rent out your villa to tourists yourself or use the services of a property management agency. This allows you to not only recoup the cost of purchase, but also receive a steady income.

Conclusion

Buying real estate in Bali for foreigners requires knowledge of local legislation and a willingness to deal with bureaucracy. However, with the right approach, mortgages or installments can become real options for you. If you are ready to take a step towards your dream and become a property owner in this paradise, do not hesitate and contact us! We will be happy to help you at all stages of the purchase.