3 Tips On How To Invest In Property In Bali
Flavia Galeotti shares how to successfully navigate Bali’s property market so you can secure your spot on the “Island of the Gods”.
Bali’s property market has undergone tremendous transformation and growth over the past decade. Where there was once only sprawling rice fields has since become the bustling hubs of Seminyak and Kuta, and the eyes of property investors from around the world are now firmly fixed on the “Island of the Gods”.
Both commercial and private real estate investment in Bali have, in large part, been propelled by increased tourism to the island. In 2016, Bali surpassed its target of 4.2 million foreign tourists for the year by November, and the total by year end was 4.92 million – up 23.14% from the year before. The target stands at 5.5 million for 2017. To meet the demand created by this booming tourism industry, a great number of stunningly modern, state-of-the-art properties are currently on the market.
Since 2011, the return on investment and capital gains on properties in Bali have been consistently high, and these figures are expected to continue to rise as Bali further cements its reputation as one of the most popular island destinations in the world. According to Knight Frank’s 2015 The Island Review, Bali recorded the strongest rise in luxury residential property prices among the world’s top island hotspots – with prices surging by 15% in 2014 – followed by Mustique and Ibiza.
No matter if you are looking for an investment to generate income from rental or sales or a villa for your future retirement, Bali’s residential real estate market offers immense opportunity. The dream of owning your own piece of paradise by the ocean or in the highlands can become a reality provided you are well-informed on the rules and regulations that foreigners purchasing property in Indonesia must follow, and have a good grasp of the Bali property scene.
Here are three essential tips to keep in mind before deciding to make a piece of Bali real estate the crown jewel in your property portfolio:
1. Understand Indonesian property ownership structures
After centuries of colonial rule, Indonesia instituted property laws forbidding foreigners from owning any property outright when the country gained independence in 1945. Over time, though, these laws have been amended and somewhat relaxed – making the Indonesian property market slightly more accessible to foreign investors.
There are seven types of ownership structures for property as per the Indonesian Agrarian Law, four of which are relevant to foreign investors. These are: The Right to Use (Hak Pakai); The Right to Build (Hak Guna Bangunan); The Right to Own/Freehold (Hak Milik); and Leasehold (Hak Sewa).
For a foreigner, the “Right to Build” and the “Right to Own” are not feasible options as these are reserved strictly for Indonesians, which leaves the “Right to Use” and “Leasehold” as possible ownership structures for foreign investors.
With that said, the “Right to Use” and “Leasehold” arrangements are almost as good as the “Right to Own,” as a Hak Pakai certificate is valid for 80 years (extended automatically after 30 and 50 years) and a Hak Sewa certificate can be valid for between one and 80 years. In 2016, the government introduced a new regulation stipulating that foreigners can purchase a property in Bali for as little as IDR3 billion (US$225,073) under Hak Pakai – and this amount varies from region to region.
It is also important to note that in order to get approved by the government to purchase a property, you must first demonstrate that you intend to live, work, or invest in Indonesia – so careful planning must be done before applying.
2. Appoint an agent and a notary
When purchasing property in Bali (or any foreign country for that matter), it is imperative to have professionals assisting you, as there can be some unscrupulous characters who may seek to take advantage of your lack of familiarity with local laws and may lead you astray. A reputable property agency will be able to match you with properties in Bali that align with your budget and requirements – companies like Elite Havens, Seven Stones, and Kibarer Property are experts and have an established presence on the island.
You will also need to engage the services of a lawyer, as the Indonesian legal system is particularly complex when it comes to property ownership regulations. Their legal expertise and advice, as well as their proficiency in the local language, will be a great asset to you.
3. Identify the best areas for investment
Due to unfettered development, hotspots like Central Kuta, Seminyak and Petitenget have become so saturated with villas and hotels that land prices have soared – and new property buyers are beginning to look elsewhere. Alternative neighbourhoods such as South Kuta, Canggu, and Tabanan offer good value for money. Some investors are even looking to the smaller islands off the coast like Gili Meno, where you can snap up a two-bedroom property for as low as US$100,000. Take the time to explore off the beaten path in order to find the right property, at the right price, for you.
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