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In Indonesia, including Bali, foreigners cannot fully own land. Instead, foreigners typically use one of the following methods to purchase land or property in Bali:
• Leasehold: Foreigners can rent land for a long period (usually 25 to 30 years, sometimes up to 50 years). After the end of the lease term, the right to lease can be extended.
• Right ToUse/Hak Pakai): This option is most commonly used for purchasing a home. This does not give full ownership but allows foreigners to use the land. The validity period is usually up to 25 years and can be extended.
• Through an Indonesian Legal Entity (PT PMA): Foreigners can form an Indonesian foreign-invested company (PT PMA) that can own land as collateral (Hak Guna Bangunan) or lease.
• Through a Local Partner or Trustee: Some foreigners use the services of local citizens who act as nominal land owners. However, this method is fraught with significant risks and legal challenges.
It is important to note that laws and regulations may change, and it is recommended to consult with qualified lawyers and real estate professionals before making deals.
• Location: Properties in popular tourist areas such as Canggu, Seminyak, Kuta, Ubud, or close to beaches generally provide higher returns due to higher rental costs and demand.
• Property Type: Villas, resorts, apartments or houses — each type has its own profitability characteristics. As a rule, pool villas in tourist areas generate more income.
• Level and Quality of Service: High-quality services such as cleaning, pool and garden maintenance can increase the rental price and the attractiveness of the property for tenants.
• Demand and Seasonality: Tourist demand affects employment and rents. Bali has high and low seasons, and yields can fluctuate significantly throughout the year.
• Property Management: Effective property management, including marketing, booking and customer service, has a significant impact on profitability.
• Economic and Political Conditions: The macroeconomic situation, political stability, and changes in legislation can affect the investment climate.
• Taxes and Operating Expenses: Property taxes, maintenance and repair costs, and other operating expenses reduce net income.
• Long-term Property Value Growth: In addition to current rental returns, it is important to consider the potential increase in property values in the long term.
When assessing the potential return on real estate investments in Bali, it is important to conduct a thorough analysis of the market, take into account all possible risks and, if possible, consult with experts in this field.
Yes, you can only build a villa in Bali using local contractors. This is a fairly common practice, and many foreigners choose this path to implement their projects on the island. However, there are a few important things to consider:
• Obtaining Permits: Before starting construction, it is necessary to obtain all relevant permits from local authorities. This may include a building permit, environmental assessment, and other documents depending on the location and scope of the project.
• Selecting a Contractor: It is important to choose a contractor carefully. It is recommended to conduct research, get recommendations, and review the portfolios of potential contractors. A good contractor will have experience working with foreign clients and an understanding of local building codes and requirements.
• Contract and Legal Aspects: Make sure you have a clear and legally sound contract with the contractor. The contract must specify the terms, budget, project details and conditions for resolving possible disputes.
• Quality of Materials and Construction: The quality of construction materials and work can vary significantly. Make sure your contractor uses good quality materials and follows construction best practices.
• Communication and Control: Continuous interaction with the contractor and regular monitoring of construction progress will help ensure that everything is going according to plan and your expectations.
• Taking into account cultural characteristics: Understanding local culture and business practices will help in effective interaction with contractors and other participants in the process.
• Compliance with Laws and Regulations: It is necessary to strictly comply with all local laws and regulations regarding construction to avoid legal problems in the future.
Remember that construction in another country may be accompanied by certain difficulties and unforeseen circumstances. Therefore, it is recommended to involve qualified specialists in the project, including architects, lawyers and possibly a project manager.
Real estate construction in Bali, as in any other place, is associated with certain risks and disadvantages. Here are the main ones:
• Legal and Regulatory Risks: Foreigners face restrictions on land ownership in Indonesia. It can be challenging to comply with local laws and regulations and to obtain all necessary permits.
• Cultural and Language Barriers: Misunderstandings due to language and cultural differences can lead to communication errors and, as a result, construction problems.
• Quality of Construction: Differences in construction standards and material quality can affect the durability and safety of the building.
• Weather and Climate Factors: High humidity, heavy rains and the potential for natural disasters such as earthquakes and tsunamis require a special approach to construction and material selection.
• Financial Risks: The construction budget may increase significantly due to unforeseen costs, construction delays, or project changes.
• Contractor and Workforce Issues: Finding reliable and qualified contractors can be a challenge. There may also be problems with the discipline and qualifications of the workforce.
• Market Risks: Changing trends in tourism and the economy may affect the demand and profitability of real estate investments.
• Environmental Restrictions: There are strict environmental laws and regulations, especially in areas close to beaches and forests, which may limit construction opportunities.
• The long-term viability of the project: Climate resilience, infrastructure maintenance and property management in the long term require careful planning.
• Social and Cultural Responsibility: It is important to consider the impact of your construction project on the local community and the environment.
Successful construction in Bali requires careful planning, an understanding of local conditions and laws, and a willingness to overcome possible obstacles. It is important to conduct research and involve professionals in the project, including architects, lawyers and experienced builders.
The increase in property prices in Bali after COVID-19 can be explained by a number of factors specific to this region:
• The resumption of Tourism: After the pandemic, many tourists have been looking for recreational opportunities, and Bali, as a popular tourist destination, has attracted many visitors. This has increased the demand for short and long term rentals, increasing the value of properties.
• Interest in Real Estate Investments: During times of instability, investors are often looking for safe assets, and real estate in Bali has become an attractive option. Investors expect the property to maintain its value and generate rental income.
• Limited Offer: Bali has strict restrictions on new construction, especially in popular tourist areas, which limits supply and increases prices for existing properties.
• Changing Customer Preferences: The pandemic has changed people's housing preferences. Many are looking for more space and privacy, which has increased the demand for villas and houses with gardens, especially in secluded areas of Bali.
• The development of remote work: The pandemic has accelerated the transition to remote work, which has allowed many people to live and work from places they consider ideal for living, such as Bali. This has also increased the demand for real estate in the region.
• Lowering Interest Rates: Similar to global trends, possible interest rate cuts in Indonesia have made home loans more affordable.
• Investors' return: After the initial downturn during the pandemic, many investors returned to the real estate market to take advantage of the market's recovery.
These factors combined to contribute to the increase in property prices in Bali after the COVID-19 pandemic.
