Its warm weather, stunning landscape and welcoming culture makes Bali one of the world’s most desirable places to live. Visitors just can’t seem to get enough of the glorious island, and more and more holidaymakers are either turning their short trips into permanent stays or securing holiday homes that they can retreat to whenever they feel the urge.

Luxurious villas by the ocean and comfortable family homes nestled in the mountains are being snapped up quickly, making Bali a hot spot not just for international home buyers looking for their own slice of heaven, but also for astute property investors.

Bali’s luxury property market is progressively attracting more and more property tycoons looking to cash in on capital gains and build a healthy property portfolio in a market that has seen rapid growth over the past few years.

For first time investors or those looking to get their hands on a beautiful home, understanding Indonesia’s complex and restrictive property laws can have its challenges. We are here to simplify the journey; with the right guidance and support, that shiny property portfolio or dreamy new home will soon be yours.

Photo credit to villa Upama

How to purchase property in Bali

Indonesian law places restrictions on the ability of foreigners to purchase property in Bali. These laws aim to keep ownership within Indonesia and protect the country’s booming economy. But it takes more than a few laws to ward off the entrepreneurial kind and a little further digging uncovers some completely legitimate methods to acquire property.

The Indonesian government recognises various rights concerning real estate, the three most relevant being:

  • The Right to Use (Hak Pakai)
  • The Right to Build (Hak Guna Bangunan)
  • The Right to Own (Hak Milik)

As long as the property is not part of government subsidised housing, foreigners are allowed to invest in commercial and residential real estate or property as an investment. However, because non-Indonesians may not actually own property (Hak Milik) under Indonesian law without the help of a nominee or under a foreign investment company structure, the most common way foreigners buy property in Bali is to have a leasehold agreement under the title of Hak Pakai (Right to Use). The land titles Hak Milik (Right to Own) and Hak guna Bangunan (Right to Build) are certainly more advantageous, but these are not available to foreigners on their own.

investing in Bali property: a slice of heaven
Photo credit bali

Various ways foreigners can purchase their dream investment property in Bali

1) A leasehold investment (long term renting)

This is a long-term lease contract. Although the land title is not under the foreigner’s name and remains under the ownership of the original owner, the land can be rented for an initial period of around 25 years and can then be extended up to a period of 70 years. After the lease begins, the owner’s title of Hak Milik (Right to Own) will be legally transferred to the foreigner under the Hak Pakai title (Right to Use).

Under the lease contract the property is able to be sub-leased (rented out to other people). This is how many foreigners turn a leasehold property into a lucrative investment and source of passive income. For most investors, the beauty of a lease is that their focus is immediate cash flow and a passive income, allowing freedom from the burden of watching market conditions as the actual value of the property is of no huge concern. In a low market there will be an increased number of long-term renters, and in a high market when everyone is purchasing, there is still the benefit of short-term holiday rentals.

If the leasehold is not renewed once it expires, all rights go back to the original owner and it becomes a freehold Hak Milik property again.

2) A leasehold – mortgage investment structure

The most common method for a foreigner to acquire and control land in Indonesia is a combination of the above lease agreement and a first registered mortgage over the property, together with various ancillary documents.

This security structure is a system of contractual agreements between the foreign investor and the Hak Milik land owner (often a business partner of the foreign investor) which grants leasehold occupation and mortgage security rights to the foreigner over the property for the terms of the lease and mortgage. The system of documents consists of:

(a) Deed of Lease in Notarial Form executed before an Indonesian Notary in the Indonesian language. The leasehold interest is an unregistered interest in the land so the foreigner’s leasehold rights do not appear on the Hak Milik certificate of title as an encumbrance. However, the unregistered leasehold interest of the foreigner is a strong, secure and enforceable right of occupation will take priority over subsequent encumbrances on the Hak Milik title. While the actual term of a lease is not regulated under Indonesian law, Notaries in Bali will generally grant leases to foreigners in terms of 25 years so that the lease term accords with the government decreed 25 year term of the Hak Pakai title available to an eligible foreigner as a registered interest in Hak Milik land.

(b) Notarial Loan Agreement and First Registered Mortgage: as the Notarial Deed of Lease is an unregistrable interest in the land (so the interest will not appear as an encumbrance of the Hak Milik Title) in order for the foreign investor to lawfully retain the original freehold certificate of title as against the Indonesian Hak Milik owner (being the Indonesian business partner) and also prohibit the Indonesian business partner dealing in a transfer of the title, the foreign investor may be registered as a first ranking mortgagee of the property. The principal amount of the loan is often the acquisition value of the property funded by the foreign investor as lender.

(c) Business Partner Agreement and Irrevocable Power of Attorney: this deed regulates the rights and obligations of the foreign investor and the Indonesian business partner. The power of attorney is back up protection which can be used in limited circumstances for the foreign investor to transact the property without the involvement of the Indonesian business partner. Advice should be taken on the circumstances in which the power of attorney can be implemented.

(b) Testamentary Wills: the Indonesian business partner may devise the Freehold land by way of testamentary will to the foreign investor who must re-transfer the land to an eligible Indonesian within one year. The foreigners interests in the property, primarily long term lease and the mortgage, can also be left by way of Indonesian Will to the beneficiaries of the foreigner.

Bali property Investment: Indoor luxury
Photo Credit Tapja

Current market trends in Bali

Bali’s property market has seen exponential growth over the past few years. In 2011, 2012 and 2013, return on investment and capital gains on property in Bali were at an all time high.

The heavy demand and high volume of transactions over the past few years has seen property prices increase by an average of 20% in most areas, and up to about 40% in popular areas such as Seminyak and Canggu.

Despite these increases, investors are still jumping at the chance to buy property in Bali and are encouraged by positive market sentiment, the island’s worldwide popularity and Bali’s ever-increasing reputation as a leader in luxury accommodation.

According Gunawan the emerging markets are now in Jimbaran, Nusadua Bukit (South Kuta) and Tabanan Regency. He affirms, “land prices have soared in the Central Kuta area in places such as Seminyak and Petitenget, making it difficult for new investors to tap into the areaIt is hard to get a good return on the Central Kuta area because it is already highly developed. Investors are now shifting to South Kuta where there are still empty land blocks and reasonable property prices.”

Small-scale investors on a tighter budget are now branching out, heading further north to Tabanan or to islands off the coast of Bali, such as the pristine Gili Meno where you can still pick up a 2 bedroom property for $US100k.

Investing in Bali property: a luxury villa

Average Bali property prices 2014

Bali has extreme variations in property prices, ranging from the very low-end to the extraordinarily luxurious high-end. If you want a high-end villa right on the beach, be prepared to pay the same as you would in Australia or America. Bargains will more likely be found off the main drag, and opportunistic investors can even nab themselves an unfinished project to capitalise on.

According to Michael Gunawan of Ray White Kuta, if you are looking to buy a 2 bedroom villa on a 250m² block of land in downtown Seminyak, the freehold (for sale price) will set you back about $US500k. In Canggu, Jimbaran or Nusa Dua, you’re looking at about $US300k, in Denpasar City it drops to $US250k and Tabanan is an affordable $US100k.

To lease a property for 25 years (Hak Pakai- Right to Use), you will usually pay about half the freehold price.

bali villa investment: luxury bedroom

Loans and Finance

It’s difficult for foreigners to acquire loans from Indonesian banks as properties are rarely registered under their name. Consequently, many foreigners pay in cash instalments.

For those determined to secure a local loan, the only way to do so is under a freehold through a nominee or company. For local loans on property developments, the project needs to be 70% complete, and for local loans on lease agreements, the leasing agreement will need to be put under the name of the bank.

A more viable option is to take out a loan through an international bank. There are local freelance agents and small businesses in Bali that help foreigners make the transaction and ensure a competitive interest rate.

Property Firms

There are numerous property firms to buy and sell property through in Bali. We recommend internationally recognized real estate agents that have branches all across Bali, as this guarantees that they understand the market of the entire island.

  • Ray White has offices in Pecatu and Kuta (where you can contact Michael Gunawan).
  • Elite Havens property consultancy firm is in partnership with Knight Frank. Ask for Matthew Georgeson.
Bali property firms
Photo credit Alila hotels


So you’ve researched the market, organised finance and understand Bali’s property laws inside out and. What’s next?

  • Appoint an agent to help you search for your property and make sure your deal is safe.
  • Negotiate the price.
  • Put down a deposit. This is usually 10-30% of the property price.
  • Sign a letter of intent with the seller agreeing to the final payment price.
  • If using a nominee, sign the Power of Attorney agreement.
  • Collect your revised certificate and pay the notary 3% of the property price.

It may sound simple, but like anywhere in the world, acquiring property can get complicated. Here are a few hot tips to help you out.

1) Find out how motivated your seller is

To see how urgently the owner needs to sell the property and how likely they are to accept a lower price, ask the agent some important questions:

  • Has the seller already purchased a new home? If so, it is more likely they will want to have a short settlement period in order to quickly pay for the new taxes and expenses on their new property.
  • How long has the house been on the market?
  • How long will they leave it on the market if they don’t get their desired price?

Consider these questions but don’t be cheap and try to avoid making ‘low ball offers’. If it is a high quality piece of land or property and you see potential to make money, waiting around for a price that is far below current market value will only make sellers and agents move away from you. Worst of all, someone else who sees the same potential in the property will probably dive in and swipe it up. It’s far better to be realistic and get a quality property for a slightly higher price than risk missing out all together.

2) Sign an unconditional purchase contract

If you have a motivated seller who wants to move quickly, signing an unconditional purchase contract can give you an unbeatable edge, which is particularly helpful if there is a lot of competition. This contract means that your offer is not ‘subject to finance’ or any other conditions. Sellers are often willing to accept a lower offer if they know that you have guaranteed finance and can offer a short settlement period.

3) Build a relationship with property sales agents

The need for trust and loyalty in a buyer-agent relationship is mutual. An agent who has several interested buyers is likely to prefer selling to a buyer that they know and trust not to back out at the last minute.

Befriending an agent in the local area you wish to buy in will have a plethora of advantages including market insights, access to property listings before they are released to the public and potential for private property viewings – all of this giving you an edge over other buyers.

4) Hire an agent, appoint a notary and be specific!

It is not the investment that is risky; it is the investor who doesn’t have the adequate skills that makes an investment a high risk“~ Robert Kiyosaki, American Tycoon investor.

Gunwan stresses the importance of “appointing a professional property agent and a good notary for a clear and proper legal process.” A notary or lawyer is essential when land titles are involved to ensure the signing process is witnessed and the documents are verified under law.

Gunawan also suggests that foreigners must be very clear about the purpose of their Bali investment. When making decisions, remember to always stick to the basics: “location, land and looks“, and always consider the pros and cons of the property and then compare it to others that are similar.

Foreigners should also thoroughly understand and carefully select the choice of property title they are buying into. Is it a Freehold, Right of Use or Leasehold? An agent can help guide investors through this. Check the surrounding area and community of the desired property, and try to pre-empt any issues that could become a problem down the track. Consider having a building inspection and bank valuation done before purchasing the property as an added safety net.

Dream Villa Investment in Bali
Photo credit Architectural Digest

An Interview with Leading Bali property authority, Matthew Georgeson of Elite Havens

Matthew Georgeson is the head of Real Estate and a partner at Elite Havens, the largest villa rental company in Bali and a property consultancy firm in partnership with Frank Knight.

With 16 years of direct experience in the Indonesian property market, Matthew is a leading authority in the field. He was kind enough to give a moment of his busy schedule to and share his words of wisdom

What do you see happening in the market?

Despite Bali’s property market seeing massive growth over the past few years, Matthew says that “it’s a tougher market now because there is a lot more competition, and consequently, yields are downHowever, transactions amongst the locals remain robust, simply because they can secure finance more easily.”

Matthew says a lot of Indonesians who purchased land around a decade ago, for somewhere around the $US200 mark, are now looking to sell because they don’t owe money and believe the property value has increased. As you would expect, this has greatly escalated property prices.

For standalone villas, which may or may not attract foreigners, there has been no great price reduction and liquidity is slow. A lot of people are paying record high prices then bulldozing the property and rebuilding. It’s not leaving much skin on the bone for the next buyer.

Despite the rise in property, Matthew assures us that Elite Havens, which specialises in exclusive, luxury property sales in Bali, is still doing extremely well. “We still have a lot of people buying very expensive, top of the shelf property,” he says, an obvious sign that despite price increases, some people still can’t resist buying a slice of heaven in Bali’s increasingly luxurious property market.

Matthew admits that foreign investors only make up a small part of the Bali property market. Naturally, the market is highly leveraged by local buyers, but for various business and lifestyle factors, foreigners maintain an interest in Bali property.

What advice would you give to foreigners who are looking to buy property in Bali?

Matthew’s first words: “Know that Indonesia has a very different legal system and get good legal advice before you commit to anything.

It makes sense for a foreigner to retain a lawyer whilst buying property, but Matthew says many people try to avoid it. “They wouldn’t dream of purchasing property in Australia without a lawyer, but for some reason if they are buying here, they just don’t get one. People don’t realise that all the decisions they make, even those at the very beginning of the deal, are going to affect them in the long term. It’s important to understand exactly what you are getting into and to get good legal advice before you commit to anything.”

Matthew’s hot investment areas that he thinks are headed for growth over the next 10 years are:

  • Nusa Lembongan Island
  • Lombok and the Gili islands including Trawangan and Gili Meno
  • Tanah Lot, which still has room for growth, or anywhere on the coast further north.

Matthew also predicts that if Indonesia goes ahead with its plans to change the laws and make it easier for foreigners to have land titles in Bali, we are likely to see a move from trendy villas to apartments.

Final Notes

Buying land in Bali
Photo credit

Irrespective of market conditions, there will always be a demand for property in Bali. For investors, Bali’s strong tourism position means good turnover rates for sub-leased properties and high demand for properties for sale. The key is getting into the market before it’s too late.

We leave you with this quote:

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” ~ Franklin D. Roosevelt