Acquiring Property in Bali: Through Rental or Leasehold?

Bali has served as a tourism hub in Indonesia for many years thanks to its excellent location, amazing landscapes, and wide range of travel offerings.

As a result, a substantial number of foreign investors see Bali as their top choice to invest in property due to the massive arrival of tourists. In 2019, a shocking 6.3 million international visitors arrived in Bali via the Ngurah Rai International Airport.

Therefore, the inflow of tourists signifies the growing demand for accommodations such as villas, hotels, resorts, and other types of long-term and short-term property. Over the years, Bali’s property market has increased tremendously by more than 80%.

Although foreigners are not permitted to own freehold property, there are ways they can acquire property in Bali.

Property Ownership in Bali for Foreigners through Rental or Leasehold

Below are the general descriptions of rental and leasehold property:

1. Long-term Rental Property

Foreigners can choose a long-term rental property with a rental period between 1 and 5 years.

Rental property works by the property owner renting out their place and collects annual rental fees upfront from the renter. The owner and the renter must sign a rental agreement with the presence of a witness. The witness’ signature is required as well.

Often, people who choose a long-term rental property in Bali are those in groups or families with an extended vacation, business trips, intention to relocate to Bali or high budget but without intent to purchase a villa.

The advantages of the long-term rental property include the following:

• 24/7 management assistance
• No contract renewal is required
• Possible discount with an extended rental period
• Complete furnishing with quality amenities and interiors
• No maintenance costs
• Own privacy
• May have maids, personal cook, nanny daycare, or butler service
• Free WiFi and satellite TV
• May sublet under the owner’s permission

2. Leasehold Property

A leasehold property is also considered long-term, but the land ownership is not under the foreigner but the original landowner.

However, foreigners can first lease the land for 25 years and then extend the lease for a maximum of 70 years with Hak Sewa (Right to Lease).

Foreigners can sub-lease the property to others and turn it into a profitable investment. Many foreigners use leasehold property as a form of Bali property ownership to increase their passive income.

For leasehold property, foreigners need to sign a leasehold agreement with the landowner through the assistance of a third-party legal consultant.

Don’t Forget to Conduct Your Property Due Diligence in Bali

You can complicate your chances of Bali property ownership if you are not careful enough, especially when you have no clear idea of whom you do business with.

It is why so many foreigners seek assistance from a reliable partner to help them conduct due diligence before sealing the deals.

If you are thinking of skimping your due diligence to save money, you will probably end up wasting your money and, worse, getting into serious legal issues.

Hire a due diligence professional who can make your property purchase in Bali seamless without the fear of working with the wrong partner or not complying with the laws.

The due diligence process for your Bali property ownership shall always cover investigations of the history of the property ownership, lease rights and zoning regulations, and neighborhood.

How InCorp Indonesia Can Assist

Bali property ownership transactions that have gone through a complete due diligence process are often the most successful.

As experienced due diligence consultants, InCorp’s integrated one-stop due diligence solution assists you in acquiring property in Bali.

We will identify crucial areas to conduct adequate due diligence and help you maximize the investment value of your Bali property ownership.

InCorp Indonesia tailors the due diligence approach for each transaction and advises you on issues ranging from minor negotiation terms to significant deal-breakers. We follow the proper procedures that comply with Indonesian law so you can avoid both legal and investment risks.

Contact us for professional land and property due diligence assistance. Complete the form below.