How to Build a Villa in Bali From Start to Finish as a Foreigner

How to Build a Villa in Bali From Start to Finish as a Foreigner

  • InCorp Editorial Team
  • 8 August 2023
  • 6 minute reading time

It is no wonder that travel restrictions struck a heavy blow to Bali, the small Island that almost entirely economically depends on the tourism industry including its Villa rental sectors. However, if we look back on history decades earlier, the Island of Gods has always been able to maintain its reputation as the world’s favorite island destination, no matter what calamities wreaked havoc on Indonesia’s social and economic dynamic, building a villa in Bali always been an interesting investment for foreigners.

Take a severe financial crisis in 1998, for example, where Bali’s tourism industry was one of the few economic sectors that successfully preserved the consumer demands, while most other sectors were in distress following the hard devaluation of the Indonesian Rupiah. Most recently, in 2017, Bali’s tourism industry once again showed its resiliency when foreign arrivals had 90% recovered in just three months after Mount Agung erupted that year.

Now in 2023, the villa construction market in Bali is telling us the same tale. Defying the harsh economic influences of the Covid-19 pandemic, many villa construction projects have been started, and interestingly, commissioned by foreigners.

If you are a foreign investor considering investing in Bali’s tourism and hospitality sector, this article will tell you why this is the right time and how you can build a villa in Bali from start to finish as a foreigner.

Bali Tourism Industry is Recovering

The changing nature of office work during the pandemic is one of the biggest influencing factors that is projected to boost demand for luxury housing in Bali, as the Island is ranked 370th least expensive place to live out of 589 cities according to Numbeo, the world’s largest cost-of-living database.

In spite of these positive contributing factors, one important question remains. How close is Bali to tackling the COVID-19 pandemic? If we look at Indonesian vaccination statistics, it is the province with the highest rate of vaccination, which has reached above 50% of its total population for second vaccination and 100% for their first vaccination.

As Indonesia’s daily new cases have dramatically decreased since last October – averaging just under a thousand – Bali is already opening their door for certain foreign travelers. This could be a sign that Bali travel and the tourism industry might be on their way to a full recovery.

Read more: Investing in Lombok: Top Reasons to Buy a Villa on the Island

Building a Villa in Bali: A Step-by-Step Guide for Foreigners

Building a Villa in Bali or buy a  villa in Bali can be complicated without the correct guidelines and professional assistance, especially in a country that is riddled with complex land ownership regulations and investment requirements. Below is a step-by-step guide for effectively building your villa in Bali.

Step 1: Establish a PT PMA

A Foreign-Owned Company or PT PMA is the only legal entity that allows foreigners to conduct business or own property in full compliance with Indonesian laws and property regulations.

Step 2: Identify a suitable location

Even though Bali is a relatively small Island, land prices can differ from corner to corner.
In developing and developed areas such as Canggu and Seminyak, land prices are estimated to cost approximately between IDR 600 million and 1.5 billion (USD 40,000 – 105,000) per 100 square meters, while outlying land is priced at approximately IDR 100 million to 350 million (USD 7,000 – 24,000) per 100 square meters.

Step 3: Acquire land

Indonesia has many forms of land titles and ownership that concern foreign investors building a villa in Bali. Generally, real estate agents and private landowners will refer to either leasehold or freehold property. Contact InCorp for more concise information regarding land ownership in Indonesia.

Step 4: Appoint a project manager

Building a villa in Bali involves a great deal of time and capital, and requires effective construction management skills. This is important if the projects are to be completed within an established timeline to meet cost limitations and quality requirements.

Step 5: Appoint an architect

Choosing an architect suitable to your specific design requirements will not only need an in-depth knowledge of the local market, but also a considerable understanding of the specific style design you desire. Consider getting in touch with Meraki Concept for effective spatial planning and cost estimation to build a villa in Bali.

Step 6: Apply for building permits

An Izin Mendirikan Bangunan or IMB is a legal permit that allows the construction of buildings in Indonesia. Before obtaining one, you need to check spatial planning and land zoning regulations per the area your building is to be constructed on. This is because certain lands or zones only allow specific uses of a building. The IMB permit is currently being phased out and will be redundant by January 2022 when it will be replaced by PBG and SLF permits under the new Omnibus Laws overhauling and regulating Indonesian legislation under the guidance of president Joko Widodo’s administration.

Step 7: Appoint a contractor for building a villa in Bali

Construction costs for building a villa in Bali can start from IDR 6 million per square meter to as high as IDR 14 million per square meter, so finding the right contractor that can deliver services on time, on budget, and meet high standards is quite challenging.

Step 8: Appoint a suitable villa management service

Having a property in Bali requires professional care to make it not only profitable but also sustainable. Villa management services can assist you to create a competitive business model for your property.

Read more: How Foreigners Can Legally Rent Out an Airbnb Villas in Bali

Building Your Villa in Bali with InCorp and Meraki Concept

Conducting your property business through your own PT PMA is the safest and most secure way to invest. InCorp, with its comprehensive business setup solutions, cuts the hefty procedures in half and provides hassle-free business registration services.

When acquiring land as a foreign investor, effective due diligence and trustworthy notary services are imperative. InCorp can also help you in setting up your land and property investment plan in the most secure way.

As for villa building operations, the Meraki concept offers exclusive project management services providing high-end design and construction solutions for your project. All of Meraki’s contractors are held contractually liable for construction guarantees and undergo a detailed construction defect snagging process to rectify any construction issues before hand over.

This article is written in collaboration with The Meraki Concept

David Susandi

Branch Manager – Bali Office at InCorp Indonesia

Holding 11 years of experience in various roles, including project manager, operational manager, and corporate strategist, David Susandi is a prominent figure for many entrepreneurial organizations expanding in Indonesia.

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Frequent Asked Questions

When a foreigner or their heir move to another country and have not stayed in Indonesia within one year, they must relinquish or transfer ownership rights to someone that meets Indonesian land or property ownership requirements in Indonesia.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.