Building Property in Bali as a Foreigner in 2023: What You Need to Know

Building Property in Bali as a Foreigner in 2024: What You Need to Know

  • InCorp Editorial Team
  • 25 April 2024
  • 6 minute reading time

Many investors worldwide still consider Bali one of the world’s leading destinations. To provide a complete leisure experience,  building a property in Bali will offer a promising return on investments. 

Tourism plays a significant role in Bali’s economy, and the pandemic impacted the industry. However, this is also an excellent opportunity to start investing.

The Prospects of Renting a Property in Bali

Bali boasts some of the highest rental yields in the world, with an average return of around 15% on the purchase price. In comparison, the global average rental yield is around 5%.

Additionally, property in Bali sees a year-on-year appreciation of about 15-20%, which is significantly higher than many other markets.

Rental costs are on the rise throughout Bali, with annual rent increasing by approximately 15-20%. However, it’s worth considering how sustainable this growth is in the long run.

The occupancy rates in Bali are impressive, with most properties being occupied for about 65-80% of the year on average.

It’s possible to recover your entire investment within six years. This rapid return means that you can reinvest in additional properties sooner, leading to substantial passive income over time. Digital nomads, in particular, often prefer investing in rental properties in destinations like Bali instead of settling in a permanent home.

Why Start a Property Rental Business in Bali?

Building Property in Bali as a Foreigner in 2023: What You Need to Know

Bali is usually a place for vacation and fun. However, aside from that, Bali is also an up-and-coming area for business – specifically the rental business. 

This is because foreigners’ demand for homes in Indonesia has significantly increased after the pandemic. As a result, Bali has been busier than ever, with tourists going in and out of the region.

In addition, the properties in Bali are getting rented out quickly due to the changing post-pandemic work style and the new second-home visa scheme. 

The Bali Real Estate industry has been trying to catch up with the demand. Rental prices have surged to a new high post the pandemic. Newly built villas now cost up to IDR 30 million per month. 

Demand range from long-term rentals to short-term ones, both beneficial and profitable in different ways. 

There are many reasons to invest in Bali property. Some of them include the following:

1. Way of Life

Bali is known for its relaxed and easy-going lifestyle compared to other cities. It provides a good mix between relaxation and vision. The infrastructure and development allow you to be connected while disconnecting from the daily bustle. 

2. Tourism Scene

The general ambiance of Bali is such that it attracts tourists. In addition, Bali has several natural beaches, waterfalls, forests, and mountains. 

Aside from that, unique restaurants, coffee houses, and other establishments are built to attract tourists, making it a worthy investment spot. 

3. Prices and Affordability

The prices in Bali are comparatively low. Therefore, it is one of the key attractions for foreigners who are okay with spending long periods in Bali for vacation. 

4. General Location 

Bali is surrounded by equally beautiful islands, including Nusa Penida, Nusa Lembongan, and Nusa Ceningan, which are also tourist locations. This makes Bali a strategic area for long-term investment, considering its potential. 

Understanding The Types of Land Titles

Building Property in Bali as a Foreigner in 2023: What You Need to Know

1. Right of Ownership (Hak Milik)

The land you own can be utilized for any purpose due to your Right of Ownership, which has no expiration date. 

However, only citizens of Indonesia are eligible to purchase the Right of Ownership. It is because the Indonesian Agrarian Law gives this land the highest authority.

2. Right to Build (Hak Guna Bangunan / HGB)

With the Right to Build, you have a permit to construct a structure on the property that is not your own. 

The right to make has a 30-year term that can be extended for a maximum of 20 years. This land right is granted to legal companies incorporated following Indonesian law and to Indonesian nationals. 

3. Right to Cultivate (Hak Guna Usaha)

You can develop farming, raising animals, and fishing areas by owning the Right to Cultivate. These lands are under the control of the State government. 

For Indonesian legal entities, the permit is valid for 35 years; for individuals, it is suitable for 25 years. This license may be extended for an additional 25 years. 

4. Right to Use (Hak Pakai)

You can utilize the goods gathered from land that belongs to the State or another individual if you have the right to use it. 

The right to use may be obtained by foreigners, Indonesian citizens, locally held businesses, and businesses with both local and foreign ownership.

5. Leasehold Right (Hak Sewa)

Through the leasing agreement, Hak Sewa permits you to utilize a portion of the land that is not your property but belongs to another person for a specific time. You must pay the landowner’s rent following the terms of the lease agreement.

6. Right of Land Clearing and to Collect Forest Products (Hak Membuka Tanah dan Hak Memungut Hasil Hutan)

These two permits allow the holder the authority to clear a portion of land that is not their own and to take materials and goods straight from the forest on the property. 

Steps To Safely Building Property in Bali 

Aside from acquiring buildings, building new properties in Bali is possible. To do this, it is advisable to primarily understand the new regulations governing the land’s ownership and use before purchasing. 

Finding a location is also integral to suit the type of property you want to build. Land certificate acquisition can be tricky to handle. For this matter – consult InCorp Indonesia (formerly Cekindo), which is well-versed in the land and property registration process. 

Post-building the property, it is also essential to ensure proper management that is experienced in providing adequate management of various property types to ensure the rental processes run smoothly.

In short, owning and building properties in Bali can be challenging but worth the risk. InCorp Indonesia (formerly Cekindo) also provides services for business licensing for entrepreneurs looking to benefit from the same.

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.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.