Real Estate Investments in Bali: Myths and Reality for Foreigners

Bali is a paradise island that attracts not only tourists but also investors, promising returns of up to 17% per annum from rent and up to 40% from resale of real estate. However, before you start calculating the profit, you need to understand the nuances of owning real estate on the island for foreigners.

Direct purchase of ownership (freehold) in the understanding of Western law is not available here. Forget about the classical understanding of property rights - in Bali, everything is a little more complicated. Let's consider the available options:

The term "Freehold" in Bali is used incorrectly. In fact, this is a long-term lease of land for 80 years, issued only to a legal entity. The lease scheme is as follows: the initial term is 30 years, then it can be extended for another 20, and finally for another 30 years. The key point is that the company owning the lease must exist continuously for the entire 80-year period.

Liquidation of the company automatically cancels the lease. This imposes significant restrictions and requires careful planning of the legal structure and risk management. The cost of such a "Freehold" is significantly higher than Leasehold, but can potentially give more control over the property.

This is the most common and understandable option for foreigners. Leasehold is a land lease agreement for a period of 25 to 30 years with the possibility of extension for another 25 years. The lessee has the right to build on the leased land and dispose of the property at his own discretion: live, rent to tourists, sell the lease.

It is worth noting that it is the lease right that is sold, not the land. The price for land lease varies depending on the location and area, ranging from approximately 18,000 to 50,000 US dollars per 100 square meters. The annual tax is approximately 0.5% of the assessed value of the property.

Hak Pakai is the right to use the land and the property located on it for a period of 30 years, renewable for up to 80 years. The foreigner receives a personal certificate (BPN) confirming this right.

This certificate allows you to build on the plot, sublease it or use it in any other way. Restriction: You can only buy one plot of land with an area of ​​no more than 2,000 square meters. This option also involves an annual tax similar to Leasehold.

• Legal advice: Before entering into any real estate transaction in Bali, it is extremely important to consult an experienced lawyer specializing in Indonesian law.
• Value assessment: It is necessary to conduct an independent valuation of the property to avoid overpaying.
• Taxation: Clarify all aspects of taxation, including property taxes, rental income tax and capital gains tax on resale.
• Risks: Understanding the risks associated with lease agreements and possible changes in legislation is a must. Check the history of the site and the availability of all necessary permits.

In conclusion, investing in real estate in Bali can be profitable, but requires a deep understanding of local legislation and a careful approach to choosing an ownership option. Do not rely on promises of high returns without a detailed study of all legal and financial aspects. Only a professional approach will minimize risks and maximize profits.