How to Invest in Real Estate in Bali: A Comprehensive Guide. Part 2.
- Olga Kurak
- May 14, 2024
- 5 min read
Updated: May 15, 2024
Hello everyone,
In the post "How to invest in real estate in Bali: A Comprehensive Guide. Part 1", I started answering questions about investments and real estate in Bali that we most often receive from clients. Today, let's continue the conversation on the same topic, how to avoid mistakes if you have decided to purchase a villa or apartment on the island.
The information below will be interesting for those who want to invest in real estate in Bali but do not have the opportunity to be here or fly here often to control the whole process. Therefore, choosing a reliable partner is the most important component of success.
In the Part 1, we discussed what to pay attention to when choosing a developer company that offers an off-plan project for investment, and concluded with a list of questions to ask the developer.
So today, let's consider issues related to the land on which the construction is planned and the importance of the location of the future project.
Location of the future property in Bali
Your income from rent in the future, your ROI (return on investment - the ratio of net income to investments), depends on where the property is located and how attractive this location is for tourists.
When tourists are deciding on their accommodations, they typically prefer places near the beach where they can surf. They also look for developed infrastructure, including restaurants, cafes, shops, pharmacies, yoga studios, and gyms. Additionally, being close to entertainment clubs and famous tourist attractions is a big plus.
The cost of land and future rental prices depend on the resort where the property is planned to be built. The most famous resorts for real estate investments in Bali today are:
Canggu and its areas around Berawa, Batu Bolong, Babakan, Pererenan;
Ubud, including the city center, Monkey Forest, Penestanan, Peliatan, Nyuh Kuning, Peliatan, Mas, Bentuyung, Campuhan;
Bukit Peninsula, including Uluwatu, Nyang-Nyang, Pecatu, Padang-Padang, Bingin, Dreamland, Melasti.
Contact the developer with the following requests:
organize a video call from the location where the construction is planned;
send you photos of the location and drone footage;
ask what is nearby;
check Google Maps;
check the reviews of the nearest accommodation facilities to the location of the future object, what tourists pay attention to there: far from the beach, nowhere to go/ eat, inconvenient access, impossible to sleep due to large construction/nightclub/restaurant, etc.
You must clearly understand where the construction is planned, the advantages of this location, and the prospects of your investment there in the future.
In which zoning is the plot where the construction is planned located?
In Bali, the land is divided into zones by colors. Depending on the color, we know what kind of activity can be carried out there. In the yellow zone, you can build villas for personal use, in the red zone, the land is intended for business, the pink zone is a tourist zone, the orange zone combines the possibility of various types of activities. And the green zone - where the strictest rules regarding construction prohibition apply. But due to corruption, attractive prices for land in the green zone, and beautiful views, some foreigners build on prohibited territory and still manage to get a license. In addition to the fact that such activities destroy nature, it is hard to predict how the facilitations today might bring headaches in the future.
In Indonesia, there are two options for obtaining a land certificate: freehold and leasehold.
What is Leasehold in Indonesia (Hak Guna Bangunan/HGB)?
According to Article 44 of Law 5/1960, a physical or legal person in Indonesia may have the right to lease land and use it for construction purposes, paying the owner a certain amount of money as rent. As a rule, in Bali, according to the contract, the lease term is from 25-30 years with the right to extend for another 20 years. The right belongs to citizens of Indonesia, foreigners, and legal entities registered in Indonesia.
What is Freehold (Hak Milik/SHM)?
The right of freehold is the highest right among other property rights to property. This right is granted to the lawful owner of a land plot or property. This type of certificate can only be granted to citizens of Indonesia; foreigners cannot own SHM or the right of freehold.
Property Due Diligence
Before signing a long-term land lease agreement in Indonesia, a Property Due Diligence procedure must be carried out. During which the company must check:
Are there currently any disputes regarding ownership of the land?
Are there any land laws that restrict the use of this land?
Are there any zoning laws that would hinder your construction plans?
Is there any outstanding land tax?
Are the details of the land certificate verified?
Are the land boundaries clearly marked?
What is the legal status of the access road to and from your property?
Are there any property rights/mortgages on the property?
In Bali, there are cases when one piece of land can have two official land certificates. Sometimes, the owner does not have access to their land, and it is necessary to negotiate with another nearby owner to obtain this access.
To avoid such situations, ask the developer if the Property Due Diligence procedure has been conducted.
And finally, I will tell you about our off-plan project Serena Villas Uluwatu as an opportunity to invest in real estate in Bali.
Serena Villas is located in a very peaceful green area, right in the center of Uluwatu. This area is currently experiencing dynamic development and is considered one of the best investment options in Bali.
Just 5-10 minutes from the complex, you can find everything that tourists need and enjoy:
Beaches with white sand and surfing opportunities: Nyang Nyang, Nunggalan, Uluwatu, Suluban, Thomas, Padang Padang.
Yoga studios: The Istana, Yoga Searcher, Uluwatu surf villas.
Restaurants, cafes, and clubs: Ours home, Mana Uluwatu, Ulu Artisan, M.Maison, Ulu Garden, Yuki Uluwatu, Single Fin Bali, La Terrazza, and many others.
SPA: The Istana, Spring SPA Uluwatu, Fields of Yarrow, and Yoga Searcher.
And also: shops with exquisite clothing from local manufacturers, grocery stores, gyms, pharmacies, laundries, the possibility to rent bikes or cars, the famous tourist attraction Uluwatu Temple.
Serena Villas Uluwatu is located in the orange zone, which allows the landowner to conduct various types of activities, including renting out the future property.
According to Indonesian law, our partners, a professional consulting company, conducted a Property Due Diligence (comprehensive document check) on the plot where the construction is planned. After coordinating legal issues with all family members, we signed a land lease agreement (Leasehold) for 25 years with the possibility of extension in the future. Our company has received all the necessary documents and certificates for the land where Serena Villas Uluwatu is planned to be built.
You can learn more about the project on our website: www.serenavillasuluwatu.com
If you have any questions, write or call us at: +62 821 47845541 (whatsapp).
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See you soon!
Olga.
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