Buying land in Bali is something many visitors to Bali ask about and the first to building your own villa on Bali. Unfortunately, given the language barrier, very little regulation documentation in English, and far too many people in Bali branding themselves as real estate professionals, buying land in Bali can be confusing and daunting bordering on scary. But not anymore!
In 2022 I went through the complete process of finding, researching, buying (leasing) land, and building my new home – with obsessive notes taken along the way, just to make the process easier for future “Bali bules.”
In this guide, you’ll find everything you know to a great piece of land in Bali for a reasonable price, ensure you can legally buy it and build on it, and navigate the contract signing and “purchase” process. We’ll also cover the land ownership models available to foreigners in Bali, and the major things not to do (don’t buy green zone land, don’t buy via the nominee method) for a successful experience securing a space for your home in Bali.
After this guide, be sure to read the rest of our “building a villa in Bali” and “buying a villa in Bali” series.
To put this in perspective, the full, international level standard design process for villa Balifornia took 9 months of meetings and $4000. All of the plans for you to build the same, beautiful, industrial style villa can be yours at a fraction of the price and time I paid.
CONTENTS OF THIS GUIDE TO BUILDING A VILLA IN BALI
- Step1: Finding Land for Sale in Bali
- Step 2: Conduct a Due Diligence Check
- Step 3: Understanding Buying (Leasing) Land for Builds in Indonesia
- Step 4: “Buying” Land in Bali (Leasing land long term): Signing Contracts and Paying
BALI VILLA DESIGN AND PLANNING PROCESS: ARCHITECTURAL, STRUCTURAL, INTERIOR DESIGN, AND MORE
- Step 5. Planning Your Villa Build and Drawing the Plans
- Understanding the Types of Construction Plans and Tests You’ll Need
- Average planning document costs
- Why are these plans important?
- My Experience Planning my Villa + Some Tips to Avoid My Disaster
- The Professionals You Need to Hire and Consult in the Design Process
- List of Elements to Think through in Your Villa Design
- Step 6: Properly Permitting the Build of Your Villa
OTHER PARTS OF THE BUILDING IN BALI SERIES
My experience building Villa Balifornia: Trial by (ring of) fire
HOW MUCH DOES IT COST TO BUILD A HOUSE IN BALI
- Hypothetical Villa Estimate Costing
- The Real World Cost of Building a House in Bali: 3 Villa Construction Case Studies, and Prices
- The Process of Building Your Own Villa in Bali: A Quick Overview
Step1: Finding Land for Sale in Bali
Before building your dream villa in Bali, you’ll need land to build on. But this can’t just be any land.
Your Bali land needs to fit these criteria:
- Fit your budget (obviously)
- ITR zoning to legally allow building (yellow zoning, building permitted) and getting a building permit (PBG/SLF)
- Be buildable, without breaking your budget (e.g., ricefield, Bukit)
- Be legally leasable to you and offered by the owner (not a cousin, brother, son, or friend) for sa
To find a piece of leasehold land in your budget, plan on looking outside of the popular tourist centers of Canggu, Uluwatu, and Seminyak. Due to recent price hikes, land in these areas can cost as much as in Europe or California.
Instead, I recommend wandering heavily to find an emerging “bule friendly village” with enough infrastructure and coffee shops to support your needs, but a 15 to 30 minute ride from the tourist hubs. For example, Nyang Nyang and inland in the Bukit, Tabanan (specifically Pasut) near Canggu and Pererenan, Amed in the north, and Baturiti in central Bali are examples of hidden gems with realistic land prices 1/10th what they are in the real estate thunder domes of Canggu and Seminyak.
For more tips on Bali property ownership where to look for villas available and analyze land prices, be sure to read this Guide to Buying a Villa in Bali or email me at [email protected] for access to my recent report on Bali land prices.
Forego the scam filled agent scene, and research land options for sale online first and then ride and explore on your own. Most land plots are available to find online, direct to owner, without the agent and middleman fees.
If you wander long enough in Bali, you’ll see that “Tanah Di Jual” or “Land for Sale” signs are everywhere and you will find them with or without an “agent.” The only difference between using a land agent in Bali vs. attempting to acquire land on your own is the agent will add 10% to 20% cost as a finder’s fee and no additional value in most cases. Speaking frugally, that money could go to the owner of the land, a very needy local school, a villa project, solar panels for your build, and the list goes on.
Though I have had the pleasure of working with a few good real estate agents in the villa rental process, there is no real estate licensing or certification process in Bali or Indonesia as a whole. As such practices aren’t standardized and can sometimes be predatory, the price increases added by the “agent” can be ridiculous, and many agents aren’t professionals – they simply knowing about land available and will introduce you to the owner for a finders fee and can guarantee no other service. Traditionally, real estate agents should be your advocate, not only finding land for sale and looking out for your interest, but also reviewing and preparing contracts, and acting in your bests interests in negotiations. From the deals I’ve seen, this isn’t always the case in Bali – so beware.
I’ve personally looked at hundreds of pieces of land by researching online, driving up, and chatting with the owners and neighbors to find the full truth. In the end, I received rock bottom price and have built a great relationship with most of the community.
As such, I recommend shopping online for land first, then visiting lands for sale on your own to see if a for sale sign is available and contacting direct to owner yourself
Look for land for sale in Bali at real price on these sites::
- OLX
- Rumah123
- Facebook Marketplace
- Facebook Groups targeting land sales, real estate sales, and villa sales in Bali
- Agent (plan on a 20% price markup)
After hunting through tens or hundreds of pieces of land, hopefully you settle on one you love. But don’t jump too fast. Before buy anything, a thorough land due diligence check is in order
Step 2: Conduct a Due Diligence Check
What is due diligence in real estate?
Due diligence is the process of conducting a thorough check of all of the important issues that affect how useable the land is, your rights to it after signing, permitted uses and construction allowed, and potentially undisclosed outside claims to the land by third parties.
You should perform a due diligence check, using a qualified and trustworthy legal team, to reduce risk in the purchase (of losing your money or not being able to build on the land) and find any important and potentially detrimental information before you sign the land lease contract
What to check for in the land due diligence process:
- Proven and verified ownership by the person selling the land
- No inheritance disputes
- No competing leases or claims to the land
- Land zoning (ITR) status (Red, Yellow, or Green)
- Land use permission (agricultural, residential, commercial)
- Taxes currently paid by owner
- No bank liens, bank claims, or any other financial claims against the land
- Buildability of land (soil test)
What you will need for the due diligence check from the owner:
- KTP (Indonesian National Identity Card) of the land seller
- Family Card (Kartu Keluarga) of the land seller
- The original land ownership certificate (“Sertifikat”) to verify and copy
- “Aspekt” as proof that the land usage aspect has been converted from ricefield/agricultural to residential or commercial use
- Proof of Recent Tax Payment
What other due diligence documents you’ll need:
- Indonesian Land Agency (BPN) printout of land zoning (ITR) zoning color
Who will be involved in the due diligence process:
- Legal team, hired by you, to perform due diligence check and validate documents
- Notary of the village where the land will be purchased, to double check that there are no competing interests
- Indonesian Land Agency (BPN) via legal team intermediary
How to execute the due diligence check:
Once you have the required documents, simply contact your trusted legal team and allow them to perform the due diligence work for you. They will return with results of the bank check, BPN zoning check, tax office check, notary check, and banjar/desa check.
Note that there are 2 types and qualities of due diligence.
The first type due diligence will cost 2jt to 4jt and take roughly 2 weeks, and will be a “cursory check,” with many confirmations by phone. This is what I did for my land and everyone I know building a residential home has done.
The second type of due diligence costs ~20jt and takes ~6 months to complete. This is more suitable very large investments and commercial projects.
Though the best choice will depend on you, I share that information so you can be more quickly aware of price differences in due diligence quotes and what they likely entail.
The important things that the due diligence team will check are as follows:
Land Criteria for any Purchase
Land Criteria #1: The aspiring seller owns the land, has legal inheritance to the land, and has the right to sell.
Many times in Indonesia, ambitious “sellers” aspire to sell tracts of land that don’t actually belong to them. Instead, these tracts commonly belong to a sibling, a spouse, or a parent. DO NOT purchase any land before verifying that the seller owns the land and has the sole right to sell.
In Indonesia, at times “claimed” sellers have taken foreign buyers through the entire process, even to a notary to sign the lease and transfer the payment, only for the buyer to find out that the land belongs to someone else (a brother, cousin, or uncle). In this case, the foreigner is most commonly out of luck, out of money, and has no rights to the land. The Indonesian court system is notoriously difficult for foreigners so, as sad as it sounds, don’t expect to get your money back. Your best bet is full research up front.
Before agreeing to purchase, check the name on the original “Sertifikat” (Land Certificate) against the KTP (Indonesian National Identity Card) of the person selling. The Sertifikat and KTP name and personal data should match perfectly.
If the current owner has inherited the land rightfully from a deceased parent, you will need a copy of the “current owner’s” KTP, their parent’s KTP, the family card (“Kartu Keluarga”) to prove relationship and inheritance rights, and a letter from the Banjar (local council) where the family lives and where their family card (Kartu Keluarga) is filed and maintained confirming inheritance. You will then present these items to the legal team to verify.
If you are unable to confirm ownership of the aspiring land seller or confirm valid inheritance verified by lawyers, DO NOT buy the land.
Land Criteria #2: The land has “zoning” or “ITR zoning” in a buildable area, colored Yellow ITR (residential) or Red ITR (commercial), and is not protected land, commonly referred to as “Green zone” or “Green ITR” (agricultural/protected)
After ownership rights, zoning and permitted land uses likely cause the most headache for foreigners hoping to buy land and build in Bali.
Throughout Bali, all land is coded with an ITR (Ijin Tata Ruang) code represented as a color. The land zoning color codes are as follows:
- Red Zoning: Approved for building commercial buildings
- Yellow Zoning: Approved for building residential buildings and agricultural buildings only
- Green Zoning: Agricultural building only or protected, and limited to 5% land development
Red zoning and yellow zoning allow the construction of villas.
Red zoning permits the construction of commercial use building (stores, restaurants) and short stay accommodation (hotels, daily rental villas) and use with the correct taxes and permitting.
Yellow zoning only permits “rumah Tinggal” construction, or simply “houses to live in.” Yellow zone rentals are legally limited to a minimum of 30 days rental (not shorter) without significant taxes, permits, and filing for different use to be used as a short stay (less than 30 days) accommodation such as a guest house, daily AirBnB, or hotel. So, if you are planning to build a villa to AirBnB or daily rental on yellow zone land, consult a competent lawyer and tax attorney first.
Green zone land is the land you want to stay away from.
Green zone is agricultural land or protected, undeveloped land for which you will not be able to get a legal permit for constructing a villa. It is imperative to find out if the land you wish to build on is green zone before you purchase because you will not be able to legally build any structures on the land until it is converted to yellow. We check that our potential land tract isn’t green zone by having our legal tea, contact BPN and get a printout of the zoning mapping as part of our due diligence process.
Beware that sales agents and land owners constantly argue that green zone land isn’t a problem for construction, that you can build anyways, or that they have a friend that can change the zoning for the right price. Don’t fall for it. Locals (be the Indonesians, Balinese, or village locals) will be able to get away with many illegal actions in the building process that, when you attempt them, will result in hefty fines for you, as a foreigner. Or worse, the government could destroy your unpermitted structure at your expense.
The moral: find out what the land zoning is before purchasing your land and avoid all green zone land.
The authority in Indonesia on land zoning is BPN, the Indonesian National Land Agency. Your due diligence will contact this agency (no one else) and get the information on land zoning and boundaries and should be able to get you an image of the land with zoning overlays so you can see the zoning of your entire parcel of land.
Land Criteria #3: The owner has the original certificate. The bank does not hold the land title.
If the owner of the land currently owns the land outright with no liens or financial obligations held against the land, the owner will hold the original version of the “Sertifikat” (Land Certificate) documents and will allow you to get photocopies for your records and for your legal team for the due diligence process.
If the owner does not have the Land Sertifikat available they likely do not own the land or hold the land sertifikat. I have encountered is wherein the owner did not have the Land Sertifikat and it was being held in a notary’s safe as collateral and they did not have the right to lease the land at the time, nullifying any contract I would have signed. This is a very common case in Indonesia. Do not purchase/lease land wherein the Sertifikat is being held as collateral.
Land Criteria #4: No other individual holds rights to the land.
In rare cases, multiple names may be listed as owners on a tract of land. Ensure that all of the owners will be signing your lease contract and that all of their ownership claims are verified by your legal team.
Land Criteria #5: Taxes are paid.
The Indonesian government is particularly aggressive about collecting their taxes, and even more vigilant about getting those taxes from foreigners.
Though Indonesians are required to pay annual taxes on their undeveloped land, many do not without any major negative consequences. You will be able to sign your land lease and pay no problem. The issue will arise when you begin applying for building perfects as they will be blocked until all past taxes are paid and you will not be permitted to build. Or, even worse, the taxman may arrive after your build is completed and prohibit use until you pay all backtaxes.
As unfortunate as it sounds, and though land taxes are the responsibility of the seller, the tax office will ultimately come to you and make it your responsibility to pay taxes for the land you will be building on. The Indonesian tax office doesn’t care who pays them their money, but they will not let things proceed until they’re paid.
Upon completion of all of these due diligence checks before proceeding, you should have confirmation that:
- You can legally lease/purchase the land via a contract signed by the rightful seller
- The land is properly zoned with an ITR code suitable for building (yellow, red)
- Taxes have been fully paid
- BPN has confirmed zoning, boundaries, and land size
- The state of the land (soil, waste) will not add undue expense to your project
At this point, you can proceed to contract drafting, payment terms, and purchasing your land.
Step 3: Understanding Buying (Leasing) Land for Builds in Indonesia
The first thing to understand about buying land in Indonesia is no foreigner or foreign owned company (PT PMA) can ever own land indefinitely or fully purchase property and own it forever in Indonesia. Foreigners and foreign owned company are limited to a land lease up to a maximum of 75 years.
The maximum land lease and rights associated depend on which “land rights” structure the land is leased (purchased) under: Hak Guna Bangunan (HGB), Hak Pakai (HP), Hak Sewa (HS), Hak Malik (HM).
We’ll get to what each of these land right structures mean in a moment.
For the sake of simplicity in this article, I will refer to long term leases of land as “land purchases” because you are essentially purchasing full rights to use the land for a limited period of time.
The things you need to realize about the purchase of land in Indonesia are:
1) No foreign entity is allowed to own land indefinitely in Indonesia. Even PT PMA’s are limited to 75 years (via Hak Guna Bangunan), divided into a 25 year initial contract with extension periods.
2) Any foreigner can lease land and build on it, maintaining all rights to use as one would with outright ownership (with the right contract).
3) For most foreigners, Hak Sewa (Leasehold) will be the most sensible approach to leasing land.
4) For foreigners attempting to qualify for the second home visa by building a luxury home, Hak Pakai (Right to Use) will be the best option as to gain proof of true “ownership” via a land title with their name on it.
5) For foreigners building through a foreigner owned Indonesian company (PT PMA) Hak Guna Bangunan will be the correct path.
6) Only Indonesian citizens can own land “Hak Milk” title (freehold title) or own freehold property. Foreigners and PT PMAs cannot own freehold land.
Does it make sense to lease land instead of buying outright like in the west? It depends…
Whether leasing land, as is required in Indonesia, makes more financial sense than outright purchase for indefinite ownership, as foreigners can do in Europe, North America, and South America, depends on the price of the land you are considering, your planned construction, and your intended use (residence, rental, investment returns) for your villa.
For my villa, in which I was able to lease land for 4.5jt per 100 squares meters of land (referred to as are) per year, the land price worked out to be barely cheaper than in my home state of California. However, construction costs in Indonesia would be easily 1/5th the price of building in the US and there would be no annual real estate taxes paid by me for my property in Indonesia. For me, leasing land made sense due to the still low overall costs, even if I plan to leave the home empty for periods.
However, if your potential plot of land is in Canggu or another area where some of the fastest land price growth has taken place, which generally costs 10x what I paid per 100m2 of land (45jt per are per year), and construction fees are increasing taking the break even cost from $500 per month to $2500, I would heavily recommend reconsidering your land purchase and construction depending on your intended use of the villa (private villa vs. short term rental property investment).
Land Ownership Models in Indonesia: Hak Sewa (HS / Leasehold), Hak Pakai (HP), Hak Guna Bangunan (HGB), Hak Malik (HM)
Hak Sewa (HS – “Right to Lease”) – Leasehold: Best approach for most foreigners to “buy” land
“Hak Sewa” of “Right to Lease” is the most common, and easiest option for foreigners to lease land in Indonesia, build on that land freely, maintain rights to lease out the land and building, and “own” that land for a period of 30 years plus a potential 20 year extension.
The terms of the lease contract determine whether the buyer can build, renovate, or sublease – so ensure your contracts are complete and reviewed by a competent Indonesian legal professional
The Leasehold contract can include extension terms that dictate the price to be paid for future lease extensions on the land. The lease extension addendums protect the later purchase (lease extension) from market price fluctuations, as agreed upon (in a signed and notarized contract) by the buyer and seller. In any case, the lease extension terms should include a bare minimum of pricing the land for the purchase at the market value of undeveloped land and should dictate the specific to be used to determine the market price of undeveloped land at the time of future sale. Though many people in the process will tell you a contract with predetermined land extension terms is unnecessary and most people informally rely on “kindness” in the extension process, still insist on a written extension agreement reviewed by your lawyer.
Hak Sewa land contracts differ from other contracts (Hak Pakai, Hak Guna Bangunan) in that the Hak Sewa (Leasehold) contract is signed with the notary and filed by the notary in their records, while the other land rights structures (Hak Pakai, Hak Guna Bangunan) require documents filed with the National Land Office and result in changing the name on the Land Sertifikat. Because Hak Sewa contracts are handled on a local level and can be subject to more “irregularities”, proper contract drafting and review, due diligence and proper land research in the regional government is imperative to avoid surprises later down the road.
Hak Pakai (HP) – “Right to Use” (Certificate registered with land office)
Hak Pakai, or “Right to Use,” is similar in function to Hak Sewa in that it allows an individual foreigner to temporarily “own” the rights to use a piece of land for 30 years with an optional 20 year extension.
The two primary differences between Hak Pakai and Hak Sewa are:
Hak Pakai requires filing a new land “Sertifikat” with the Indonesian National Land Office wherein the land owner delivers the original land Sertifikat to the land office and the new owner, the foreigner, receives Hak Pakai and full rights associated with the land.
Hak Sewa lease contracts are filed only with the notary and are not filed with the Indonesian National Land Office.
Hak Sewa (leasehold contracts) are more commonly used because of ease, and so that the owner of the land does not have to give up title.
However, Hak Pakai land title allows the foreigner to prove ownership of the land and coming villa, potentially qualifying as a luxury residence under the Second Home Visa qualifications
Note that Hak Pakai is only allowed for personal residences, and foreigners are limited to one Hak Pakai property.
Hak Guna Bangunan (HGB) – Right to build, exclusively for PT PMA (foreign owned Indonesian companies)
For Indonesian companies owned by foreigners (PT PMAs) purchasing land, Hak Guna Bangunan (HGB) is the right choice.
In HGB land purchases, PT PMAs purchase freehold land from Indonesian citizens, at which point the title (Land Sertifikat) is delivered to the land office and converted to an HGB title in the name of the company.
The PMA maintains full rights to use, build on, lease out, and sell the land for a period of 30 years plus options for a 20 year extension arranged through the Indonesian National Land office and requiring a negligible payment for the extension years.
HGB is the mechanism by which PT PMAs acquire freehold properties.
The land under HGB title converts back to Hak Milik if sold back to an Indonesian citizen, a fully Indonesian owned company, state owned banks, or Indonesian religious organizations
Hak Malik (HM) – Freehold ownership of title for indefinite ownership (Indonesian Citizens only)
Hak Malik, also referred to as “Freehold” is the normal ownership mechanism by which Indonesians own their land indefinitely. Note that only Indonesian citizens, and 100% Indonesian owned companies, may own freehold land. Foreigners may only purchase freehold land via Hak Pakai (persons) and Hak Guna Bangunan (companies).
The Land Ownership Approach Not to Use When Buying Land: The “Nominee Method” or “Nameholder construct”
The short version: Don’t purchase land in anyone’s name but your own.
Because foreigners are not allowed to own land indefinitely (freehold), and the hurdles of starting a PT PMA can be expensive and taxing, and converting land to Hak Pakai can cumbersome, many foreigners incorrectly follow the recommendation of their Indonesian “friends” to use the “nominee method”.
Do not do this.
The nominee land ownership method involves a variation of a foreigner financing the purchase of a piece of land freehold by a local. The foreigner and new (local) owner then create an unofficial side agreement that the foreigner can use the land indefinitely, circumventing the government’s attempts to limit foreign ownership to 75 years.
Do not do this because the side agreement does not hold up in an Indonesian court of law. The Indonesian government has stated very explicitly that this “side agreement” construct is illegal and nullifies any contracts/agreements. The only valid “lease” contracts follow Hak Sewa (leasehold), follow a proper contract, include proper payment of taxes, and follow a proper notarization and contract filing process.
Here’s a horror story about why you shouldn’t use the nominee land ownership method:
I once had a freediving instructor in Bali that loved his Indonesian girlfriend so much that he wanted to build a dive resort with her. They’d been together for a few years and they decided it would be more worth the invested money (his life savings) to purchase the land in her name, to get freehold ownership and rights, than the short periods of leasehold which would apply to him as a foreigner.
So, he transferred the money for the land purchase process to her and the couple created a side agreement about his ownership. Fast forward 6 months and her mother forced the two to break up, and in the process the girl took the land title and all of the construction invested to that point. The poor guy was left without his life savings and no recourse because no Indonesian court would recognize land agreements created via the nominee method – as he did. When I saw him, he was saving up to afford a ticket to fly him and his cat back to London.
Though Indonesians are lovely people, and anyone can be quite convincing at times, DO NOT purchase land under the nominee method. It may work out for a handful of people, but those who lose in “nominee ownership” deals lose big, losing everything invested, and frustratingly.
Now that you understand how land ownership works in Indonesia, its time to understand land purchase (lease) contracts, payments, and signing.
Step 4: “Buying” Land in Bali (Leasing land long term): Signing Contracts and Paying
Drafting, signing, and executing contracts for the purchase of your land lease in Bali are an important period.
Execute these contracts correctly – legally, all inclusive, and futureproof – and you’ll avoid price hikes, disagreements, and inconveniences in the future
For the section we will primarily discuss leases for “Hak Sewa,” or leasehold, ownership, as this is what most foreigners use and should use for their land purchase in Bali.
For Hak Guna Bangunan (purchasing land contracts under PT PMAs) or Hak Pakai (land title as a foreigner) contacted my trusted advisors at Smart Advisory Solutions in Bali, and ask for Mike (best account manager there.
A quick note on good legal advisement in Bali
The only legal advisor I recommend for your Bali home purchase is Michael Budgoll at Smart Advisory Solutions legal and accounting firm – you can contact Michael via Whatsapp at +6287840258332 if you have any real estate legal or tax questions.
Mike and his team helped with drafting and reviewing contracts, due diligence and checking my seller’s documentation, and advising on Indonesian law (for purchase and renting for profit) as a foreigner.
Now, back to leasehold Contracts
Land Lease Contracts in Bali
The contract for your land lease in Bali should pass this checklist:
- Completed by a legal team to include all necessary terms, your personal data, the owner’s personal data, and checked against due diligence findings
- Written in English and Indonesian
- Notarized by a licensed notary during signing
- Includes a separate addendum with lease extension terms including future prices and timeframes
- The land lease itself should have the following information checked for accuracy
- Identities of the buyer and seller including KTP/Passport info, registered address, and occupations
- Price for the entire sale (not discounted for tax evasion purposes)
- Period of ownership with start and end date
- Clauses dictating the buyer has unlimited rights to build without owner permission and that the owner will willingly sign all permit applications willingly and without additional compensation
- Clauses including the right to sub-lease the land and do future constructions without the permission of the owner
Now, lets go through these contract points in detail
Have the lease contract completed/verified by a legal team to include all necessary terms, your personal data, the owner’s personal data, and checked against due diligence findings
Whether you are producing the contract to be signed or the owner is producing the contract to be signed, have the contract checked by a competent legal team with your interests in mind beforehand. Despite how friendly the seller is and how trustworthy he may seem you should still ensure you are double checking your own interests.
Again, I highly recommend SAS for the contracts work of any deal, as they’ve managed mine and that of several friends with no issues
Execute all contracts in English and Indonesian
You should understand and have understandable copies of any document you sign – especially this significant. For this reason you should demand English copies of all contracts. If English copies, to be signed and for you to keep are not presented then do not sign anything.
However, only contracts written in Indonesia stand up in the Indonesian court of law. Contracts in any other language are not valid in Indonesia. For this reason, ensure you all sign and receive copies of the original contracts in Indonesian as well.
The English contracts are for your reference, the Indonesian contracts are for the worst case scenario.
Have all documents in the land purchase process notarized by a licensed notary during signing
Notaries are pivotal points of records in Indonesia, arguably rivaling the regional government offices in how frequently they record documents. As such, your best hope of avoiding disputes and issues of ownership and payment later is to have a professional notary record and manage the entire process.
Not only should the notary oversee the signing of the lease and notarize contracts, have them notarize the receipts, the land lease extension addendum, and possibly manage and record the funds escrow of the process.
If you’re new to doing business in Indonesia, it can seem quite like the wild west, so use the notary to keep things straight and trustworthy.
Include an addendum for land lease extension terms, signed immediately
Many people are aware that land leases can be purchased with a 20+ year extension at a later date, which convinces them it is worth building a monstrous villa in the long term. However, most individuals forget that, just like land prices go up so can the price of that land lease extension if the price is not locked in a contract. As a result, 10, 15, or 25 years down the line the buyer of the original lease may end up having an awkward conversation of “please let me stay in my house for a good price.”
Avoid this awkward discussion by having your lawyers draft a land lease extension contract (in English and Indonesian) dictating the price that you can purchase an extension for and the date until which that agreement is effective.
Note that this clause cannot be in the primary lease otherwise you risk voiding the original contract, but instead needs to be a separate contract to execute (with payment) at a later date.
The lease should include the right to sub-lease the land and future constructions without the permission of the owner
Though leasing and Hak Sewa give you full rights within the period of the lease, it is better to have written, explicit, and unlimited permission from the land owner for you to build as you please and rent out the land or buildings on it as you please. Additionally, this clause assures that the owner is obligated to sign any building permit applications (IMB/PBG/SLF) without any additional compensation in return.
The land lease itself should have the following information checked for accuracy
As a final note, you and your legal team should ensure the lease contract has all of the following information fully and clearly
- Identities of the buyer and seller including KTP/Passport info, registered address, and occupations
- Price for the entire sale (not discounted for tax evasion)
- Period of ownership with start and end date
- Clauses dictating the buyer has unlimited tight to build without owner permission and that the owner will willingly sign all permit applications willingly
Again, I highly recommend contacting SAS’s legal team to manage drafting lease contracts and recommending a reliable notary
Payment: The Process of Paying for Your Land in Bali
If you are at the point of purchasing land in Bali and building, you should already have a local (Indonesian) bank account. Local bank accounts will allow you to perform low fee, instant mobile transactions up to 250,000,000 million IDR per day or higher with approval.
Thanks to these fast cash transfers via mobile, you will be able to sign the lease in front of the notary, transfer the cash in front of the notary, and have your receipt for the transaction notarized then.
Note, you will have to plan in advance as the value you will pay for your land likely exceeds that limit of your mobile bank transfer per day
Financing Land in Bali: Not possible for foreigners
Bank financing for land or construction loans in Indonesia by Indonesian banks is essentially unavailable for foreigners. You will most likely be required to pay cash for the full transaction pulled from your resources abroad.
The only case in which a foreigner in Indonesia has as a slim chance of bank financing is if they have a KITAP, have resided in Indonesia for 5 years, and have verifiable financial history in Indonesia.
Owner financing or payments over time has been negotiated by some buyers, however the full payment period generally happens within 1 to 2 years at maximum.
Transferring Money into Indonesia: Wire transfers or Wise
As you likely don’t work in Indonesia or have wealth there, your resources for your home purchase will likely come from abroad.
For transferring money from internationally into Indonesia, wire transfers will be the cheapest, fastest, and convenient method as the maximum limit for a wire transfer is far higher than other options.
If you do transfer money in via a wire transfer and it is more than $10,000, contact your bank about special exchange rate pricing before your transaction which might earn you a 3% to 5% better exchange rate.
For those that don’t want to go through the hassle of a wire transfer WISE works well, but tends to take longer (up to a week) when transferred amount are around $10,000 USD or higher.
NEXT IN THE BUILDING A VILLA IN BALI SERIES
BALI VILLA DESIGN AND PLANNING PROCESS: ARCHITECTURAL, STRUCTURAL, INTERIOR DESIGN, AND MORE
- Step 5. Planning Your Villa Build and Drawing the Plans
- Understanding the Types of Construction Plans and Tests You’ll Need
- Average planning document costs
- Why are these plans important?
- My Experience Planning my Villa + Some Tips to Avoid My Disaster
- The Professionals You Need to Hire and Consult in the Design Process
- List of Elements to Think through in Your Villa Design
- Step 6: Properly Permitting the Build of Your Villa
RECAP OF THE REST OF THE BUILDING IN BALI SERIES
HOW MUCH DOES IT COST TO BUILD A HOUSE IN BALI
- Hypothetical Villa Estimate Costing
- The Real World Cost of Building a House in Bali: 3 Villa Construction Case Studies, and Prices
- The Process of Building Your Own Villa in Bali: A Quick Overview
- Step1: Finding Land for Sale in Bali
- Step 2: Conduct a Due Diligence Check
- Step 3: Understanding Buying (Leasing) Land for Builds in Indonesia
- Step 4: “Buying” Land in Bali (Leasing land long term): Signing Contracts and Paying
Also Consider Reading: 4 Easy Steps to Buying a Villa in Bali
Other Great Articles in the Bali Series
- Moving to Bali: A Complete Guide
- The Bali Digital Nomad Visa: A complete guide
- 73 Awesome Cafes in Canggu
- The Best Bali Coworking Spaces
- Things to do in Canggu
- The Best Sunset Points on Gili Trawangan
- Buying a House in Bali
- Buying Land in Bali
- Building in Bali
- How much does it cost to build a villa in Bali?
- Bali villa design and planning process
Other Great Nomad, Travel, and Expat Lifestyle Articles
- Moving to Malaysia: A Complete Guide
- The Ultimate Malaysia Digital Nomad Visa Guide
- Thailand Visa Exemption Essentials: What to know before your trip to Thailand
- The 51 Best Digital Nomad Jobs among Successful Nomads
- 9 Epic South America Backpacking Routes
- Backpacking the World…2 Weeks at a Time
- Is Geoarbitrage for You? An Ultimate Guide to Living Better for Cheaper as a as a Nomad
ABOUT THE AUTHOR
Carlos is a nomad, slow traveler, and writer dedicated to helping others live abroad and travel better by using his 7+ years of experience living abroad and background as a management consultant and financial advisor to help other nomad and expats plot better paths for an international lifestyle. Click here to learn more about Carlos's story.