When I hear the phrase "Bali real estate market," it makes me a bit uncomfortable. The reason is simple: there is no real estate market in Bali..
What we often see are chaotic (or occasionally well-organized through smart marketing) transactions between buyers and sellers, where investors encounter surprises at every turn..
Why is this happening?
Indonesia welcomes real estate investments but does not enforce any strict laws to regulate this market. As a result:
No minimum capital requirements for developers are enforced by the government. In fact, anyone can start a real estate business.
No specific quality or quantity requirements for technical and engineering personnel in development companies. As a result, foreign-owned companies often subcontract local firms with construction licenses—or sometimes even just local crews without any licenses at all.
The most interesting part here is that the difference between having or not having a contractor's license only affects taxes. If you use a contractor with a license, the tax is 2%. If they don’t have a license, it’s 4%.
There is no strict government oversight over construction phases or progress. Only about 10% of companies actually obtain a building permit (PBG certificate).
Investors are not protected by any standard investment or purchase agreement, as these documents can be easily modified by a notary or the developer themselves.
Notaries operate independently, and "whoever pays the notary is right" — meaning notaries often favor the party compensating them.
BUT!!!
Here lies the main advantage of investing in Bali: POTENTIALLY HIGH RETURNS. The reality is that returns of 12-30% annually are achievable in many projects.
Of course, profitability depends on factors like the initial investment, project stage, location, and project type.
Investors are left to choose between a somewhat unstable market and the promise of potentially high returns.
How to Reduce Risks While Maintaining Profitability
Main Risks When Purchasing Real Estate:
1 - DOCUMENTS DO NOT MATCH REALITY, AND THE LAND DOES NOT MEET THE INVESTOR'S GOALS.
The title says it all =)
I won’t dwell on this for long. Bali is a unique island with its own limitations, opportunities, and types of ownership. If you're not familiar with it yet, check out the complete guide on how to verify land from developers here - https://bali-legal.com/en/proverka-zemli-en.
Also, here you can find descriptions of the types of land on Bali and a step-by-step plan for foreign ownership through a company (which is interesting for those with long-term investment goals): https://bali-legal.com/en/land-on-bali-en.
SOLUTION:
Always verify the land documents according to this guide: https://bali-legal.com/en/proverka-zemli-en.
2 - THE MAIN CONTRACT IS NOT PAID IN FULL
You probably already know that foreigners cannot own land in Bali. Typically, the land is owned either by a company or an Indonesian individual.
Developers enter into a lease (or sale/purchase) agreement for a specific term, for example, 25 years. BUT!!! Most often, they do NOT PAY FOR THIS CONTRACT IN FULL! They may only pay for 1 to 2 years.
You can understand the developer—they don’t want to invest more money than necessary to start building and selling. However, they transfer the lease rights for the land to the investor specifically for the duration of the main contract, which is 25 years.
From this, we can draw 2 conclusions:
Firstly, the transfer of lease rights for a contract that has not been fully paid is illegal. You can only dispose of a contract that has been completely paid for.
Secondly, there is a risk that the developer will NOT pay for their contract in full (for any reason, even if they didn’t intend to deceive anyone), and your property along with the land will turn into a pumpkin.
There have been many cases of such financial discipline violations by developers, and there will be more.
SOLUTION:
Check the main contract of the developer and the landowner. It must be fully paid. Request this contract from a notary or a lawyer at the developer's company. If the developer refuses to show the main contract, draw your own conclusions…
3 - NO CONSTRUCTION PERMIT
This is a common issue with 95% of development companies.
You can read about what these certificates are and why they are necessary here: https://bali-legal.com/en/kupit-i-postroit-nedvizhimost-na-bali-inostranczu-en.
Most often, you will be told that the documents will be obtained after construction, and this is usually true. However, the risk that the legal registration of the building for your purposes will not be completed by the time the property is handed over for use is significant. You will have to bear this risk out of your own pocket unless you clearly outline the corresponding conditions in the contract.
SOLUTION:
Include in the agreement that the property handover will only occur upon obtaining the PBG and SLF certificates. A detailed explanation of these can be found here: https://bali-legal.com/en/kupit-i-postroit-nedvizhimost-na-bali-inostranczu-en.
If you want to check a real estate property, a developer, or build your own project CONTACT US via TELEGRAM OR WHATSAPP for quick communication.
Together, we will make life on the island comfortable.
