Legal aspects of buying real estate in Bali

29 October 2024

Investing in Real Estate in Bali: Legal Aspects and Important Considerations

Investing in real estate in Bali can be one of the most profitable decisions; however, it is crucial to understand the legal aspects to successfully complete a deal.

The island is known for its unique regulations regarding foreign ownership, and understanding these norms helps avoid common mistakes.

Types of Property Rights in Bali

In Bali, there are several forms of property rights, the most common of which are:

Hak Milik (Ownership Right): This is the right to full ownership, which can only be acquired by Indonesian citizens. Foreign investors cannot directly purchase land with this right.
Hak Pakai (Usage Right): Foreigners can obtain this right for a period of up to 25 years, with the possibility of extension. This right allows the use of the land and is therefore the most suitable option for most foreign investors.
Hak Sewa (Lease Right): This right allows leasing land for a period of up to 30 years, also with the possibility of extension. This option is suitable for those who wish to use properties temporarily without owning them.

Procedure for Purchasing Real Estate

The purchase of real estate in Bali requires adherence to several key steps:

Choosing a Reliable Real Estate Agent: Working with an experienced agent who is familiar with local laws minimizes risks and simplifies the process. A good agent assists in property search, document verification, and negotiations.
Legal Review: Before signing contracts, a thorough review of the documents for the property is necessary. This includes checking the property rights, absence of debts, and legal disputes.
Contract Signing: After agreeing on all terms, a contract is signed, which should be translated into a language understandable to both parties. It is important that all terms are clearly formulated and comprehensible.

Taxes and Fees

When purchasing real estate in Bali, additional costs that may arise should be considered. These include:

Income Tax on Rental Income: Foreigners must pay taxes on the income they earn from renting properties. The tax rate may vary depending on the amount of income.
Tax on Property Acquisition (BPHTB): This tax amounts to 5% of the purchase price and must be paid during the transaction.
Attorney and Notary Fees: It is advisable to hire an attorney to accompany the deal, which also incurs additional costs.

Risks of Purchasing Real Estate

Investors should be aware of the potential risks associated with purchasing real estate in Bali:

Changes in Legislation: The rules regarding ownership and rental can change, which could affect your investments. Therefore, it is important to stay informed about current changes and consult an attorney.
Fraud: Unfortunately, cases of fraud in the real estate market in Bali are not uncommon. Trust only reputable agents and conduct thorough checks of all documents.

The legal aspects of acquiring real estate in Bali represent an important area that must be carefully researched and understood. Understanding the different property rights, adhering to the established procedure, and collaborating with qualified professionals allow you to avoid issues and make your investment as profitable as possible.

Investing in real estate on this unique island can not only be financially attractive but also an unforgettable experience if you are well-prepared.