Buying a Bali Property: 8 Steps on How to get it right!
Do your homework first before even considering buying a property in Bali. There are many stringent laws regarding foreign property ownership and without professional guidance from the Paradise Property Group, you risk running into unnecessary problems.
Buying property is a big investment decision. We’ve created these simple steps as a guideline of some of the things you’ll need to consider when investing in Bali.
- Choose a location
- Familiarize yourself with property ownership structures in Bali
- Budget your property
- Find a property agent
- Inspect the property
- Negotiating an offer
- Ready for transaction? Find a notary
- Due diligence
1. Choose a Location
There are many factors affecting your choice of property but location should be your number one consideration. You can easily improve the property but you cannot improve the location.
Choose a location you love because if you love it, other foreigners (potential guests to your villa) will like it too! As with any real estate investment, it is all about location, location, location. If you are looking for safe returns, target Seminyak; the investment will be twice as much as in Canggu, but the returns will come much faster.
2. Familiarize yourself with property ownership structures in Bali
The best way of doing this is to contact a property advisor, in this case a notary, who is familiar with the property laws and able to provide an overview of the legal options available with regard to the specific property you are looking at. We have a written an article on property ownership structures in Indonesia
3. Budget your property
When budgeting for your dream property, you need to keep in mind that there will be the normal buyer’s tax, transfer fees, notary fees and if transferring funds, you will also be slapped with bank transfer fee’s.
If you build in Bali, the price of construction should be between 300 to 1,000 USD per square meter, depending on the quality you are aiming for. Construction does not include the price of finishes and furniture so add another 50% to the construction price to avoid any unexpected surprises!
If you plan to rent out your villa, budget for a villa manager, staff and a good photographer too. Do not compromise on service as Bali tourists are also coming for the hospitality, especially when they travel with the family.
4. Find a good property agent
Do meet agents that have a legitimate company, have an office and are a recognised name in the market. A good agent will guide you through the whole process of due diligence (including securing the access to your land, obtaining your building permit, recommending a good notary for the transaction) and will show you “safe” land or villas with proper certified property titles. If you are closing a deal with an agent, make sure he or she has a contract with the owner of the land or villa you are targeting.
Don’t trust the many agents out there that have “friends” selling a villa or a piece of land. They are usually steering you in the wrong direction. Needless to say, they won’t be there if problems occur, before or after you have made your deposit payment, as they have no legal right to assist you in the transaction. A good agent, again, has a contract with the owner of the land or villa (or his/her official representative) and will be there to assist you the entire time.
5. Inspect the property
We suggest you have the following inspections completed before buying:
- mechanical, electrical and plumbing
- landscape – soil investigation
- geological structure of cliff properties or wetland areas, as well as an erosion/sea wall inspection for waterfront properties
You should also satisfy your knowledge, and make yourself aware of the physical condition of the buildings, the relationship with the Banjar (the local community council), access to fresh water, electrical systems, drainage and waste disposal systems, noise or other impediments to peaceful living, security issues, and existing management contracts.
For land, you will also want to know about road access, drainage, soil stability, potential site work problems, building restrictions, and commercial or governmental developments planned for the area that might impinge on the property.
Go through a reputed agency. If you’re doing a private deal, be particularly wary of handing over money to just anyone.
6. Negotiating an offer
Firstly, let the agent know that you want to make an offer and, most importantly, insist that you wish to sign a contract. This lets the agent and the sellers know you are serious.
In your discussions, talk about the amount of deposit you will pay. Again, a good negotiating strategy is to pay a solid deposit. This shows them you’re serious about buying the property and the sellers won’t want to let a buyer like you slip through their fingers.
Your agents will act as an intermediary in negotiations between buyers and sellers, generally representing one or the other; sometimes both and negotiate other sale conditions for a smooth transaction.
7. Find a good notary
The notary can be chosen by you the buyer and the fee charged by the notary is usually between 1% and 2.5% of the sale price, typically depending on the complexity of the acquisition and the scope of services requested.
The sales and purchase agreement is drawn up by the notary in Indonesian and in English or other language translation may be supplied but the Indonesian document is the legally binding one.
Amongst other things the notary conducts a “due diligence” which includes making sure that the property is accessible, free of any outstanding mortgage and that the property has a land certificate, building license and proof that several taxes have been paid.
A good notary will make the whole process easier. We have a few notaries that we can recommend which have proved to provide a good service.
8. Do your Due diligence
A buyer should always conduct thorough due diligence on a property before committing substantial funds other than a deposit, which should be fully refundable in the event of any due diligence issues. Due diligence should comprise of, amongst other things, checking the history and current status of the land certificate also regarding any potential disputes; ensuring there are no encumbrances on the land; checking environmental or zoning restrictions; checking the construction permit (IMB), if already in place; ensuring that there is unrestricted and legal access to the property; and checking the property’s tax records, including construction tax.
If you buy land, make sure the zoning of the neighbourhood is not agricultural or green as this will make it impossible to get an IMB. Check if there are any roads or construction projects to be built around the villa (Jalan Sunset will be extended through Canggu one day!). Again, a good agent or a good notaris will guide you through the legal process.
As a specific matter in Bali, there should also be a check that there is no customary law (known as adat law) restricting or even prohibiting the use of land in question for the intended purpose (such as height or building use restriction near temples or religious places).
In summary, there are five essential points to consider before buying a property in Bali:
- Are all the necessary documents – such as land deeds and certificates in order?
- Is the seller the rightful owner?
- Are there any disputes or mortgages on the property?
- Have the necessary taxes been filed and paid?
- Are there any zoning laws that would interfere with your investment plans?
New regulations and laws come into effect often, therefore one should have an ear on the ground whilst considering the list of questions above.