Investing in a villa in Bali is always a good idea. With an influx of 5.7 million tourists a year, there is always a demand for accommodation that contributes to a market share of almost $140 million.

However, when it comes to setting up a property business in Bali, things may be slightly more complex if you are a foreigner. While the legal procedures have become more streamlined today, foreigners must fulfill more requirements compared to locals – but this is typical anywhere in the world.

Location, size, and amenities

If you want to invest in a villa, you should spare no expense on three very crucial determinants to return on investment: the location, size and facilities included in the villa.

Location

The most important consideration before a potential customer chooses a villa, is the distance of the villa to the beach.

Don’t worry about building your villa a little off the prime real estate, such as in Seminyak and Legian. Most tourists rent motorbikes to explore other towns, but a location within walking distance to the beach is a must.

Size

The villa should accommodate at least 3 bedrooms for 4 or 5 people. Most visitors are families who want to stay in Bali for at least a week, and find that it is much cheaper to rent villas than two hotel rooms.

Amenities

Your villa should include a swimming pool, WiFi and a garden. If you had to choose only one of these, opt for fast and reliable WiFi.

Legal matters

To operate a villa legally, you must purchase the land under either Hak Pakai or Hak Guna Bangunan titles.

You cannot do business with Hak Sewa. Under Hak Sewa title and with permission from the landlord, you may set up an informal subletting to rent the villa out to a friend or family member, but it is not advisable to set up a homestay for regular rents under this title.

Hak Pakai is obtainable by foreigners with a residency permit. These are people who must have lived in Indonesia for at least 5 years and have contributed to the country’s economic growth. This title is granted for 25 years and extendable up to 80 years maximum.

However, to properly secure a lifetime, cross-generational property business, especially large villas up to a hotel scale, you may want to acquire Hak Guna Bangunan title. This is obtainable once you form a limited foreign investment company (in Indonesian, PT PMA).

Building permit (in Indonesian, IMB) is another certificate that specifies how the land is specifically used. If the land IMB is specified to be a residency, you must update it to be a villa IMB. Furthermore, you need a license to lease villas (in Indonesian, Pondok Wisata). At a hotel scale, you need a hotel license.

At Bali Coconut Living, we simplify legal procedures so that you can own or lease a villa or holiday home securely. Note that the article written here only covers the surface, and that it is NOT legal advice of any form. It is merely a guide to increase awareness of terms and keywords. If you need further assistance on legal matters, consult your trusted notary.