Thinking of buying a piece of land or property in Bali as an investment? Fantastic choice! But before you dive into those turquoise waters, let’s make sure you don’t trip over any hidden coral. Land/property transactions in Bali can be as complex as finding the perfect wave on a crowded beach. Especially for foreigners.
But no worries! We got you covered with this handy guide to ensure your land/property transaction goes smoother than a sunset cocktail. Here are 10 crucial things to look out for when buying land or property in Bali.
1. Clarify Your Real Estate Goals
Before diving into a land/property transaction in Bali, it’s important to define your objectives clearly. Are you looking to invest for rental income, future resale, or personal use? Also consider the desired location, your financial condition, and property type. Understanding your goals will guide your decisions and help you select the right property that aligns with your investment strategy.
2. Choose a Trusted Notary
Public notaries play a critical role in land/property transactions in Indonesia. Selecting a reputable notary ensures that all legal documents are correctly processed and verified. A trusted notary can help to avoid potential legal issues and ensure that the transaction is legitimate and compliant with local laws. Typically, the notary fee is around 1% of the total transaction value.
3. Understand Land Zoning Regulations
Land zoning regulations in Bali dictate how a piece of land or property can be used. It’s crucial not to trust anyone, including public notaries or local officials or anyone, who offers to change restricted land zoning to make a purchase legal.
Such practices are not only unlawful but can also lead to severe legal consequences down the road. Make sure your intended use of the property complies with existing zoning laws. Thorough research and proper verification are essential to avoid future disputes.
4. Learn the Customary Law
Many lands in Bali are owned by indigenous communities who uphold their own law. In Bali, indigenous law is known locally as awig-awig, a written basic law at the village level. Understanding it and securing the support of the local banjar (traditional Balinese community groups that function as local governments, upholding customary laws and managing village affairs) is crucial for a smooth property transaction.
The community leaders also play a significant role in local customs and their approval can significantly impact your project. Building positive relationships with them can streamline the process and mitigate potential conflicts.
5. Prepare for Additional Costs
In Bali, it is common practice to allocate a portion of your budget for local community contributions. This budget, often given to the Banjar or local village, can be used for community development projects or as a goodwill gesture.
It’s important to understand that this practice is legal and a part of the local customs, not a form of extortion or blackmail. Being prepared for these additional costs can ensure smoother relations with the local community, fostering a positive transaction experience.
6. Pay Attention to the Type of Ownership
Foreigners face restrictions when it comes to freehold ownership in Indonesia. Alternatives like leasehold or Hak Guna Bangunan (HGB) grant long-term usage rights but are not permanent. Yes, it’s temporary rights to use the land, but these agreements have expiration dates. It’s crucial to understand these types of ownership to make an informed decision.
7. Conduct Thorough Due Diligence
Before finalizing any transaction, conducting thorough due diligence is essential. This includes verifying the land/property’s legal documents such as ownership certificate, building permit, and tax report. And don’t forget physical inspection to avoid any potential risks or liabilities. A comprehensive due diligence process helps mitigate risks and ensures a secure investment.
8. Review the Purchase Agreement
The purchase agreement is a legally binding document that outlines the terms and conditions of the property transaction. Pay close attention to all terms and conditions, including payment schedules, transfer of ownership, and dispute resolution mechanisms. Seeking legal advice can help identify any potential issues before signing.
9. Consider Tax Implications
For example, in a freehold property transaction, both the buyer and the seller must pay taxes—the buyer’s tax is 5%, while the seller’s tax is 2.5%. In leasehold transactions where the company plans to rent the property, it is obligated to withhold and report the 10% of leasehold transaction tax on behalf of the property owner. Being aware of these costs upfront can help you budget accurately and avoid unexpected financial burdens.
10. Engage a Knowledgeable Property Consultant
Partnering with a local property consultant can make a significant difference in your property transaction. Seven Stones Indonesia consists of an expert team with more than 20 years of experience in the real estate sector.
We assist you in securing your property investment by performing safe transactions, ensuring legal compliance, and streamlining the entire process. This December, take advantage of our exclusive promo. Our property transaction management offers thorough due diligence service for free. Don’t miss out on this fantastic opportunity.
Contact us today via our Whatsapp at +62 877-7711-7701 or [email protected] to make your property investment safe and hassle-free.