Bali Property Insights: Your Top Questions Answered

1. What is the difference between leasehold and freehold?

In Indonesia, property ownership falls into two main categories: Leasehold and Freehold.

• Leasehold (Hak Sewa): This allows you to lease the property for a set period, usually between 20 to 30 years, with an option to extend. This type of ownership is available to both Indonesian citizens and foreigners.
• Freehold (Hak Milik): This grants you permanent ownership of the property. However, only Indonesian citizens and companies with Indonesian ownership can hold freehold titles. Foreign individuals are not permitted to own freehold property.
• Right to Build (Hak Guna Bangunan or HGB): This type of title allows the holder to build on the land and use it for up to 80 years, with an initial period of 30 years followed by two extensions. HGB titles can be held by both Indonesian citizens and foreign-owned companies (PT PMA). This option provides a way for foreign investors to engage in property development in Indonesia.

2. What happens at the end of my lease?

At the conclusion of a leasehold period, typically 20 to 30 years, the property must be returned to the landowner. You may negotiate an extension based on the market value at the time, or there might be a pre-agreed extension price in your initial lease contract.

3. How can I rent my villa out short term?

To rent your villa short-term, enlist a villa management company to handle marketing, photography, videography, and advertising. This saves you from managing these details yourself.

4. Which area offers the highest ROI yields?

Return on Investment (ROI) measures the efficiency of your investment. Popular areas in Bali like Ubud, Nusa Penida, and Uluwatu typically offer the highest ROI for property rentals. Each area’s ROI percentage varies, and you can expect between 10 to 15% for an existing property and up to 20% for an off-plan property.

Use this formula to calculate ROI = Net Profit / Cost of the investment * 100

‍Contact us for an ROI forecast brochure.

5. What is the buying process?

Tipi Estate facilitates a smooth buying process, even if you cannot be in Bali. Here are the steps:

1. Agree on the price.
2. Sign a Memorandum of Understanding (MOU).
3. Pay a 10% deposit into an Escrow account.
4. Due diligence by a notary.
5. Review and sign final agreements.
6. Finalize settlement payment directly to the seller.

6. How long is the buying process?

The buying process usually takes 4-5 weeks for both leasehold and freehold properties. This period includes document submission, compliance checks, and final approval.

7. Can I get a loan in Bali?

Indonesian banks seldom grant loans to foreigners. However, if you own a company in Indonesia with legal representation, you might be eligible. Note that only freehold properties qualify for loans from Indonesian banks.

8. What are the tax implications on my rental and/or purchase?

These are the main taxes, while others may apply depending on your particular transaction:

• Income Tax on Rental Income: If you rent out your property, you are subject to income tax on the rental income. For individuals, the tax rate is 10% of the gross rental income for tax residents of Indonesia, 20% otherwise. This is almost always paid by the lessor (understand seller) for villas, and can vary for lands.
• Selling Tax: When selling a property, a 5% tax on the transaction value is imposed for Freehold properties, with 2,5% to the buyer, and 2,5% to the seller.

9. Do you have a notary we can work with?

Yes, we work with a notary, but you are welcome to choose your own.

10. What are the notary fees?

Notary fees cover the cost of witnessing and certifying the signing of important documents. At Tipi Estate, the notary fee is 1% of the property price, paid by the buyer.

For any further questions or detailed information, feel free to contact us.