INVESTING IN PROPERTY
IN BALI, INDONESIA
Buy an Existing Villa or Build for Yourself ?
If you are interested in buying an existing villa in Bali, please keep in mind that all better houses are owned by foreigners who have financed their vacation home in foreign currency. If they agree to a sale they understandably wish to recover at least the same amount they originally spent in US or Australian dollars, Euros, or any other currency.
The important advantage of purchasing an existing villa is that you can carefully inspect all details before making a buying decision and therefore know exactly what you get for your money. You will be immediately the owner of a completed villa - usually fully furnished - so you can either move in yourself the next day or start generating a return on your investment by renting your villa out.
Alternatively – if you have lots of time to supervise the construction of your dream home yourself – you can acquire a plot of land and build your own villa. The disadvantage is that you'll have all the worries and responsibilities connected with building a house anywhere in the world.
In Bali this can be a truly frightening experience, especially if you are not personally on-site all the time, do not speak Balinese or at least Indonesian, and are not a construction expert yourself. Even when you appoint the most reputable architects and contractors, you have to be present yourself to achieve satisfactory results!
Most people ask for top quality, fast completion, and low cost. Be aware that, if you're lucky, you can perhaps achieve two out of these three points, but never all three together! The choice is yours.
The third option is to buy a land & villa package from a reliable developer experienced in building in Bali. This way you won't have any worries or problems during the construction period, and you deal with foreign experts who understand what you say AND what you mean.
Click here to see details about two high-quality villas currently for sale at the "BALI IMPIAN ESTATE", a development on the "Bukit" (hill) on Bali's southern peninsula offering spectacular views of the ocean and Bali's mountains.
Purchase Prices, Land & Construction Costs
To give you some idea about prices: existing high-quality villas with garden and a swimming pool which have been built a few years ago start around US$400,000 and can go up to US$2,000,000 and more.
This is over 50% less than comparable villas in other tropical destinations such as Phuket (which is much less attractive and has a much longer rainy season than Bali). However, there are very few good-quality villas offered for sale in Bali, and they are usually sold within a very short period. We do not recommend to buy one of the many cheaply built houses as they are difficult to rent out and their maintenance costs are often very high!
Land prices range currently from US$50 to US$300 per square meter (11 square feet) depending on the location (in the middle of nowhere you might still find land for less than US$20). A plot not too far from the beach and the tourist areas in South Bali will cost today about US$70 to US$150 per square meter. If it's located right on the beach, offers a spectacular view or is part of an up-market development, it can be US$300 and more per square meter. Properties in crowded Denpasar and in Ubud are again priced much higher.
Keep in mind that property prices in Bali have appreciated VERY substantially during the past few years. Many foreigners have bought land and numerous Indonesians have acquired properties in Bali as they feel safer here than in other parts of the country. Even after the terrorist attack in 2002 property prices continued to increase – investors regard that attack as a one-time incident which does not change Bali's long-term development.
The basic construction cost of good quality residential buildings is right now about US$500 to US$1,200 per square meter. This does not include any access roads, site preparation and development, water and electricity supply, swimming pool, water pumps or filtration, waste water treatment, power generators, landscaping, architects and consultants fees, costs for the many licenses and permits required, etc.
Please also note that all US dollar prices quoted are based on an exchange rate of about 8,900 Rupiah per US dollar (click here to see the current exchange rate) and are continually increasing. If you build yourself don't try to safe money by cutting corners. This will only inflate your subsequent maintenance costs and make renting out your villa quite difficult!
Which Areas of Bali are Most Recommended ?
LOCATION is the most important factor — in Bali as anywhere else in the world. Land prices in beach front and town centre locations and properties offering spectacular views will increase most, and houses on the beach or offering a great view will be the easiest to rent out if you do not want to live in them yourself throughout the year.
Most recommendable are (in our opinion) locations in Jimbaran Bay and on the Bukit (the hill on the southern peninsula between Nusa Dua, Ulu Watu, and Jimbaran), the area from Batubelig to Tanah Lot on Bali's West coast, in or very near the town of Ubud, and near the Handara golf course and Lake Bratan near Bedugul. These locations promise in to produce the highest increase in value over the next few years. In the long term, the area between Tanah Lot and Negara as well as the coastal areas in Bali's North-East should also show attractive price increases.
Friday, April 30, 1993
Calls grow for foreign property ownership
Calls grow for foreign property ownership
Monday, February 27, 2006
Anissa S. Febrina, The Jakarta Post, Jakarta
Many long-term expatriate residents here cannot consider Indonesia a welcoming second home when they are barred from owning property here.
"Property ownership is the core around which one builds one's life. Why should foreigners be handicapped here?" complains Robert Eskapa, a British businessman who has opened a pizza-chain in Indonesia.
"Many foreigners are forced to buy property through some firms here. The firms buy them on our behalf and we end up paying them up to US$100 a month for such a service."
Restrictions on foreigners owning property here, as stipulated in a 1960 law governing use of land, water and space, have been blamed for deterring investment and helping add to the high-cost economy.
With the government revising the land law, property analysts and developers are joining expatriates in urging its expeditious passage.
Currently, foreigners are only entitled to the rights to use, cultivate and build property for a maximum period of 25 years.
"The maximum period varies between provinces, depending on the policy of the local administration," National Land Agency (BPN) legal bureau head Reiner Manurung told The Jakarta Post.
The policy has deterred investment in several regions, particularly areas with sizable expatriate communities.
"Many Singaporeans, for instance, are interested in owning shop-houses and opening businesses in Batam, but the regulation discourage them," he said.
In contrast, foreigners can purchase property and seek local financing support in Singapore, developer Far East Organization (FEO) said.
The Indonesian market is a prized target for Singapore realtors. FEO, which will launch sales of its Orchard Scotts condominium here in March, said foreign nationals accounted for 44 percent of high-end property buyers in the city-state last year.
With lending interest soaring as high as 20 percent, and risking hurting property take-up, foreign investment would help pick up the slack and revive the sector.
Chief analyst at the Center for Indonesian Property Studies Panangian Simanungkalit said Indonesia would benefit from following the example of its neighbors in opening up its property sector, especially in areas such as apartments.
A CIPS study revealed that the apartment subsector alone contributed 17 percent, or some Rp 12 trillion (about US$1.3 billion), to total Indonesian property market capitalization.
The chairman of the Indonesian Real Estate Association, Lukman Purnomosidi, estimated the country could reap at least $10 billion in foreign investment in the next five years should it decide to open the sector.
"That's only the potential in seven major areas -- Jakarta, Batam, Medan, Pekanbaru, Bali, Lombok, Makassar and Manado," he said.
BPN land information deputy head Chairul Basri Achmad said the revised draft might contain a clause extending a leasehold period for foreigners to up to 50 years.
"We hope it will be applicable by the end of 2006," he said.
Although the draft revision of the land law has been completed, BPN still needs to hold public consultation sessions before submitting it to the House of Representatives, Chairul said.
For Eskapa, the sooner such foreigner-friendly policies are introduced, the better it will be for the investment climate.
"It's not like we are going to cut out the property or land and take it away from this country," he added.
Monday, February 27, 2006
Anissa S. Febrina, The Jakarta Post, Jakarta
Many long-term expatriate residents here cannot consider Indonesia a welcoming second home when they are barred from owning property here.
"Property ownership is the core around which one builds one's life. Why should foreigners be handicapped here?" complains Robert Eskapa, a British businessman who has opened a pizza-chain in Indonesia.
"Many foreigners are forced to buy property through some firms here. The firms buy them on our behalf and we end up paying them up to US$100 a month for such a service."
Restrictions on foreigners owning property here, as stipulated in a 1960 law governing use of land, water and space, have been blamed for deterring investment and helping add to the high-cost economy.
With the government revising the land law, property analysts and developers are joining expatriates in urging its expeditious passage.
Currently, foreigners are only entitled to the rights to use, cultivate and build property for a maximum period of 25 years.
"The maximum period varies between provinces, depending on the policy of the local administration," National Land Agency (BPN) legal bureau head Reiner Manurung told The Jakarta Post.
The policy has deterred investment in several regions, particularly areas with sizable expatriate communities.
"Many Singaporeans, for instance, are interested in owning shop-houses and opening businesses in Batam, but the regulation discourage them," he said.
In contrast, foreigners can purchase property and seek local financing support in Singapore, developer Far East Organization (FEO) said.
The Indonesian market is a prized target for Singapore realtors. FEO, which will launch sales of its Orchard Scotts condominium here in March, said foreign nationals accounted for 44 percent of high-end property buyers in the city-state last year.
With lending interest soaring as high as 20 percent, and risking hurting property take-up, foreign investment would help pick up the slack and revive the sector.
Chief analyst at the Center for Indonesian Property Studies Panangian Simanungkalit said Indonesia would benefit from following the example of its neighbors in opening up its property sector, especially in areas such as apartments.
A CIPS study revealed that the apartment subsector alone contributed 17 percent, or some Rp 12 trillion (about US$1.3 billion), to total Indonesian property market capitalization.
The chairman of the Indonesian Real Estate Association, Lukman Purnomosidi, estimated the country could reap at least $10 billion in foreign investment in the next five years should it decide to open the sector.
"That's only the potential in seven major areas -- Jakarta, Batam, Medan, Pekanbaru, Bali, Lombok, Makassar and Manado," he said.
BPN land information deputy head Chairul Basri Achmad said the revised draft might contain a clause extending a leasehold period for foreigners to up to 50 years.
"We hope it will be applicable by the end of 2006," he said.
Although the draft revision of the land law has been completed, BPN still needs to hold public consultation sessions before submitting it to the House of Representatives, Chairul said.
For Eskapa, the sooner such foreigner-friendly policies are introduced, the better it will be for the investment climate.
"It's not like we are going to cut out the property or land and take it away from this country," he added.
Analysts say it's time to open up property sector
Analysts say it's time to open up property sector
Tuesday, February 28, 2006
Anissa S. Febrina, The Jakarta Post, Jakarta
Giving foreign nationals greater property rights in Indonesia could absorb up to US$10 billion in potential investment and make the sector more resilient in times of crisis, a property analyst says.
"The time is just right to give more access to foreigners. We can expect a significant amount of investment that will absorb more capital into the real sector," Indonesian Property Studies (CIPS) chief analyst Panangian Simanungkalit said Monday.
A CIPS study found that opening only 30 percent of property units -- ranging from apartments, office space to malls -- to foreign ownership could contribute $10 billion of investment in the next five years.
Property analysts and developers have called for the government to revise the existing regulation barring outright foreign ownership of property and to extend the leasehold period to up to 99 years to attract more investment. The government is currently in the process of revising a 1960 law on the use of land, water and space.
Currently, foreign nationals are only entitled to leasehold titles for a maximum period of 25 years.
The CIPS study showed that, in Jakarta alone, the sector could gather at least $2 billion investment if 30 percent of the available 65,000 high-end apartment units were sold to foreign investors.
According to property research firm Jones Lang LaSalle, about 70 percent of serviced apartments in Jakarta were rented to foreigners.
"That does not include those who rent houses in Kemang, Pondok Indah, Kebayoran and Menteng," LaSalle national director Lucy Rumantir said.
The study also showed that if a similar percentage was provided for the office and commercial subsector, there would be potential investment of $2.1 billion and $4.2 billion respectively.
The Indonesian Real Estate Association also identified Batam, Medan, Pekanbaru, Bali, Lombok, Makassar and Manado as areas with potential for foreign investment in property.
Panangian said Singapore, Thailand and Malaysia, which have opened their property sectors to foreigners, have benefited from the policy.
"When the (economic) crisis happened, foreign investors also shared the bursting of the bubble, so they also put in an effort to make the situation better instead of running away when the property sector collapsed," he said.
The local property sector was hard-hit by the economic crisis that struck in 1997, with numerous developers crippled by soaring debt when the rupiah sunk to an all-time low against the greenback.
The sector did not start to rebound until 2003 when its market capitalization reached almost Rp 50 trillion, a tenfold improvement on its value in 1999.
Development of the sector continued to improve until soaring interest rates curtailed developers' aggressive expansion plans.
Panangian said foreigners currently had to rely on informal gentlemen's agreements with locals to buy property because they could not own the units themselves.
"It is not legally binding and if the locals aren't trustworthy, it could give Indonesia a bad name," he added.
Land reform expert Gunawan Wiradi said the government still needed to apply restrictions in opening up the sector to foreigners.
"It should be opened but controlled," he added.
Tuesday, February 28, 2006
Anissa S. Febrina, The Jakarta Post, Jakarta
Giving foreign nationals greater property rights in Indonesia could absorb up to US$10 billion in potential investment and make the sector more resilient in times of crisis, a property analyst says.
"The time is just right to give more access to foreigners. We can expect a significant amount of investment that will absorb more capital into the real sector," Indonesian Property Studies (CIPS) chief analyst Panangian Simanungkalit said Monday.
A CIPS study found that opening only 30 percent of property units -- ranging from apartments, office space to malls -- to foreign ownership could contribute $10 billion of investment in the next five years.
Property analysts and developers have called for the government to revise the existing regulation barring outright foreign ownership of property and to extend the leasehold period to up to 99 years to attract more investment. The government is currently in the process of revising a 1960 law on the use of land, water and space.
Currently, foreign nationals are only entitled to leasehold titles for a maximum period of 25 years.
The CIPS study showed that, in Jakarta alone, the sector could gather at least $2 billion investment if 30 percent of the available 65,000 high-end apartment units were sold to foreign investors.
According to property research firm Jones Lang LaSalle, about 70 percent of serviced apartments in Jakarta were rented to foreigners.
"That does not include those who rent houses in Kemang, Pondok Indah, Kebayoran and Menteng," LaSalle national director Lucy Rumantir said.
The study also showed that if a similar percentage was provided for the office and commercial subsector, there would be potential investment of $2.1 billion and $4.2 billion respectively.
The Indonesian Real Estate Association also identified Batam, Medan, Pekanbaru, Bali, Lombok, Makassar and Manado as areas with potential for foreign investment in property.
Panangian said Singapore, Thailand and Malaysia, which have opened their property sectors to foreigners, have benefited from the policy.
"When the (economic) crisis happened, foreign investors also shared the bursting of the bubble, so they also put in an effort to make the situation better instead of running away when the property sector collapsed," he said.
The local property sector was hard-hit by the economic crisis that struck in 1997, with numerous developers crippled by soaring debt when the rupiah sunk to an all-time low against the greenback.
The sector did not start to rebound until 2003 when its market capitalization reached almost Rp 50 trillion, a tenfold improvement on its value in 1999.
Development of the sector continued to improve until soaring interest rates curtailed developers' aggressive expansion plans.
Panangian said foreigners currently had to rely on informal gentlemen's agreements with locals to buy property because they could not own the units themselves.
"It is not legally binding and if the locals aren't trustworthy, it could give Indonesia a bad name," he added.
Land reform expert Gunawan Wiradi said the government still needed to apply restrictions in opening up the sector to foreigners.
"It should be opened but controlled," he added.
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