Buying or Building a Villa in Bali as a Foreigner

Bali continues to attract foreign buyers seeking lifestyle properties and long-term investment returns. Strong tourism demand, limited land supply, and rising rental yields have made villas one of the island’s most sought-after asset classes. Yet for foreign nationals, buying or building property in Bali is governed by a legal framework that differs significantly from many other destinations.

Indonesia’s land laws are designed to protect national ownership while still allowing foreign participation through defined legal structures. Understanding those structures—and choosing the right one at the outset—is the difference between a secure investment and a costly mistake.

Under Indonesia’s Basic Agrarian Law, freehold land title (Hak Milik) is reserved exclusively for Indonesian citizens. Foreigners cannot legally hold this title, regardless of marital status or length of stay.

This restriction does not prevent foreigners from investing in property, but it does shape how that investment must be structured. Rather than freehold ownership, foreign buyers must rely on alternative land rights that offer use, control, or development authority without violating national land policy.

In practice, there are three recognised pathways for foreigners who want to buy or build a villa in Bali.

Leasehold arrangements remain the most common option for lifestyle buyers. Under a leasehold agreement, a foreigner leases land or an existing villa from an Indonesian owner for a fixed period, typically 25 to 30 years, with negotiated extension rights. Well-drafted leases can provide effective control for decades, but the legal strength depends heavily on contract quality and due diligence.

Hak Pakai, or Right to Use, is another option. This title can be granted to foreigners who hold a valid stay permit and is generally intended for residential use rather than commercial rental. While more formal than leasehold, Hak Pakai is often limited in scope and less flexible for income-generating properties.

For investors planning to operate villas as rental businesses, the most robust structure is a foreign-owned company (PT PMA) holding Hak Guna Bangunan (HGB). HGB allows the company to build and operate on the land for an initial term of up to 30 years, extendable for additional periods. This structure is widely recognised by banks, regulators, and investors as the strongest legal footing for commercial villa projects.

Despite clear legal alternatives, some foreigners are still offered “nominee” structures, where an Indonesian individual holds land on their behalf. These arrangements are not recognised under Indonesian law and offer little protection if disputes arise.

Authorities have consistently warned against nominee practices, and courts have shown limited sympathy when such arrangements fail. From a risk perspective, legitimate leasehold or corporate structures offer far greater long-term security.

Before signing any agreement, thorough due diligence is essential. This includes verifying land certificates with the National Land Agency, confirming zoning and spatial planning permissions, reviewing land tax history, and checking for disputes or encumbrances.

Zoning is particularly important in Bali. Not all land can legally be used for residential or tourism purposes, and mistakes at this stage can prevent licensing or rental operations later.

Experienced advisors often note that many foreign property disputes could have been avoided with proper due diligence before the transaction.

For those planning to build rather than purchase an existing villa, compliance does not end with land acquisition.

Indonesia has replaced the former IMB building permit with PBG (Building Approval), which confirms that architectural plans comply with zoning, safety, and structural standards. Construction cannot legally proceed without this approval.

Once construction is complete, an SLF (Certificate of Feasible Function) is required before the villa can be occupied or rented. Authorities may also require environmental documentation and local community approvals, depending on project size and location.

For rental villas, additional business licences are required through the OSS Risk-Based Approach system. Operating without these licences exposes owners to fines or closure, even if the property itself is legally built.

Property transactions in Bali involve several taxes, including acquisition tax (BPHTB), seller’s income tax, and annual land and building tax. Rental operations trigger additional obligations such as income tax and, in some cases, tourism-related levies.

These obligations vary depending on whether the property is held personally under leasehold or through a PT PMA. Structuring decisions made at the beginning therefore have long-term tax and compliance consequences.

The key decision for foreign buyers is not whether Bali property is attractive, but how to access it legally and sustainably. Leasehold arrangements may suit personal use, while PT PMA structures provide clarity and protection for commercial operations.

Corporate advisors with experience in Indonesian investment law, such as CPT Corporate, often emphasise that company registration and PT PMA setup should be viewed as part of the investment strategy itself, not merely an administrative step. When structured correctly, corporate ownership can simplify licensing, taxation, and eventual exit planning.

Bali’s villa market continues to evolve as regulations become more structured and enforcement more consistent. For foreign investors, this creates both opportunity and responsibility. Those who follow recognised legal pathways benefit from greater certainty, smoother operations, and stronger resale prospects.

Buying or building a villa in Bali is not about bypassing restrictions—it is about understanding them and working within a system that balances foreign participation with national land policy. With careful planning, due diligence, and the right legal structure, foreign ownership remains both possible and rewarding.

As Indonesia’s property and licensing frameworks mature, informed investors who prioritise compliance are best positioned to benefit from Bali’s enduring appeal.

This press release has also been published on VRITIMES