Loads of you are wondering on the reliability of an investment in Bali. In this article, we will discuss the status of lands for a foreigner (the leasehold) and analyse its potential in order for you to have a better understanding to jump the step.

The Legal Status of Lands in Bali, The leasehold

In Indonesia, therefor in Bali, two legal status exist for the lands, le freehold (full owner) and the leasehold (long time renting). We will focus more on the leasehold status rather than the freehold because of its complex administrative, legal aspects and its relatively high cost.

Thus, we will explain the leasehold. In Indonesia, a foreigner cannot become the owner of a land in his hand. Why? Simply because of the protectionist measures from the government but it is still very attractive for a future investment. The leasehold allows you to be the “unique” owner of a land for a given time (this can vary from 20 to 35 years in general). We can easily compare this status to a long time rent but we a one-time payment.

The signature of a leasehold contract is strictly frame by the Indonesian law; the buyer is the only one to benefit of the land during the time determined. You are allowed to build or destroy what you wish, the land owner does not have any rights on the land. All the procedures are done with a notary making notarized deeds. During the signature of the lease and exceptional extensions of the lease can be added. This extension takes effect in exchange for the payment of a fixed sum between the buyer and the owner, this is not compulsory.

The buyer can sell its land (during the time left on the lease) to whom he wishes and once again the land owner as no rights on this transaction. The terms of the lease do not change just the name of the new buyer is registered. This procedure requires a notary and needs to be framed by the Indonesian law

How can I benefit from my investment by being limited in time?

Come on let’s go! We are going to get the heart of the subject. In Bali, the tourism in full development. It does not stop rising each year with an occupancy rate reaching up to 80% for a year. The average rate of return can attain 12% per year, especially on the popular areas (Seminyak, Canggu, Umalas), the rates can go up to 40% of profitability!

Therefore, when you purchase a good or you build a house on a land for 17,20,25 or even 30 years, you will make profitability in 10 years in the worst scenario. At the end of these 10 years, you sell your good according to the pro rata of the years left of the lease. This will allow you to generate more value however you can continue to rent until the end of the lease and you are sure to make constant revenue.

Let us explain with numbers!

You build a good on a land with a leasehold status for a given time of 25 years, located in Bukit (The south of Bali) for $125 000 where the rate of return is around 12% per year. After 8 years, you good will be profitable, there is 17 years left therefore you sell it. You are able to sell it between $81 000 and $98 000, you are able to benefice from this coquettish amount. Unsallable certain say, we respond that your buyer will do the same and will sell it again at $38 000 8 years later or will keep it until the end of the lease to continue generating revenue from the rents. This example does not take in count the constant augmentation of the real estate price in Bali.

So, are you convinced? Discover our catalogues without waiting!