Indonesia is a fantastic place to live. Bali, the most popular resort in the country, has been attracting investors with its affordable prices and high profitability over the past decades: the profitability of renting out properties reaches 12% per annum and the annual real estate growth exceeds 20-30%. If you are considering buying a local residence, you may be wondering about the cost of real estate in Indonesia. After reading this article, you will become acquainted with market prices to reasonably assess your capabilities.
Content:
- Three Reasons to Invest in Real Estate in Indonesia
- Real Estate Types
- How much does accommodation cost in Bali?
- Can foreigners buy real estate in Indonesia?
- How to buy a property in Indonesia?
- Conclusion
Three Reasons to Invest in Real Estate in Indonesia
There are three major reasons for buying a residence on the island.
- Affordable Prices
Investing in Balinese housing is a sound solution, as prices are steadily rising here. The cost of real estate in Indonesia is one of the lowest in Southeast Asia, offering profitable investment opportunities in 2023 and 2024.
- Government Support
The Indonesian government has taken steps to attract overseas investment, particularly in the real estate sector. The relaxation of foreign ownership laws has made it easier for citizens of other countries to purchase housing, thereby contributing to economic growth. So, since 2023, you do not need to have a residence permit to purchase a local property – only a passport is required in this case. The government's desire to create a favourable environment for foreign investors helps this area become increasingly popular.
- The Market is Booming
Millions of tourists visit the country and Indonesia has also experienced high demand among expats and digital nomads in recent years. Other excellent factors, such as high security and low living costs, make Bali the perfect place to invest in properties. You can always find tenants here, even during the off-season.
Real Estate Types
The Bali market offers various types of real estate, including villas, apartments in Indonesia, townhouses and commercial properties for investment.
As high-rise buildings are prohibited in Bali, local residences are typically found in small resort-type residential complexes with 3-4 floors. Apartment buildings are hands-on and offer a range of additional benefits, including gyms, swimming pools and round-the-clock security.
Although Indonesian homes are often associated with luxurious and expensive holidays in places like Bali, they are surprisingly common and affordable. Villas with a pool and garden are popular on the island. Moreover, owners offer a range of services including cleaning, pool maintenance and even the option to call a massage therapist or chef to the home.
Townhouses are less common, but they are also a popular residential real estate type. These cosy houses with shared walls offer an affordable and compact option for those seeking more privacy.
As for commercial properties, this category is more likely to feature expensive options as Indonesia becomes a business hub. However, there are numerous spaces available for small businesses and entrepreneurs in shopping malls and business communities.
How much does accommodation cost in Bali?
The cost of housing depends on various factors such as location, size and real estate type. As per the latest data, the average price of houses in Indonesia ranges from 500 million Indonesian rupees (USD 32,500) to 2 billion Indonesian rupees (USD 130,000), although the amount can vary significantly depending on the area and type of property.
Prices in the country are among the lowest in Southeast Asia, making Indonesia an attractive and promising destination for foreign buyers. However, the value can vary significantly depending on the location and type of property. While prices are low in suburban and rural areas, they are much higher in large cities and on the coast.
As Indonesia's top tourist destination, Bali boasts an impressive selection of accommodation options. In addition to stunning natural landscapes and picturesque beaches, the island is also well-known for a variety of comfortable projects. Here, you can find classic villas in traditional style, minimalistic glass houses and eco-friendly complexes from modern developers.
The average price per square metre is 14.7 million Indonesian rupees (USD 950) and the average rental price is 85.1 million Indonesian rupees (USD 5,500) per year.
| Property type | Average cost of real estate |
|---|---|
| Villa | 2.4 billion Indonesian rupees (USD 155,000) |
| Commercial unit | 4.3 billion Indonesian rupees (USD 278,000) |
| Apartment | 1.7 billion Indonesian rupees (USD 109,900) |
| Land plot | 1.8 billion Indonesian rupees (USD 116,500) |
Can foreigners buy real estate in Indonesia?
Yes, they can, but they cannot have full ownership – Hak Milik (HM) – as this type of housing is only available to Indonesians.
Setting up a PT PMA (limited liability company with foreign participation) is one way for foreigners to purchase Balinese properties. You can establish your company through the Indonesia Investment Coordinating Council (BKPM). However, many foreigners prefer to use a local agency to create a PT PMA. The process takes about two weeks and costs approximately 25 million Indonesian rupees (USD 1,625).
If you are planning to buy a house in Bali as an individual, you can opt for a leasehold property or own it through a long-term lease. You can enter into a contract for 30 years, which can be extended. Under this agreement, you can purchase real estate for both residential and commercial purposes, but you cannot bequeath it.
How to buy a property in Indonesia?
The Balinese market is difficult for foreigners to understand. The services of an experienced agent will help you save time and effort throughout the entire purchase process. The broker will manage complex negotiations, addressing sensitive issues such as repair obligations. Acting as an intermediary, the specialist will also help smooth out any conflict that may arise between the buyer and the seller.
Before finalising a deal, it’s imperative to request two vital documents from the seller:
- An ownership certificate;
- A valid building permit (PBG).
If the seller does not provide these documents or is stalling, this serves as a signal that there are some issues.
Following this, you should conduct a comprehensive assessment, which you can also conduct with your agent. Please get clear answers to the following questions:
- Who is the owner?
- Is the owner married and does he/she have the consent of his/her spouse?
- Was the property inherited and are all beneficiaries in agreement to sell it?
- What type of ownership certificate does the property have?
- Do the documents belong to the owner or the bank?
- What are the local zoning laws?
- What tax should you pay for your home?
If everything checks out with your property, you proceed to the next stage – signing a sales and purchase agreement (SPA). This legal document outlines the responsibilities of both parties involved. It must be signed in front of a notary authorized for the territory (PPAT). It’s crucial to ensure that the SPA agreement protects your interests and that you understand all its terms. The buyer pays for the notary's services, typically about 1% of the purchase price.
If the property certificate is held by the bank, you need to agree on who will pay the remaining amount owed to the financial institution. Additionally, it’s important to wait for the notary public (PPAT) to receive and confirm the certificates before paying.
The final transfer and signing of the contract of sale must be conducted in front of a notary public. Before transferring ownership, both parties must settle the property tax. As a buyer, you should be prepared for a property transfer tax called Bea Pengalihan Hak atas Tanah dan Bangunan (BPHTB). This fee has a fixed rate of 5%.
The seller may propose an "unofficial" price to minimize taxes, but each housing unit has a value (NPOP) that determines the amount of property tax. The transaction price cannot be lower than the NPOP and should be deemed "realistic" by the local government. Otherwise, this will lead to additional verification and delay the purchase process.
In addition to the real estate transfer tax, buyers should also be aware of the land and building tax, known as Pajak Bumi dan Bangunan (PBB). Annually, you are required to pay 0.5% for the house and 0.1–0.2% for the land.
Conclusion
Finding and buying a house in Indonesia is not difficult. The wide range of options, streamlined transaction processes and minimal document requirements are the main advantages. However, for foreigners, purchasing real estate may be difficult as they do not know the local laws and language. Therefore, relying on the help of an experienced agent is essential. Contact our specialists for advice on purchasing Indonesian property. We will help make your dreams of owning a home in Bali come true!