Wanting info on owning/ leasing a villa in Ubud as an Investment

lemenaj wrote:

Hello Everyone,

I frequently visit Bali and in particular Ubud. I am currently studying Interior Design and would love to own a villa within ubud that I can decorate and rent out to holiday makers in between coming and going myself.

Is this possible ?

I have done a little research and worked out that owning a property in Bali as a foreigner is almost a nightmare but there are other options such as leasing.

Is it possible to lease, re-decorate and rent out to holiday makers ?? I am assuming it is as i expect most of the hotels in seminyak and ubud are owned by europeans or westerners.

What are costs and legal things I will need to know ??

This is one massive learning lesson so any information will be valuable.

It's not a nightmare, you simply can not own property as a foreigner in Indonesia.

Also hotels are not owned by foreigners.

You can rent a villa but not decorate and rent out to others.

Actually, if you use a Hak Pakai lease, a foreigner can rent out (sublet) "their" villa, but the villa must be licensed at the appropriate regency land office, and the "owner" must have a tax number and file tax returns with appropriate tax payments. 

Next time you're in Ubud swing by The Fly Cafe any late afternoon and brain storm with local expats (many being Australian).

Hi Roy,

Lemanaj is frequently visiting Bali so he/she is not permanent living here to my understanding. So as a visitor on one of the "visa" you can go this way you pointed out ??

Cheers,
Tom

Tom, there are no visa requirements necessary for a foreigner in order to lease land/villas here in Indonesia.  Lots of expats have leased properties here in Bali but only use the properties a few times, or even just once in any given year.  The problem is when said "part time" expat wants to lease out their properties when they are absent.  At that point the property crosses the line from being residential to being commercial...thus licensing requirements, business establishment, etc.  Some regencies are cracking down on what they call "illegal villas" more than others, and this is an admittedly difficult thing to effectively police especially if any rents paid are done so "off shore" through non Indonesian banks, Paypal, or such. 

The whole point behind the slowly intensifying crack down is of course to put the brakes on land development here in Bali.

Thanks Roy,

That is actually I was thinking about when it comes to off shore payments, I mean renting a villa at the amount of "X" then lease it out more expensive at "Xx"  gaining profit and by passing possible taxes etc could not be seen as totally legal.

No, it isn't legal at all.

Komangbali wrote:

Hi Lemenaj

Villa - Hotel - Or even Something ... Never Own By Foreigner , But As I see Many Foreigner has Villa In Bali as Temporary Use, For More Invormation Please PM Me, I will Give You the Answer How And What To Do , I Got What You really want to do By This -
1.Busines - To Business
2.Pressing Budget To Spent
3. All Must Done , When You Got The Right Person To Be Trust !

I saw on this Forum , People talk About Bad between Investor with Partner ( Local People ) But On this Day No one Stupid - everybody know what must to do to be SAFE !!! Is Not About Like Or Dislike In The future , Must Be Hold By Agreeman
Get The real person to be Trust,

NB: " Still Alot Good People - But Many Bad People Around "

Best Regard
Komang Bali

Komang, if you read the previous posts from Ubudian and myself you should not confuse Lemanaj and trying to promote yourself, telling that you know how to deal with it.

I think Indonesian Rules and regulations regarding Foreign investments is very backwarded, it doesnt change since the independence- Sokarno period, all modern economies are competing to attract foreign investments but Indonesia is doing the Vise Versa they are pushing ppl out of the country... hope Indonesians see how their neighbors countries rapidly growing such as: Malysia, China, Singapore ...etc

Economics is a very complicated topic especially because of the endless effects that change in one sector will have on another.

Personally, I don't share your view, largely because in the 16 years I've been living here, what I've seen is a great deal of positive growth and improvement along each and every sector.

That being said, this year's investment climate index for Indonesia is two positions below what it was last year, but if the reasonable objective is to be in the middle of this index (and that is a responsible objective), that's still not too bad...IMHO.   

http://www.vrienspartners.com/category/ … mate-index

Ubudian wrote:

Economics is a very complicated topic especially because of the endless effects that change in one sector will have on another.

Personally, I don't share your view, largely because in the 16 years I've been living here, what I've seen is a great deal of positive growth and improvement along each and every sector.

That being said, this year's investment climate index for Indonesia is two positions below what it was last year, but if the reasonable objective is to be in the middle of this index (and that is a responsible objective), that's still not too bad...IMHO.   

http://www.vrienspartners.com/category/ … mate-index

Dear Ubudian,
I totally agree with your comment, the economy issue is very complicated,  Indonesia is rapidly growing and its within 15 years will be one of the top 10 largest global economy..but what i meant is the economic rules doesnt meet the basic international standards, so i cant see any reason for banning foreign investments !! they can make it much better and speeding up,  by updating economic rules..trust me !! it will have a huge impact on the economy...foreign investments will help Indonesia to grow more especially there are 3 big Islands (kalimantan, Sumatra & sulawesi) which are not developed at all yet.. all the economic development is based currently on Java Island only...
Regards, Salem

Foreign investment should always be considered if the investors are actually supporting the area they are going to invest. There should be if not already strict regulations on how the foreign business treats their local employees in terms of employment standards (wages, benefits, health care etc) but also in regards to supporting the communities it has to interact with in terms of assisting schools hospitals social needs which in turn will support them. However simply welcoming foreign investment and shutting out the people who live and work the land being taken is not a useful or sensible approach. Once foreign investors are allowed to do as they please as long as the government is happy then the social and economic problems that create will in the long term damage the communities and the country overall.
The problems arise when the foreign investor leaves creating an employment and welfare problem behind which cannot be filled.

If that is a great way to attract new investment then I must have missed something. Honda UK threatening to pull out of Swindon in England. Panasonic pulling out of Wales, Tata steel closing plants in the UK have created more problems than solving them. This foreign investment can affect any nation and supporting governments are aware of this.

However long term investors like BP  in Indonesia who provide community support employment and real skills training for local Indonesians are seeing the benefits of doing so. Such as increased productivity, less social disruption and better working relations.

Luke, all excellent points IMHO.  Well done my friend! 

What I truly like about Indonesias approach to foreign investment is the overall respect and protection of its culture.  Indonesia should remain conservative with its solicitation of foreign investment. 

All too often success with foreign investment means abdication of culture.  And, unfortunately, the appeal of the dollar is just as strong here as anywhere else. 

I pray God every day that NEVER happens here, and I pray not for me, but for my three sons and all their Balinese cousins that their heritage, their culture, their way of life will NEVER be subjected to outside influence and money to such extent that their culture dies.

Its a very fine line that Indonesia walks every day between advancing its economic strength and maintaining the superb and totally unique diversity of its almost endless inherent cultures.  It is our diversity and our cultures which most defines us.  The true source of our wealth is not our oil, our gas, our minerals, or our labor force.  The true source of our wealth lies within the heart of each and every Indonesian, their bonds to family, to village, to Province and to country.   

The current trend in Bali is most assuredly positive.  Many Balinese outside of southern Bali are now more acutely aware of what foreign investment, and local greed, has done for places like Kuta, and other areas as well.

The idea, greed is good does not resonate here, and I thank God for that.

I do agree with you guys ... but I still think that Indonesia is badly need for foreign investments due to the huge number of poor and unemployed... and it is not the responsibility of foreign companies to provide care, assisting schools ,hospitals and other community support, some multinationals companies will do so, just for media propaganda but infact its just another way of pure buisness marketing  ...the real thing is those companies will pay taxes to the gov. and let it be heavy taxes, which provides the government large sums of money that can build more roads, hospitals and the developing the least poor and rural places ... those companies shall be controlled by strict rules and regulations in term of wages, benefits, health care of their employees...i think Indonesia should be more opened to the world for their own benefits...regarding the social,cultural and heritage impact this is another long story and it is happening everywhere in the world..we can discuss abt it when there is no more poor, Homeless & jobless Indonesian....Regards,

Salem_SBY wrote:

I do not agree with you guys   .. companies will pay taxes to the gov. and let it be heavy taxes,.

It doesn't work like that.
Companies come to Indonesia and provide jobs, but won't come if the taxes outweigh the cost benefits of moving here.
High taxes means they split, see Burger king's move to Canada.

Responsible global companies recognise the value of the country and the people that will make up the workforce. I don't disagree investment is needed but the manner in which it is done should be with complete focus on bettering the people it employs and that the people working are given access to a higher quality of life. This in turn increases the persons standard of living and spending power therefore stimulating the economy further. Taxation and government command won't necessarily do that as the money the investor pays goes to a central find rather than the local one.
The cheap clothing mills of Bangladesh and the recent tragedies there highlighted the exploitation of a workforce where the investing company just paid government taxes.
Investment in Indonesia should be long term, community work force based, profitable for all parties and a way to help secure better futures for families and the environment

mas fred wrote:

High taxes means they split, see Burger king's move to Canada.

The worst thing to happen to Tim Hortons since their deal with Coke.

About Lemenaj comment :
''I have done a little research and worked out that owning a property in Bali as a foreigner is almost a nightmare but there are other options such as leasing.'' here's a good information from Bali Property :

''here are 2 ways for foreigners to own the land in Indonesia:

1. Using the Nomine
The Nominee will sign four documents with the foreigner as follow:
A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.
A Right of Use agreement: allows the foreigner to use the land.
A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.
Power of Attorney: The nominee signs an irrevocable Power of Attorney giving the foreigner the complete authority sell, mortgage, lease or otherwise deal in the land.
2. Using the PMA
The most significant change in Indonesian investment law came in 1997 when the government introduced the PMA (Penanaman Modal Asing or Foreign Investment Company). This allows foreign investors to set up a company in Indonesia, without having to have Indonesian partners. The PMA can be 100% owned by the foreign investor. PMA companies are allowed to own the title of the property for a period 25 years and have to be renewed by the government.

To set up a PMA, you will be required to:
Submit the detailed business plan.
Operate in a business environment that adds value to Indonesia in terms of foreign skills, employment and environmental benefit.
Make an appropriate cash deposit in an Indonesian based Bank. The amount varies and is calculated from the capital employed in the business.
Show the property investment as an asset of the company.
The process takes approximately 3 to 4 months and once its completed; the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up the PMA is between IDR 30 to 40 Million or equivalent with USD 4,500.
''

A nominee arrangement does not allow for any sort of outright ownership to the foreigner.  The Hak Milik, which is the land certificate (deed) will absolutely be required to be in the name of an Indonesian national.  In any court in Bali, the Hak Milik will always overrule whatever POA document that is offered. 

The nominee approach is far, far more riskier to the foreigner than the best lease approach, which is called a Hak Pakai, and which will hold up in court.

The PMA approach has restrictions as well, and that includes the requirement of an Indonesian partner for most (but not all) types of business, restrictions on the use of the land, and most of all, huge sums of money (foreign investment) which must be documented to be primarily for the establishment of the business and NOT the purchase of land. 

And btw, good luck finding anyone who can set up a PMA for around $4,500 US.  That is the average cost to set up a PT.

Be very careful with any schemes, or anyone who tries to convince you that you, a foreigner, can legally own land in Indonesia.  The horror stories I could tell you would bring tears to your eyes.

Do the smart thing, and go the Hak Pakai route.

BaliRadar wrote:

About Lemenaj comment :
'
Make an appropriate cash deposit in an Indonesian based Bank. The amount varies and is calculated from the capital employed in the business.
Show the property investment as an asset of the company.
The process takes approximately 3 to 4 months and once its completed; the company can apply for work permits for the foreign directors, 3 permits in the first year of operation. The cost of setting up the PMA is between IDR 30 to 40 Million or equivalent with USD 4,500.
''

And what you think is an appropriate cash deposit ??

USD 4.500 for setting up a PMA ??

Even to set up a PT might cost more.....

"Even to set up a PT might cost more....."

A very valid point Tom.  We recently set another PT as part of my family businesses and was quoted by one legal firm 70 million to handle it all.  My brother in law decided to do it himself and it cost 43 million.

Ubudian wrote:

"Even to set up a PT might cost more....."

A very valid point Tom.  We recently set another PT as part of my family businesses and was quoted by one legal firm 70 million to handle it all.  My brother in law decided to do it himself and it cost 43 million.

Roy, about 70 mio make sense if you do it via legal firm, similar I am hearing also.

Andi, what kind of "permit" allows a foreigner to "own" land in Indonesia? 

And for your information, no kepala desa of any village, even Desa Adat Pecatu in Kuta can issue any such permit.

Ubudian wrote:

Andi, what kind of "permit" allows a foreigner to "own" land in Indonesia? 

And for your information, no kepala desa of any village, even Desa Adat Pecatu in Kuta can issue any such permit.

He also sells wine, wood products, plastic pipes and a load of other stuff.
I'm starting to think he's a scammer.

mas fred wrote:

Ubudian wrote:

Andi, what kind of "permit" allows a foreigner to "own" land in Indonesia? 

And for your information, no kepala desa of any village, even Desa Adat Pecatu in Kuta can issue any such permit.

He also sells wine, wood products, plastic pipes and a load of other stuff.
I'm starting to think he's a scammer.

Same I replied on the NGO topic.....now he is banned already as I just notice

He can also help you set up NGO bank accounts too... The man is a modern marvel.

I'm thinking it was the fake moustache that did him in!   

mas fred wrote:

He also sells wine, wood products, plastic pipes and a load of other stuff.

All in the same store?  I want to check that place out.