Bali has long been a tropical haven for travelers, but in recent years, it has also become one of Southeast Asia’s hottest real estate markets. With its booming tourism industry, picturesque landscapes, and attractive rental yields, the island offers plenty of opportunities for both lifestyle seekers and property investors. 

However, investing in Bali real estate isn’t without its pitfalls, especially for foreigners unfamiliar with Indonesia’s complex property laws and market dynamics. A lack of due diligence or a simple oversight can lead to costly mistakes, legal disputes, or even loss of ownership.

To help you navigate the process safely and confidently, here are some of the most common mistakes investors make when buying property in Bali and how you can avoid them.

1. Assuming You Can Buy Freehold Property as a Foreigner

A common misconception among foreign investors is thinking they can legally acquire land in Bali under a freehold (Hak Milik) title. In reality, Indonesia’s Agrarian Law restricts such ownership solely to Indonesian nationals.

Foreigners must instead explore legal alternatives such as:

• Hak Pakai (Right to Use)
• Hak Guna Bangunan (Right to Build) via a foreign-owned company (PT PMA)
• Leasehold (Hak Sewa) agreements

Failing to comply with these ownership structures can result in legal complications or the nullification of your purchase.

2. Using Nominee Structures

Some foreign buyers attempt to bypass ownership restrictions by registering the property under the name of an Indonesian national (a nominee). While common in practice, this method is illegal and risky. The property legally belongs to the nominee, and if disputes arise, you may have no legal ground to claim the asset.

Instead, consult with a legal professional to explore legitimate ownership pathways.

3. Skipping Legal Due Diligence

Buying property without proper due diligence is a recipe for disaster. This includes:

• Verifying land certificates
• Checking zoning regulations
• Confirming that the property is not involved in any legal conflicts or burdened with claims from third parties.

Always work with a certified PPAT (Pejabat Pembuat Akta Tanah) or a reputable notary familiar with Bali property law.

4. Not Understanding Zoning Laws

Every piece of land in Bali is assigned a particular purpose—whether for housing, business activities, or tourism development. Purchasing property in a zone that does not align with your intended use (e.g., running a business in a residential zone) can lead to hefty fines, permit issues, or even forced demolition.

Before finalizing any property transaction, it’s essential to verify the land’s zoning classification through the appropriate local government offices.

5. Relying on Verbal Agreements

Spoken agreements hold no legal weight in Indonesian property transactions and should not be relied upon. Even if you trust the seller or agent, always ensure that all terms—especially for leasehold or joint ownership—are clearly written and notarized.

This includes:

• Duration of lease
• Extension rights
• Payment terms
• Use of property

6. Underestimating Maintenance and Management Costs

Owning a villa in Bali may sound glamorous, but it comes with ongoing expenses—especially if you're not residing on the island full-time. Costs can include:

• Property management fees
• Repairs and maintenance
• Security services
• Gardening and cleaning staff

These expenses can quickly add up and impact your rental returns or investment ROI.

7. Ignoring Tax Obligations

Indonesia imposes several taxes on property transactions and income, including:

• Income Tax (PPh) on rental income
• Value Added Tax (VAT) for commercial properties
• Land and Building Tax (PBB)

Failing to report income or fulfill tax obligations can result in penalties or legal trouble.

8. Not Hiring a Local Expert

Trying to navigate Bali’s real estate market without help is risky. Hiring a local property agent, legal advisor, or consultant with a deep understanding of the legal and cultural landscape is essential for avoiding missteps.

A local expert can help you:

• Understand regulations
• Evaluate property values
• Conduct negotiations
• Avoid scams

9. Buying Off-Plan Without Guarantees

Buying a villa that’s still under construction (off-plan) can be a lucrative move—but only if you do it right. Many investors have lost money to unfinished or poorly constructed developments due to untrustworthy developers or lack of regulation.

If you're considering an off-plan investment, ensure:

• The developer has a proven track record
• Construction permits are valid
• Payment stages are tied to actual development progress

10. Thinking Short-Term Instead of Long-Term

Lastly, many investors make decisions based on current market hype without considering long-term sustainability. Real estate in Bali is a dynamic market, influenced by:

• Political and regulatory changes
• Global tourism trends
• Currency exchange rates

Create a clear investment plan and be realistic about your goals, whether they are rental income, capital appreciation, or personal use.

Conclusion

Investing in Bali real estate offers incredible potential, but it’s not without risks—especially for those unfamiliar with local laws and customs. By avoiding these common mistakes, conducting thorough due diligence, and working with the right professionals, you can maximize your investment and enjoy peace of mind.

Looking for trusted guidance? Koskaki is here to help you navigate the Bali real estate market safely, legally, and profitably.