Buildings classified as villas and homestays (pondok wisata) can only be owned by Indonesians.
As a foreign-owned real estate or hospitality management company, you can acquire the right to build or right to use the land these properties sit on and set up a legally binding agreement with the local owner of the building.
In this agreement, you can set out the terms of how you want to manage the building including the provision of short and long term rentals.
Once you’ve decided on the kind of property (or properties) you wish to acquire, make sure each building has the correct building permit (IMB) as this will define its legal use.
The IMB of your property will dictate the extent of your planned construction and will determine if your property can operate as a homestay or villa. If the property you desire doesn’t have the right IMB, you can obtain the right permit before your planned construction begins.
Requirements for building a villa in Bali
A building permit for a villa in Bali stipulates that the building must consist of several units and 1 unit of several rooms, not to be confused with a hotel where one building comprises many rooms, not units. Villas can have:
Up to 25 rooms
Up to 10 are (1,000m2)
No restriction on room size
Requirements for building homestays in Bali
A building permit for a homestay has more restrictions than a villa.
Up to 5 rooms (suitable for small buildings)
Up to 5 are (500m2)
Maximum room size 32m2
Maximum 2 floors
Building coverage ratio 50%
Possible facilities: pool, kitchen, living room, family room
Why you shouldn’t use individual nominees to purchase property
The Indonesian constitution states that only Indonesian Citizens can own freehold land. The commonly used set up of using the name of an Indonesian individual to purchase property as a foreigner is illegal and also very risky to your investment.
These types of agreements are based on blind trust and give the foreigner no legal control over their investment. Even if the nominee has the best intentions, problems usually arise when other family members get involved.
If you decide to build a villa, conduct thorough research and due diligence on land acquisition and the types of land certificates required. For an in-depth overview, read our previous article on land acquisition in Bali.