Investors are drawn to Indonesia’s real estate market because of the strong demand for short-term rental properties. However, successful investment depends on a solid understanding of local regulations and land laws. Many buyers encounter legal or financial issues when they overlook important details during the purchasing process. Avoiding common mistakes helps ensure that buying property in Bali remains a safe and profitable investment.
Failing to Verify Land Ownership
The first mistake is not confirming the land title. Indonesia recognizes several types of land ownership, with freehold titles restricted to Indonesian citizens. Foreign buyers generally acquire property through leasehold arrangements or approved legal structures. It is essential to verify the land certificate at the local land office to confirm that the seller has the legal authority to transfer the property. Proper verification helps prevent ownership disputes when buying property in Bali.
Overlooking Zoning Regulations
The second mistake is disregarding zoning laws. Bali is divided into designated zones such as residential, tourism, and agricultural areas. Land zoned for agriculture cannot legally be used for villas or rental businesses, and development on green belt land is prohibited. Purchasing property in the wrong zone can result in construction being stopped or rental licenses being denied. Anyone buying property in Bali should review the official spatial zoning plan for the land in question.
Skipping Building Permit Verification
The third mistake is failing to conduct due diligence on building permits. Some developers begin construction before receiving full approval. Purchasing a property without a valid permit can lead to penalties or even demolition. Buyers should confirm that the permit matches both the physical structure and the intended use of the property. It is also important to verify that the permit is officially registered before completing the transaction.
Underestimating Taxes and Fees
The fourth mistake is overlooking tax obligations. Property transactions involve various taxes and fees for both buyers and sellers, including transfer taxes and value-added tax. Foreign owners are also subject to income tax on rental earnings. Failing to factor in these costs early can significantly reduce profit margins. Requesting a detailed tax breakdown from a legal advisor helps clarify the true cost of buying property in Bali.
Working with Unlicensed Agents
The fifth mistake is engaging unlicensed real estate agents. The market includes many informal brokers who lack proper credentials or legal support. Buyers should work with registered agencies that have a physical office and proven experience. Reputable agencies provide access to qualified legal professionals and certified notaries, who act as neutral parties to manage official documentation and ensure compliance with Indonesian law.
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