Comprehensive guide to building a leasehold villa in Bali
Discover the ins and outs of acquiring a leasehold villa in Bali. Learn about the various options available, such as off-plan villas and leaseholding land, and make informed decisions.
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If there was ever a doubt whether Bali would bounce back from the global pandemic, the answer in 2023 is a resounding yes. Bali is back and busier than ever.
In fact, Bali benefits from a global megatrend called remote work. As more companies allow their employees to work remotely, an increasing number of them choose to move to Bali.
As Bali becomes more crowded, it seems like almost everyone (exaggerating slightly) living in Bali has entered the property business. At Emerhub, our job is to help you navigate this safely and prevent you from making poor business decisions.
Let’s discuss building and buying leasehold villas in Bali.
Understanding the concept of leasehold villas in Bali
Indonesian Agrarian law outlines different types of control over land and property. Unlike other forms of property ownership, leaseholding doesn’t require foreign nationals to register a company or obtain a residence permit in Indonesia.
In essence, a leasehold is a kind of “temporary” ownership or long-term lease. You gain full control over the property for a specified amount of time. The contract is notarized, making it a stronger form of ownership than merely signing a lease agreement with the landlord.
What is the typical length of a leasehold agreement in Bali?
In Bali, the market standard is 25 years, but contracts for up to 35 years are not uncommon.
The contract is paid at once, so there won’t be an annual lease payment. This also means you will sign the contract according to current market conditions. While historical performance doesn’t guarantee future gains, people who bought leaseholds in Bali 25 years ago are typically quite pleased with the deals they got back then.
What are some of the clauses to put into leasehold agreement
We strongly recommend including the following clauses in your leasehold agreement:
- Complete ownership over the property during the contract period. Ensure the lessor has no right to dictate the kind of villa you can build or whether you can sublease.
- Ability to extend the property according to the market rate. It’s a good option to have, even if you plan to retire within the next 25 years or consider that Bali’s tropical climate may leave little of your villa after 25 years.
Downsides of a leasehold in Bali
Leaseholding in Bali has several downsides, mainly due to the fact that you don’t actually own the property, such as:
- You can’t sell the property. However, you can sell the leasehold agreement (for the remaining years) or sublease.
- The leasehold villa won’t stay permanently in your family – your children won’t be able to inherit it (beyond the years of the leasehold agreement).
Which type of property to leasehold in Bali?
When choosing between a leasehold villa or land, consider the following options.
Leasehold an empty land
Acquiring an empty plot and building your own villa is a great option if you want a villa built precisely according to your preferences.
It’s also cheaper. Based on Emerhub’s research, you can save up to 40% by purchasing an empty plot of land and hiring a construction company to build a new villa for you.
If you’re on a tight budget and have the time and skills, you can even hire construction workers directly. The market rate is Rp. 150,000 per day per construction worker.
Downsides to leaseholding an empty land:
- It usually takes around a year to build an average-sized villa (about 180 m2 in Canggu), so you won’t be able to move in any time soon.
- You’ll need to spend time working with architects, monitoring construction, etc. Most of it can be outsourced, but if you don’t enjoy
- A limited supply of small lands to leasehold. With ready-made or off-plan villas, the developer has already purchased a bigger plot and divided it into smaller pieces. It’s quite rare to find land below 1000 m2.
Leaseholding an off-plan villa
Off-plan leasehold villas are all the rage in 2023 in Bali. Emerhub even did a special podcast episode on them. Get it on Spotify, Apple Podcasts, or YouTube.
An off-plan villa is a villa that is still under construction. In contrast to leasehold land, the developer has already taken care of splitting the land, creating designs, and supervising construction.
Off-plan villas are usually slightly cheaper than ready-made villas. Developers prefer to sell properties as quickly as possible to recover their investment and use the capital to start new projects. As you drive around Bali, you’ll notice off-plan villa billboards everywhere.
Leaseholding an existing villa
This is the most straightforward option. You find a villa you like, agree on the price, and move in whenever you want.
However, keep a few aspects in mind:
- How long is the leasehold valid? Some villas on the market have a leasehold expiring in just a few years. Ensure the price reflects the duration of the leasehold agreement and avoid overpaying.
- Can you sublease? If you don’t plan to use the villa year-round, it’s wise to rent it out short-term while you’re away. However, not all leasehold agreements permit this.
Cost of buying leasehold property in Bali
Emerhub Bali tracks all property transactions in Bali to which we have access. In our latest research, we analyzed more than 500 property transactions in Bali in the last 12 months, providing us with proprietary information.
Typical cost of a leasehold villa in Bali in 2023
Here are the typical costs of leasehold villas in Bali in 2023:
|Area||Average leasehold villa price (per m2)|
|Canggu, Berawa and Pererenan||Rp. 28,765,522|
|Bingin, Bukit and Uluwatu||Rp. 31,858,754|
|Umalas, Seseh, Nyanyi, Padonan, Tumbak Bayuh, Babakan||Rp. 23,460,087|
Case study: Leasehold land vs. off-plan villa
In 2023, a typical off-plan villa in Canggu is 180 m2 and costs Rp. 4,829,162,500. Let’s compare that to leaseholding a land and building yourself.
|Lease duration for land||Lease Price (per m2)||Construction Cost (high end, per m2)||Total cost to build a 180m2 villa|
|25||Rp6,496,016||Rp. 10,000,000||Rp. 2,969,282,880|
If you’re willing to invest time and energy, you can save significantly by building your own villa. The calculation is for high-end construction, so your villa will likely be more luxurious than most villas available on the market. We’ve already covered the downside of spending time and energy in the previous section.
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