Foreign Owned Bali Villa

A well known foreigner involved in real estate and villas in Bali says “Once those rose tinted glasses come off”. What they are referring to is the love for Bali many foreigners experience that compels them to build their own villa in paradise, and the process of migrating from the love of to the hate of many aspects of Bali. A lot of foreigners own “villas” in Bali, many if not most of which are there illegally (see our report: Illegal Bali Villas). But the temptation is clearly great especially with the carrot of some guest revenue even profit. After all the common and garden holiday visitor who starts to dream of their own vacation home is generally only ever exposed to the charming face of Bali; smiling, charming locals all calling them “Mr.” this, “Pak” and “Ibu” that. So owning a place in paradise must be just as pleasant right? Wrong!

The moment you make any kind of investment or commitment to Bali, including trying to build a villa or even marrying a local, your status changes, you become fair game for cheating, lying, fraud, extortion, corruption and more. Actually these rose tinted glass wearing foreigners are exposed to such things before, but on a much lower scale and unfortunately they do not imagine such things are proportional. They accept traffic police demanding fines without receipts for motoring offences they have not committed. They accept that many money changers will try every trick in the book to defraud them. They think that shop keepers and stall holders telling them everything is best quality, handmade in Bali, and being offered at a really cheap morning price is OK when they really know what they are being sold is mass produced junk from outside the island. And yet these dream world potential investors of their life savings remember just the smiles, and are prepared to risk their nest eggs on facial expressions alone, and a bit of cheap sun. For many that is a big mistake, one that will cost them everything.

We will tell you here some of the problems, the nasty things done to foreign investors in Bali, those lovely money trees (in the eyes of the Indonesians).

First you have to find the “perfect” land or someone else’s perfect villa to buy. If it is the later, and being offered by a foreigner, then it can hardly be perfect and the honest reason for their trying to sell it is probably not a good one (for example see our report on Unlawful Luxury Bali Villas), and getting licenses is therefore now a very good idea. Unfortunately the process is also not an easy one for a foreigner, of course. You see, not only is a foreigner unable to own land in Bali they are also not allowed to own a business either! They can not operate as sole traders, as partnerships or as small companies (PT’s). Their only options are to a) Trust others to manage the business for them, or b) To form a public company and issue themselves the majority of voting shares, the cost of which simply to manage a villa makes it no option at all.

Of course even trusting others to run your business and getting licenses still means paying taxes and keeping accounts, etc; hardly a holiday pastime, and legally it is not. That is, if you build a vacation rental villa on land owned by a name-giver and manage the running of the business through others, you can not come to Bali legally on a visitor visa and do any business while you are there. You would have to do it remotely, before or after you came while in your own country! If you came to Bali and so much as cleaned a plate in your own villa, let alone performed any managerial tasks, you could and likely would be construed as working illegally. And the irony is you likely could never become legal in the first place.

Even if you find a trustworthy name-giver and partners, have them form a small company (PT) which can apply for villa trading licenses and also a work permit for you, so you could come and perform managerial tasks legally, you are unlikely to get one. You see Indonesian work permits (KITAS) are issued based on ability, not investment. So unless you had a career path that justified a work permit, you would be unlikely to get one. Of course, you could pay for one, where a KITAS was issued under false pretences, but that may well simply end you up in a whole lot of trouble with Bali’s mafia style extortion police if someone who knew ever had reason to bear a grudge against you, or your money. Not only that, it costs KITAS holders 1 million Rupiah in exit taxes every time they want to leave Indonesia!

So, potential villa “owning” foreigners have a lot to look out for, but very little reward to look forward to. Apart from seeking and paying for professional advice and services from people with a good reputation in Bali to protect their investment, a potential villa owner really needs to realize they are likely to end up breaking very restrictive Balinese and Indonesian laws one way or another, plus likely will be cheated every step of the way. In short, they should prepare to be very diligent, extremely resilient, to expect many problems, and to probably allow an extra 30% to 50% on top of what they think their villa will cost for rip-offs (such as the previous land owner removing all the trees because they were not listed in the land sale agreement), theft and police / government officials’ extortion.

Of course, when you look at it like that, without the rose tinted glasses, the question is “Why bother?” And we can only agree with that. We believe the Indonesian government and their intentional or unintentional anti-western sentiment and laws need to change. We therefore urge potential investors to think more than twice about what they are planning and for western holiday makers to boycott Bali’s villas on the basis they are either unlawful or discriminate against foreign investors as Indonesians can build and operate villas for less. We will happily remove our plea for people to boycott building and / or staying in Bali’s villas if and when the Indonesian Government pass laws that make it possible for all foreigners to own and operate villas legally, to pass an amnesty for the benefit of hitherto unlawfully operating foreign owned villas, to remove the extortion from the process, and to make it realistically possible for all the westerners ever cheated by Balinese / Indonesian land owners, name givers, real estate agents and business partners to sue them to get their money back.

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