Bali Villa

Securing Real Estate Financing in Bali

In the not-so-distant past, acquiring financing for a villa in Bali was an uphill battle for foreigners. This was largely due to the fact that Indonesian law did not permit foreigners to hold property titles solely in their own names. 

As a workaround, foreigners seeking to obtain a HAK MILIK (freehold title) typically employed the use of a local “nominee” to act as a placeholder for the property’s deed documents. However, this arrangement often led to discrepancies in the document’s namesake, which made Indonesian banks hesitant to facilitate such transactions.

However, the introduction of Hak Pakai (right to use) has revolutionized property ownership for foreigners in Indonesia. This new provision allows foreigners to hold land in their name for a set duration, typically a leasehold of 25 years with the possibility of extending to 75 years. Currently, this is the most favorable structure for foreigners wishing to possess land in Indonesia, as it allows their names to be registered directly on the deed. As a result, securing financing for a Bali villa has become a more straightforward process for expats.

In line with this, foreigners are now eligible to apply for an Indonesian Property Loan (IPL).

The Indonesian Property Loan (IPL) offers the following advantages

  • Currency Flexibility: Loans can be disbursed in USD, AUD, and IDR.
  • Wide Range of Loan Amounts: Applicants can request a minimum of $12,000 and up to a maximum of $450,000.
  • Reasonable Down Payment: The minimum deposit required is 40% of the property’s value.
  • Extended Repayment Period: The maximum loan period extends up to 10 years.
  • Variable Interest Rates: The interest rate is subject to changes and is determined by the cost of funds.

Here’s a list of the eligibility criteria for securing an Indonesian Property Loan (IPL)

  • Residency Status: The IPL is available exclusively for foreigners who are currently living in Indonesia.
  • Property Type: Only residential properties are eligible for financing.
  • Loan Registration: The loan should be registered in the same name as the property title.
  • Loan Limit: Borrowers are allowed to have only one active loan.
  • Financial Capability: Applicants must be able to demonstrate their ability to fulfill their financial obligations.

Property Valuation Process

While the borrower is responsible for conducting an initial property valuation, the lending bank also takes an active role in this process. They will delegate the task to a valuation company of their choosing to ensure a comprehensive and unbiased appraisal.

Notary Fees

In terms of notary fees, it’s important to note that the borrower is responsible for all related costs when obtaining financing for a villa in Bali.

Payment Flexibility

Payments towards the loan are structured on a monthly basis. In terms of repayment options, borrowers have the liberty to make either partial or full payments at any time before the loan reaches its maturity. This provides a great deal of flexibility in managing your financial commitments.

Potential Risks

One important factor to keep in mind is the potential impact of currency exchange rate fluctuations. These can influence your repayment amounts, especially if the loan is taken in a currency different from your primary source of income. It’s essential to factor in these potential shifts when considering property investment in Bali.

Additional Banking Requirement

Borrowers are required to sign an “Upfront Surrender” agreement with the bank. This is a procedural step taken to expedite the property repossession process in the unfortunate event of a borrower’s default. It’s crucial to understand this clause when securing a property loan in Bali.

Crucial Points to Remember

It’s essential to remember that failure to keep up with your loan repayments could lead to your property being repossessed. Also, it’s a requirement for foreigners to visit Indonesia at least once every 12 months. Failure to do so may result in the land title being transferred from the foreign owner’s name to that of the government. These are significant points to consider when investing in real estate in Bali as a foreign national.

Important Note

Please be aware that while we strive to provide comprehensive information and guidance, we are not equipped to assist directly with securing financing or funding for your projects. We highly recommend reaching out to local banks and financial institutions for assistance tailored to your unique needs and circumstances.

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