Bali Real Estate Scam – by Joannes Rhino – Freelance Writer
Due to its mild, tropical climate and beautiful natural attractions, Bali is one of the most popular tourist attractions in Southeast Asia. Consequently, investors look to capitalize on the booming tourist industry by buying private villas and renting them. Some people even buy private villas for their own personal use. However, Bali has specific laws governing the sale of real estate to foreigners. This has led to an increase of real estate scams in Bali.
According to Balinese law, foreigners cannot legally own land and they specifically are prohibited from operating holiday villas in Bali. Only foreigners who live in Bali and have legitimate work permits can own residential property. Consequently, Balinese real estate agents sell properties to foreigners with the promise to get them a work/residency permit in Bali. While this may sound legal to a foreigner, these permits are often obtained fraudulently through corrupt government officials. This invalidates a foreigner’s visa. Furthermore, even if the permit is obtained legally, the foreigner will have to pay taxes on all income that they earn worldwide.
Regardless of these issues, the real estate agent who sells the villa to the foreigner will often report the foreigner to his corrupt friends in the Indonesian police and the Indonesian immigration service. The Indonesian police will confiscate the foreigner’s property and often give it back to the real estate to relist it. The Indonesia immigration service will revoke the foreigner’s visa and often bar them permanently from the country. In the worst case, the Indonesian police will arrest the foreigner if he is still on Balinese soil and the foreigner could face significant fines and prison time. Finally, the real estate agent will keep the money that the foreigner paid for the property, often splitting it with his friends from the Indonesian police and the Indonesian immigration system.
Legally owning and renting private villas in Bali is a complex, difficult, and expensive process. The most common procedure for a foreigner owning property in Indonesia is to create a company that does international lending and private villa planning. Then the owner applies for a business visa to Bali. Once the person has reached Bali, they must set up another company to run their real estate operations in Bali and they must find a trustworthy person to buy and hold the land that they want. It is also important to make sure that there are no disputes regarding the land that the foreign investor wishes to buy so that the investor does not lose it through corruption. Once these steps have been accomplished, the company that is set up in Bali must send a representative to the investor’s home country in order to complete the contractual agreement. This ensures that all disputes between the Indonesian company and the parent company are settled under the investor’s legal system. Finally, the written contract must be professionally translated to Indonesian and notarized. While this process is lengthy, it is virtually the only way for a foreign investor to safely own property in Bali.
Bali has many natural attractions, which makes it a popular tourist attraction. While tourism is normally a magnet for foreign investment, the corruption of the Indonesian justice system and complexity of the investment process make it very costly to invest in Balinese property. However, those who succeed reap rich rewards for their patience and hard work.