Running a Villa in Bali – A Detailed Guide to Get it Right and Legal

Undoubtedly, Bali is one of the most popular destinations in Southeast Asia. This Indonesian island draws more than 6 million tourists in a year. In the first half of 2017, the arrival of foreign visitors went by almost 24 percent! That’s around 3.4 million people looking for the perfect accommodation — your villa in Bali. Villa rental in Bali, then, is an exciting business to run.

Tourists are not the only ones interested in Bali. Expats would like to capitalize on its economy by building hostels and guesthouses for backpackers, villas, and resorts for tourists who want to enjoy Bali with all its luxury.

Planning, though, is only a fraction of the entire process. A significant part of it is securing the proper building permits and licenses. This one can be challenging to navigate.

To help you, InCorp Indonesia provides an essential guide on how to start your hostel or do a villa Bali rental.

Property Rights for Villa Rental in Bali

As a business person, one of your responsibilities is safeguarding your assets. For example, if you are building an accommodation, these assets could refer to both the land and the property.

In Bali and elsewhere in Indonesia, foreign nationals have several land restrictions. Non-Indonesian citizens cannot own any of these assets as individuals. It doesn’t mean. However, you won’t have access to land. There are certain property rights you can explore.

You can own the following ones, but if you want to know more, check our in-depth overview of Property Rights for Foreigners in Bali.

1. Right to Build (Hak Guna Bangunan)

One of the first rights you can explore is the right to build. An HGB certificate allows you to build structures on certain kinds of land. These include a freehold title, which is limited to Indonesians only, and state-owned land.

With this certificate, you can use the land for as long as 80 years. Upon approval, you can build and operate for 30 years. After that, you can request an extension for 20 years. You can also renew it for another 30 years, which can be great for Bali long-term rentals.

However, the certificate is valid for 30 years only if it’s freehold land. Subsequently, you need to negotiate a new agreement with the Indonesian owner.

This title offers many advantages besides the length of the validity. You can also use the title to secure a bank debt since you can make it as collateral. As an Indonesian legal entity, you can have the option to sell, exchange, or bequeath the land.

The HGB certificate, though, isn’t for everyone. It can only be for Indonesian citizens and Indonesian-based corporate entities such as PT PMA. InCorp Indonesia can help you with the company registration process.

2. Right to Use (Hak Pakai)

Setting up a PT PMA is one of the best ways to access Bali land. Not everyone can do it, however.

Expats who cannot open a PT PMA can still use Indonesian land using the “right to use” title. With Hak Pakai, you can rent it for no more than 25 years. Depending on the agreement between the lessor and the lessee, it can extend up to 80 years.

The primary benefit of this setup is it is open to foreign individuals as long as they hold a KITAP or a KITAS.

How to Build and Operate a Villa Rental in Bali

At InCorp Indonesia, we can help you understand the ins and outs of regulations that govern the hotel industry in Bali or Bali villa resort. For the sake of discussion, there are two critical points: accommodation license and Ijin Mendirikan Bangunan (IMB). Let’s discuss each.

When it comes to a license for accommodation, you have two possible options. It all depends on the number of rooms and your housing type.

Read more: Building Property in Bali as A Foreigner in 2023: Everything You Need to Know

Homestay License

Take, for example, a homestay. It allows a tourist to stay with a local family for a fee. The rooms are usually basic or cheaper than other forms of accommodation.

For this, you need to acquire a Pondok Wisata license. It is a homestay license to operate a villa as a vacation rental and applies to properties with between 3 and 5 rooms. It all depends on when you have obtained the license.

Hotel License

You must have a full hotel license if your property aims to provide more than five rooms. It is also known as a Melati license. This one is not easy to obtain due to the many requirements. For example, the hotel needs to be within a tourism zone. It should also be around 500 meters away from the beach.

Building License

Aside from the license, you also need to secure a building license or the IMB. It is essentially a document that says you can construct a building. It also outlines the purpose of such a structure.

Who gets the IMB depends on the owner of the structure. If it is under your name, then it becomes your responsibility. If you’re leasing the property, your landlord must obtain it on your behalf. This process takes about three months to complete.

Negative Investment List

Note that other regulations may also affect your license and ability to operate in Bali. One of these is the percentage of foreign ownership. Foreign entities can own 5-star hotels wholly. Homestays are only for the local citizens. A foreigner may hold 67 percent for a non-star accommodation.

Furthermore, the local government may impose guidelines on hotel permits. For example, in well-developed areas in Kuta, the Regent of Badung changed the size of the plot in which one can develop an accommodation. Since 2014, it no longer allows properties to sit on less than half a hectare of land. That’s about 5,000 square meters. In South Kuta, the minimum plot size is 1 hectare. In the North, it’s about 7,500 square meters.

Villa Rental in Bali: Foreigner Police Report

THere’she exciting thing about operating an accommodation in Bali is the foreigner police report letter. Also known as Surat Tanda Melapor (STM) is an A4-sized document and proof that the foreigner is staying or registered in the accommodation.

Since Immigration Law No. 6 in 2001, accommodations and foreigners no longer have to process this. However, there are times when you may have to do this.

First, you may be required by the police to get one. Second, your lessor may not be confident with one of your foreign guests. Anyone who wants to obtain civil registry papers may also need them.

Who is responsible for getting it? If you’re an accommodation, then it becomes your duty. You must provide your KITAS/KITAP, accommodation license, and a copy of the guest’s passport. If you’re a homestay, you still need to do the same.

Get Your Property Needs in Bali Easily with InCorp Indonesia!

The most reliable way to start a guesthouse or villa in Bali is to register a PT PMA. It makes your business an Indonesian legal entity.

You can uncomplicate the process of building and operating an accommodation in Bali. Contact us to get more information. Our business consultants are ready to assist you.