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Hyping the News on Property

‘The Australian’ Writing on Booming Bali Real Estate Market Dangerously Misleads Foreigners Looking to Purchase Property in Bali

(8/20/2017) In an article written by, Lisa Allen, a Senior Writer from The Australian, the many charms and advantages for Australians wishing to purchase a prestige “dream villa” in Bali are enumerated.

Allen says that “for a song” a chosen few Australians can pick up a beachfront Bali villa “replete with swimming pool and cheap labor” via a leasehold or long-term rental contract. Adding temptingly: “Think rock-star lifestyle with 24-hour butlers, chefs, chauffeurs, and gardeners.”

The same article champions the purchase of Bali villas by quoting Matthew Georgeson, director of Elite Haven/Knight Frank in Bali who, when talking about Bali real estate, insists “You can buy very well.”

The article admits in passing that while it is actually illegal for foreigners to “own property outright” - AU$1.5 million will net a 400-500 square meter villa on a 1,000 square meters of land in Batubelig in “trendy Seminyak” that can be purchased in partnership with a local.

What is not revealed by the article are the grave legal problems experienced by legions of foreigners in Bali purchasing property using local Indonesians as the nominee owner. Legally wrong from the get-go, it is a well-accepted principle of law that any legal device purposely configured to circumvent or frustrate both the letter and spirit of the law are ipso facto legally null and void and therefore without legal force. And, on this count, foreign buyers should have no doubt that the Indonesian Constitution is absolutely clear in its opposition to ownership of Indonesian property by non-Indonesians.

Underlining this fact are a large number of cases of nominee deals gone bad in which foreigners have lost their “dream properties” due to their inability to enforce legal agreements created outside the law. Add to this, is the precarious position compliant nominee owners now find themselves in the changing legal environment in Indonesia where officials are taking sterner steps to halt money-laundering, asking the source of funds used to purchase properties by so-called nominees.

The Australian article quotes Tony Smith, an Australian entrepreneur living in Bali, citing his arguable claim that rental rates are rising rapidly in Bali due to Airbnb. In a seeming contradiction, Smith rightly warns that in order to rent a property in Bali the “home owner” must first obtain a pondok wisata license. The pondok wisata license can only be issued to an Indonesian property owner and is not available to foreigners holding property under a “hak pakai” arrangement, a problematic class of property ownership open to facilitate long-term control and occupation of an individual property by a foreigner that does not, however, permit sub-leasing or short term rental.

Georgeson told Lisa Allen that Australians still make up “a significant proportion of buyers, but Indonesians make up most of the market.”

What Foreign Property Buyers in Bali Aren’t Being Told

Here are come of the things not being shared with the foreign customers in Bali by those promoting property sales:

Those considering buying a villa as an investment should consider that a "Hak Pakai" property held by a foreign national cannot in principle be rented out. The government grants foreigners the "Hak Pakai" facility for "a single residential property" to provide housing to the subject purchaser. "Hak Pakai" properties held by foreigners cannot therefore be legally subleased and cannot obtain a Pondok Wisata License that can only be issued to an Indonesian citizen.

Sadly, the article in The Australian smacks more of being an advertorial parading as news presented by Bali-based realtors than anything resembling a factual news report on the possible pitfalls of foreign nationals trying to buy property in Bali.

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