Purchasing a property in Bali is a major step that requires careful consideration. Whether you are buying for vacation, permanent residence, or planning to start a business in Bali, it is essential to conduct a thorough property audit to avoid unpleasant surprises and protect your rights.
A property audit is a comprehensive inspection aimed at identifying hidden issues with the property and potential risks associated with the transaction. During the audit, the legal, technical, and financial condition of the property is typically assessed.
Since there are many types of property, an audit should be tailored to your goals for the specific object. For example, a villa may require one set of checks, apartments another, and a commercial building yet another. A property audit is especially necessary if you are looking for a property to start a business in Indonesia. However, many audit stages are universal for all types of property.
The first step is to:
First, ensure that the ownership rights to the property belong to the seller.
Further document checks depend on the form of ownership you choose. Since only Indonesian citizens can have full ownership rights, foreigners have these options:
✓ Hak Sewa — leasehold ownership, i.e., long-term rental without transferring ownership.
✓ HGB — construction permit, ownership through a PT PMA company.
✓ Hak Pakai — right of use for specific purposes (residential, running a business in Indonesia, etc.).
Sometimes you may come across offers involving Hak Milik (freehold ownership registered to an Indonesian nominee), but we strongly recommend avoiding this option. Instead, seek help from professionals — a lawyer and a notary. These specialists know Indonesian law and will help you verify all legal documents.
Additionally, you should check:
• Encumbrances and existing mortgages
• Building permits and the designated use of the property
• Any lawsuits or disputes involving the property with local residents
This stage involves assessing the physical condition of the property, including:
1. Structural components — foundation, walls, partitions, ceilings and roof, windows and doors, balconies, and terraces. They should be checked for damage, defects, installation quality, waterproofing and insulation condition, wear and tear, etc.
2. Engineering systems:
✓ Electricity — check wiring, sockets, switches, and lighting.
✓ Water supply and sewage — evaluate pipes, filters, and pump equipment.
✓ Heating and ventilation — inspect air conditioners, ventilation systems, boilers, and radiators.
✓ Gas supply — check the condition of pipes, connections, and gas equipment, and ensure the gas systems are safe.
✓ Fire safety systems — assess detectors, alarms, and evacuation routes.
3. Exterior parts — façade, surrounding area, including the condition of paths, parking spaces, and drainage systems.
4. Environmental parameters — check air, water, and soil pollution levels, as well as the noise level in the area.
You should also compare the technical documentation of the property with the actual building. To avoid missing important details, hire a technical expert, such as an engineer or builder, for a thorough inspection.
1. During the financial inspection, confirm that all required payments have been made and there are no outstanding debts. Mandatory payments include:
✓ Property tax (PBB — Pajak Bumi dan Bangunan)
✓ Utility bills (electricity, water, etc.)
To avoid relying solely on the seller’s word, request the necessary receipts and certificates. These documents will also help you estimate the ongoing maintenance costs of the property.
2. Additionally, it’s a good idea to compare the property’s price with similar listings on the market. An independent appraiser can help with this.
3. If you plan to rent out the property, assess its potential profitability by researching demand and average rental prices in the area.
When buying property, you may encounter unscrupulous sellers. To avoid unpleasant surprises, follow these tips:
1. Engage specialists: a lawyer, notary, financial consultant, engineer, or agent — professionals will help you identify risks at every audit stage. However, don’t rely only on experts: be sure to personally attend inspections and study documents yourself.
2. Don’t rush into signing the purchase agreement; clarify any doubts during the audit stage.
3. Verify the seller’s identity and reputation.
4. Familiarize yourself with Indonesian property laws for foreigners.
5. Never finalize a transaction without a notary.
6. Never pay a deposit without a signed contract.
7. After signing the contract, make sure you receive all original documents and that both parties fulfill their obligations.
Keep in mind that the main risks when buying property in Bali include:
• Fraud with ownership rights, e.g., selling to multiple buyers or without consent from all co-owners
• Incorrectly prepared documents
• Hidden property defects
• Overpricing targeted at foreigners
In conclusion, by carefully going through all audit stages, you can avoid financial losses and other unpleasant issues, allowing you to start enjoying your new home or successful investment on this beautiful island. More and more foreigners choose Indonesia to start a business in Bali, as the island offers favorable conditions and significant growth opportunities thanks to its booming economy and stable tourist flow. If you also want to join the ranks of entrepreneurs and investors, our company Good Luck Group can help you register a company, open a bank account, handle accounting, and support your business in Indonesia. Contact us to learn more!
