Buying or leasing a plot of land in Indonesia can be a profitable investment and bring significant benefits in the future. This is especially relevant for those who plan to start a business in Bali. But how do you properly inspect a plot before purchasing? What legal nuances should you be aware of, and how can you avoid being scammed? This article will help you conduct a comprehensive land audit and minimize potential risks.
A land audit is a comprehensive inspection aimed at assessing the legal, technical, and commercial status of a plot. The audit process includes an analysis of legal documents, verification of permits, and an on-site inspection to ensure the plot matches its declared characteristics.
When buying or leasing land for business in Bali, it is important to conduct a thorough, step-by-step audit. Here are the main stages involved:
✓ Checking legal documents
✓ Evaluating the physical characteristics of the land
✓ Conducting a financial assessment
Let's look at each stage in detail.
To confirm the legal status of the land, you must verify:
• Certificate of ownership (SHM — Sertifikat Hak Milik)
The land must be registered in the seller’s name. This certificate is the primary proof of ownership and must be valid.
• Zoning
Ensure the land is designated for your intended use. For example, building a villa is only possible in certain zones, and agricultural land may have restrictions on construction.
• Construction permit (IMB — Izin Mendirikan Bangunan)
If there are already buildings on the land, check for valid permits. Lack of permits can indicate legal issues.
• Debts and liabilities
The plot should not be burdened with debts, unpaid taxes, ongoing lawsuits, or be pledged as collateral.
Since verifying documents is the most crucial stage, it is highly recommended to enlist the help of a professional lawyer. They will review all documents and prepare the necessary agreements.
After verifying the documents, you should inspect the land itself:
1. Borders check — precisely measure the plot, usually with a surveyor. This expert will perform a land survey to determine the exact borders and area. Compare whether the actual borders match the documents; discrepancies are common.
2. Infrastructure accessibility — check for access to roads, water, electricity, and internet. If these are missing, your setup costs could rise significantly.
3. Overall condition — look for slopes, swampy areas, or other features that could impact construction.
4. Environmental analysis — optionally, check if the land is in a protected area or near volcanoes, rivers, or forests, where restrictions may apply or inconveniences could arise.
5. Neighborhood prospects — find out what infrastructure projects are nearby or planned in the area — these can impact the land’s future value.
To avoid unexpected costs, pay attention to:
• Ownership history
Frequent resale of the plot can indicate potential legal issues.
• Market value
Compare the offered price with similar plots in the area to understand if it’s a fair deal.
• Tax obligations
Check if land and building taxes (PBB — Pajak Bumi dan Bangunan) have been paid to avoid unpleasant surprises later.
PRO TIP! Conducting a thorough audit on your own can be difficult, especially if you’re unfamiliar with Indonesian law. It is best to work with local agents who understand the market and cultural nuances of doing business.
Even with good preparation, fraud during land transactions is not uncommon. To protect yourself, follow these tips:
Tip 1. Work with reliable professionals
In Bali, it’s essential to work with reputable real estate agents, lawyers, and consultants who know local laws and have a good reputation.
Tip 2. Understand Indonesian law
According to law, foreigners cannot directly purchase land in Indonesia. Lease agreements or company structures are used instead. Ensure the chosen method is legal.
Tip 3. Don’t rely on verbal agreements
Always sign a written contract that details all agreements and have it notarized.
Tip 4. Verify service providers
If someone offers to speed up paperwork, check the authenticity of any documents provided.
Tip 5. Be cautious of prices below market value
If the price seems too good to be true, it may indicate legal or physical problems with the plot. Conduct additional checks.
Tip 6. Compare audit results from different specialists
Don’t rely on just one company’s opinion. Order audits from multiple independent agencies or lawyers to identify discrepancies and get an objective view.
Tip 7. Check the plot in both Bali and Jakarta land databases
Sometimes local officials make zoning changes for a bribe — for example, changing a plot from a “green” to a “yellow” zone. Such changes might only appear in Bali’s local database but not in Jakarta’s central records. If inconsistencies are later discovered, the land’s status could be revoked. Always verify both databases.
In summary, conducting a thorough land audit is an essential step if you want to purchase a plot in Bali. This will help you avoid legal and financial pitfalls. Working with professionals and carefully examining every aspect of the deal will ensure you make the right choice and turn your investment into a source of income.
If you need assistance with a land audit or advice on acquiring land for business in Indonesia, contact the experts at Good Luck Group — we’ll give you confidence in every transaction!
