Complete Process from Due Diligence to Closing—What You Need to Know Before Signing
Buying real estate in Bali as a foreign investor is fundamentally different from buying property in your home country. The legal structure is different. The due diligence process is different. The ownership mechanics are different. The tax implications are different.
Many first-time buyers discover these differences after committing capital, which is expensive and stressful.
This guide walks you through the actual step-by-step process of buying real estate in Bali legally, safely, and with realistic expectations. Whether you are purchasing your first property or your fifth, understanding each step prevents costly mistakes.
Read also: What Areas in Bali are Suitable for Investment Property?
Part 1: Pre-Purchase Due Diligence
Step 1: Understand Foreign Ownership Limitations
The Legal Reality
Foreigners cannot own land in Indonesia. Period. This is not a limitation you can negotiate around or find loopholes in. It is constitutional law.
What you can own is a Hak Guna Bangunan (HGB), which is a long-term building right on someone else’s land. Typically 30 years, renewable for another 30 years, and transferable to heirs.
What This Means
When you “buy” a property in Bali, you are actually acquiring a long-term lease on the building and land use. You do not own the underlying land. After the lease expires, the land reverts to the Indonesian owner (unless you renew, which is typically straightforward but not guaranteed).
Red Flags
- Developer promises “full ownership” or “permanent ownership”
- Lease terms are shorter than 25 years without clear renewal mechanism
- Land ownership documentation is vague or held by undisclosed parties
- Developer cannot explain the legal structure clearly
What to Do
Insist on independent legal review of the HGB structure by an Indonesian real estate attorney before committing funds. This typically costs $200-500 but prevents $500K mistakes.
Step 2: Verify the Developer’s Legal Status
Check PMA (Foreign Investment License)
The developer must have a valid PMA (Perseroan Modal Asing—Foreign Investment License) to legally accept foreign investor capital for property development in Indonesia. This is not optional.
How to Verify
- Ask the developer to provide their PMA certificate number
- Request the official PMA document from Indonesia’s Investment Coordinating Board (BKPM)
- Verify the certificate is current (not expired)
- Confirm the PMA specifically authorizes real estate development
What to Look For
The PMA should show:
- Company name and registration number
- Type of business authorization (should include “real estate development”)
- Issue date and expiration date
- No compliance violations or restrictions
Red Flags
- Developer cannot provide PMA number or certificate
- PMA is in a partner’s name, not the development company’s name
- Certificate is expired or pending renewal
- PMA is for a different business type than real estate development
Step 3: Research the Developer’s Track Record
Completed Projects
Ask the developer to show you 2-3 completed projects. Visit them if possible. Speak to current property owners.
Key questions:
- Were projects completed on time?
- Did returns match projections?
- Are owners satisfied with property management?
- Have any disputes or legal issues arisen?
Financial Stability
Ask for 2-3 years of audited financial statements. Professional developers provide these without hesitation.
What to assess:
- Is the company profitable or cash-flow positive?
- Do they have sufficient reserves to cover investor commitments?
- Is debt level reasonable?
- Is cash runway adequate for current projects?
References
Request contact information for 5-10 current investors. Contact them without the developer present. This is your best source of truth.
Step 4: Verify Property Status and Zoning
Land Ownership Certificate
Every property should have a Sertifikat Hak Milik (property ownership certificate) issued by Indonesia’s Land Registry Office (BPN). This document shows legal land ownership and current encumbrances.
What to verify:
- Certificate is current and valid
- Land area matches your understanding
- No competing claims or liens
- Zoning classification matches proposed use
Environmental Compliance (AMDAL)
For major projects, an Environmental Impact Assessment (AMDAL) should be completed and approved by provincial environmental authorities.
What to verify:
- AMDAL approval is current and official
- Project scope matches AMDAL documentation
- No outstanding environmental violations
- Mitigation measures are implemented
Building Permits
Verify that building permits are current and legally obtained:
- Building permit (Izin Mendirikan Bangunan—IMB) should be issued
- Permits should cover the construction scope
- No stop-work orders or violations should be outstanding
Red Flags
- Property certificate is unavailable or unclear
- Zoning does not match intended use
- AMDAL is missing or not fully approved
- Building permits are incomplete or questioned
Read also: Buying Property in Bali: Where to Invest
Part 2: Financial Structuring and Due Diligence
Step 5: Understand the Investment Structure
PMA Investment Structure
If you are a foreign investor buying through a PMA developer, you typically invest capital that funds the project. The developer manages construction, operations, and property management. You receive shares or investment certificates representing your ownership stake.
Mechanics
- You wire funds to developer’s bank account (verified by attorney)
- Developer uses funds for construction and operations
- You receive quarterly reports and return distributions
- Exit typically requires finding a buyer or waiting for project buyout
Lease Ownership Structure
Alternatively, some developments allow you to directly lease the property as the occupant, with ownership of the lease term passing to you.
Mechanics
- You acquire long-term lease on specific unit
- You own the lease; can lease to renters, live in it, or sell
- More control, but you are responsible for management or hiring management
- Property tax and annual costs are your responsibility
Which Is Better
- PMA Investment: Less operational burden, professional management, diversified returns, but less control
- Direct Lease: More control, potential for higher returns, but you manage operations or hire management
Step 6: Review Financial Projections and Perform Reality Checks
Ask for Detailed Projections
Get documentation showing:
- Projected rental income by year
- Projected operating expenses
- Projected returns to investors
- Assumptions behind projections (occupancy rate, nightly rates, seasonal variation)
Reality-Check the Numbers
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Occupancy Assumptions: Are they realistic for the location? Bali’s established areas typically achieve 70-80% occupancy. Emerging areas might achieve 50-70%. If projections assume 95% occupancy, that is unrealistic.
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Nightly Rate Assumptions: Research comparable properties on Airbnb, Booking.com, and property listing sites. Does the projection’s assumed nightly rate match actual market rates? Budget conservatively.
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Operating Costs: Are they realistic? Typical costs include property management (15-20% of rental income), maintenance (2-5% of gross value annually), utilities, taxes, insurance. If projections assume zero management costs, that is a red flag.
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Growth Assumptions: Do they assume 15%+ annual appreciation? That is speculative. Realistic appreciation in Bali is 5-12% annually depending on location.
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Downside Scenarios: Does the developer show a “what if” scenario if occupancy drops 20% or nightly rates decline? Professional developers model downside scenarios. Sketchy ones assume everything goes perfectly.
Step 7: Get Independent Financial Review
Before committing capital, have an accountant review:
- Developer’s financial statements
- Investment structure documentation
- Projected returns and underlying assumptions
- Tax implications for your situation
This typically costs $500-1,500 but prevents multi-hundred-thousand-dollar mistakes.
Part 3: Legal Documentation and Contracts
Step 8: Hire an Independent Indonesian Real Estate Attorney
This is non-negotiable. Your attorney should:
- Be licensed to practice in Indonesia
- Have specific experience with foreign real estate investment
- Not be connected to the developer (independent counsel)
- Speak fluent English
- Provide written legal opinions on all key documents
What They Will Review
- PMA status and compliance
- Property legal documentation
- Investment contract terms
- Payment terms and escrow arrangements
- Return distribution mechanisms
- Exit terms and buyout procedures
- Tax implications
- Any other legal concerns
Cost
$2,000-5,000 for comprehensive legal review is standard. This is not an expense to minimize.
Step 9: Review and Negotiate the Investment Contract
The investment contract is the critical document. It defines:
- Your capital contribution amount
- Timeline for capital deployment
- Expected returns and distribution schedule
- Your rights and obligations
- Developer’s rights and obligations
- Dispute resolution process
- Exit mechanisms
Key Contract Points to Negotiate
- Capital Deployment Timeline: When will your capital be used? Ensure developer commits to specific timelines.
- Return Distribution Schedule: How often will you receive returns? Monthly, quarterly, annually?
- Minimum Returns Guarantee: Realistic contracts show projected returns with downside scenarios, not “guaranteed” returns.
- Reporting Requirements: How often will you receive updates? What will reports contain?
- Buyout Terms: Under what conditions can the developer buy back your investment? What is the buyout price mechanism?
- Transfer Rights: Can you transfer or sell your interest? Are there restrictions?
- Dispute Resolution: Where will disputes be resolved? Indonesian courts or arbitration?
- Termination Clauses: Under what conditions can either party terminate? What are the consequences?
Red Flags in Contracts
- Vague return commitments (“up to 12%”)
- Unclear capital deployment timeline
- No minimum reporting requirements
- One-sided terms favoring developer
- No clear exit mechanism
- Binding arbitration in developer’s preferred jurisdiction
Step 10: Verify Payment Terms and Escrow Arrangements
How Payments Should Work
Your capital should be held in escrow (not in the developer’s operating account) until specific milestones are met. Typical escrow arrangement:
- 20-30% payment at contract signing
- 30-40% payment when construction reaches 50% completion
- Remaining 30-40% payment when construction is 95% complete
Escrow Agent
The escrow agent should be a neutral third party:
- Indonesian bank (preferable)
- Neutral law firm
- International escrow service
NOT the developer’s preferred bank or affiliated entity
Verification
Your attorney should:
- Confirm escrow arrangement in writing
- Verify bank holds funds in actual escrow (not commingled with developer funds)
- Get written confirmation that funds will not be released without your written authorization
Red Flags
- Developer asks for full payment upfront (before construction starts)
- No escrow; funds go directly to developer’s operating account
- Escrow agent is affiliated with the developer
- No written escrow agreement
Read also: Bali Visa Application: Step-by-Step Guide
Part 4: Final Steps Before Closing
Step 11: Conduct Final Inspections
Property Inspection
Visit the property and verify:
- Construction quality matches specifications
- All amenities are complete and functional
- No defects or damage
- Property matches photos and plans
Documentation Inspection
Your attorney should verify:
- All original documents are present and authentic
- Property certificates are properly registered
- Building permits are complete
- Environmental approvals are current
Step 12: Arrange Property Management (If Required)
If you are acquiring a lease on a specific unit:
- Identify a professional property management company
- Review their track record and references
- Get management agreement in writing
- Confirm fee structure (typically 15-20% of rental income for full service)
Step 13: Understand Tax and Ongoing Obligations
Initial Taxes
- Property Transfer Tax (Bea Perolehan Hak Atas Tanah dan Bangunan—BPHTB): typically 3-5% of property value
- Registration and documentation fees: $500-1,500 typically
Annual Obligations
- Property tax (Pajak Bumi dan Bangunan—PBB): 0.3% of property value annually
- If property is leased: Income tax on rental earnings
- If property is part of PMA investment: Possible corporate income tax implications
Your Attorney Should
- Calculate total tax burden
- Explain payment timelines
- Identify any tax optimization strategies
- Clarify your tax residency implications
Read also: Bali Indonesia Real Estate: 2026 Market Overview for International Investors
Part 5: Closing and Beyond
Step 14: Final Contract Execution
Once all terms are agreed and documented:
- Sign final investment contract
- Provide final payment authorization
- Execute any required notarized documents
- Obtain copies of all agreements
Step 15: Ongoing Investor Communication
After closing, you should receive:
- Quarterly Reports: Construction progress, financial status, occupancy, returns
- Annual Statements: Full year performance, audited if investment is substantial
- Regular Updates: Timely communication about any issues or changes
Red Flags
- Infrequent or vague communication
- Missed reporting deadlines
- Unclear or inconsistent returns
- Lack of transparency about project challenges
Read also: Bali’s Real Estate Market Is Growing Up: A Founder’s Reflection on 2025
Critical Checklists: Before You Say “Yes”
Developer Verification Checklist
- PMA license verified and current
- 2-3 completed projects reviewed
- Audited financials reviewed
- 5-10 investor references contacted
- No unresolved legal disputes
- Management team experienced and stable
Property Verification Checklist
- Land certificate current and valid
- Environmental approval (AMDAL) obtained
- Building permits complete
- Zoning matches intended use
- Title search shows no liens or claims
- All documentation authenticated
Financial Verification Checklist
- Return projections include downside scenarios
- Occupancy and pricing assumptions realistic
- Operating cost estimates realistic
- Tax implications understood
- Exit mechanism clear
- Independent accountant has reviewed
Legal Verification Checklist
- Independent attorney hired
- All contracts reviewed and negotiated
- Escrow arrangement in writing
- Payment timeline specified
- Dispute resolution process defined
- Transfer and exit rights clear
Red Flags That Mean “Don’t Buy”
- Developer cannot provide current PMA certificate
- Promised returns sound too good to be true (they usually are)
- Developer discourages legal review or independent counsel
- Contract is vague or heavily favors developer
- No clear exit mechanism or timeline
- Property ownership or zoning status is unclear or contested
- Developer discourages property inspection or reference checks
- Payment structure does not include escrow protection
Read also: Sanur: The Best Area in Bali?
Final Guidance: The Step-by-Step Reality
Buying real estate in Bali legally and safely takes time. The complete process—from initial research to closing—typically takes 4-8 weeks for due diligence and legal review, then 18-36 months until the project is complete and returns begin.
If anyone promises faster than this, they are cutting corners on due diligence. Do not be that investor.
The investors who do best in Bali are those who:
- Take time for comprehensive due diligence
- Hire independent legal counsel
- Verify developer credibility thoroughly
- Reality-check financial projections
- Understand they are buying a 5-10 year asset, not a quick flip
- Accept that returns are 10-15% annually from rental yield + appreciation, not 30%
Follow this step-by-step process, and you will be positioned to invest successfully in Bali real estate.
Skip steps, rush due diligence, or take shortcuts—and you will learn expensive lessons.
About Magnum Estate International
Magnum Estate International is a Bali-based property development company focused on modern real estate development through a digital technology approach.
The company is recognized as a developer that prioritizes transparency, integrated services, and innovation in property investment management.
With a portfolio of premium property projects across Bali, Magnum Estate targets both local and global investors and continues to develop a digital ecosystem to support safe, efficient, and measurable investment processes.
About Professional Real Estate Investing in Bali
The best Bali real estate investments come from developers who welcome comprehensive due diligence, provide transparent documentation, and maintain institutional-grade governance. These are not obstacles—they are the foundation of legitimate investment.
If a developer makes any of the due diligence steps in this guide difficult, that is your signal to look elsewhere.
The right developer wants investors who have done their homework. The wrong developer wants investors who have not.
Choose accordingly.
