Mastering Construction Legal Requirements for Bali Property Development

img Adiel Bukitvista | December 15, 2023

Hi, my name is Adiel and I am a digital marketer based in Bukit Vista, Bali. I have learned a lot about the local real estate market . From understanding the factors that go into managing a successful rental property in Bali, and different requirements needed to build a property, we help our partners to increase guest bookings and maximize returns on investment.

Navigating the construction legal requirements in Bali is crucial for any villa development project. This guide, backed by Bukit Vista’s decade-long expertise in property management, offers in-depth insights into the legal nuances of constructing a villa in Bali.

Table of Contents

Bali’s Evolving Construction Legal Landscape

Bali’s construction legal landscape is indeed dynamic and multifaceted, requiring developers to stay informed about the latest regulations and requirements. The legal framework for construction in Bali is largely governed by Law No. 2 of 2017 on Construction Services, as recently amended by Law No. 6 of 2023. This law does not specify a standard form of construction contract, allowing for flexibility under the principle of freedom of contract as stated in the Indonesian Civil Code. However, certain mandatory provisions must be included in construction contracts.

Understanding and adhering to these evolving legal requirements is vital for developers in Bali to ensure compliance and successful project completion.

Budget and Time: Key Legal Considerations

Efficient budget and time management are crucial to avoid legal and financial complications. The significance of these factors cannot be underestimated, as even slight deviations from the plan can lead to substantial financial implications. Ensuring projects are completed within budget and time constraints involves several legal considerations:

1. Drafting Construction Contracts:

Effective risk mitigation in construction budgeting requires carefully drafted contracts. These should clearly define the scope of work, payment terms and milestones, risk allocation and insurance, change order management, and dispute resolution mechanisms. Each of these aspects plays a crucial role in maintaining control over project costs and timelines

2. Regulatory Measures and Compliance:

Comprehensive project planning and compliance with building codes and regulations are critical. This includes understanding the project scope, collaborating with stakeholders, conducting feasibility studies, and integrating regulatory costs into the budget to avoid financial penalties and delays

3. Contingency Planning:

Given the potential for unforeseen circumstances, contingency planning is essential. Allocating a portion of the budget as a contingency fund and considering potential risks such as regulatory changes or adverse weather conditions are key strategies​

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Adherence to Local Construction Laws

Compliance with local construction laws in Bali is pivotal for legal and hassle-free construction. The regulations encompass various aspects of property ownership, development, and management, crucial for developers and investors to understand and adhere to.

Property Ownership:

Foreigners are not permitted to own land in Indonesia, including Bali. However, they can own property through leasehold agreements or Hak Pakai titles. This process involves obtaining a land certificate, due diligence, securing necessary permits and licenses, and registering the property with relevant authorities. Property taxes in Bali include a transfer tax, land and building tax, and income tax on rental income.

Specific Legal Requirements:

To legally acquire property in Bali, foreigners must obtain an Indonesian Tax Identification Number (NPWP), register a local company (common for foreign property acquisition), and obtain a building permit (IMB) and other relevant permits. It’s essential to ensure that the property is not in a protected area and is free from land disputes or claims

Understanding and adhering to these regulations is vital for anyone involved in property development or investment in Bali. Failure to do so not only risks legal repercussions but can also impact the overall success and viability of the investment.

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Building Codes and Regulations Compliance

The construction legal landscape in Bali, as in much of Indonesia, is shaped by a complex array of regulations and standards that ensure safety, sustainability, and compliance. For developers and construction professionals, navigating this terrain requires a thorough understanding of several key areas.

  • General Building Regulations:

Bali’s building regulations encompass land usage, town planning zones, and rules for building design, including size, heights, setbacks, ground coverage, and road widths. Specific regulations include a maximum building height of 15 meters (12 meters in tourism zones), requirements for traditional Balinese design elements in all landscaping and buildings, and stipulations for shade trees, water permeation, sanitation, parking, and access for fire engines

  • Standard Forms of Construction Contracts:

The FIDIC (International Federation of Consulting Engineers) standard forms are commonly used in Indonesia, particularly for projects funded by foreign aid. These forms have been translated into Indonesian to facilitate their use. Projects impacting national or public interest must  also follow specific selection processes. If state finance funds these projects, they must use standard forms provided by the Government Goods/Services Procurement Policy Agency (LKPP)

  • Statutory Requirements and Safety Standards: 

Indonesian construction contracts must adhere to labor, tax, and health and safety requirements. The Construction Law and GR No. 14/2021 stipulate worker protection, tax obligations, and a construction safety management system (SMKK) for health and safety. These include provisions for fire hazard protection systems and compliance with construction security, safety, health, and sustainability standards

bali villa construction & building permit documents

Conclusion : Construction Legal Requirements Needed for Success

the successful execution of a villa project in Bali hinges on a thorough understanding and compliance with local and national construction legal requirements. These encompass property ownership laws, adherence to building codes and regulations, and a comprehensive grasp of statutory requirements pertaining to labor, tax, health, and safety.

Navigating this complex legal landscape can be challenging. Therefore, engaging with a knowledgeable property management company like Bukit Vista offers invaluable expertise. Bukit Vista’s proficiency in these areas can ensure seamless navigation through the legal intricacies, significantly enhancing the potential success and compliance of your property investment project in Bali.

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