By Puertas Cerradas
Oct 12, 2007, 08:22
Foreigners who bought into the false dream, still perpetuated by the greedy and powerful of Indonesia such as the current president, of owning a holiday home in Bali when they legally can not, are becoming increasingly aware their dream likely is about to be taken away from them. While tourists staying at foreign owned villas in Bali have already started to be afflicted in the great 2007 illegal villa crackdown!
Badung Regency, tourism wise, covers everything from Tanah Lot down (excluding Denpasar and Sanur), which includes the prime foreign owned villa zones around Canggu and Seminyak. It has said any unregistered villa in its jurisdiction as of the 31st December will have the legal process started to have it closed down. But it seems they are not just going for unlicensed holiday villas (villas rented out to tourists without operational permits), oh no; the hundreds of villas they cite include foreign owned or rather paid for holiday homes (villas used solely by their owners and perhaps family and friends of theirs). What makes matters worse is that Gianyar Regency, which covers the Ubud area where many foreigners have sunk their life savings, is going to join them!
So what is the problem some ask? If you are a foreigner with a property in Bali, why not just register your villa? The answer is, despite the fact even now the current president of Indonesia is appealing to westerners to make Indonesia their second home, he is not being literal; everyday foreigners can not own villas legally, which means foreign villa owners do not own anything but bits of paper! The problem comes that foreigners can only legally lease residential properties in Indonesia and only then if it is used as their Indonesian place of residence, because they are working / paying taxes there. Oh sure, there is tons of baloney around doled up by the criminal and ignorant about any foreigner being able to lease a house according to the 1996 revision of that law; but that revision is wrongly “interpreted” and abused (see: Hak Milak Bali Villas). So if a foreigner with a bit of paper that says they own a villa in Bali registers that claim under this crackdown, what will happen? Secondly, the other problem is that only legal Indonesian entities and therefore only Indonesians can obtain operational permits for villas. Third, Badung Regency has not issued new operational permits for some time, so none are now legally available. Get the picture, something like a rock and a hard place?
Already the process has started with villas in the Bukit Peninsula being raided by armed police officers and, strangely, tourism officials (hmmmm). Already tourists have been impacted, have lost money and been forced to find somewhere else to stay.
Of course when these foreign wallets (punters) were sold the villas they do not actually own, everything was smiles and sunshine. With so many licensed agents selling “freeholds” and “investment opportunities”, the truth was kept or rather fraudulently misrepresented to foreigners and the authorities did nothing except encourage the practice of attracting all this foreign currency to the island; of course. So what has changed or gone wrong?
Foreigner are encouraged to open their wallets
Prior to and even after the first terrorist bombing in 2002, buoyed on by false claims and promises, foreigners poured their life savings into “owning” Bali villas; their own slice of paradise and a rental return “investment”. The people in authority knew what was going on and allowed it to continue, as it suited their purpose at the time. The real owners of all the large hotels in Bali, the Suharto and other powerful families just watched on.
The tourism boom bombs
After the 2002 and especially the 2005 Bali bomb attacks and other events like the Corby case, foreign, especially western tourism to Bali plummeted, while a large number of foreign villa projects were midway. As big buck western tourism numbers declined, the so called luxury hotels in Bali lost a lot of customers. In addition, because large luxury hotels in Bali were increasingly only seen as luxury by the less wealthy, those with healthy bank balances still going to Bali increasingly chose to rent a luxury villa instead.
Upset wealthy hotel owners
Matters were not made better by the continual lies put out by the Indonesian Tourism Board that Bali’s tourist industry was doing much better than it actually was; wealthy Javanese who owned hotels in Bali believed their nonsense and got increasingly angry about their own falling profit margins, believing foreign villa owners were creaming it. The wealthy Javanese families started building their own villas, which mostly were nowhere near as good as foreign “owned” accommodations, as the foreigners had much more love for Bali and for their projects. Recent news this month that the Indonesian Government is planning to drop the exit fiscal tax levied on Indonesians means former domestic guests will more likely holiday outside Indonesia as a result. As the Javanese owned villas failed to turn the hotel tourism tide around and with even less trade looming, so the foreigners who invested in Bali had their property fate sealed.
So the hotels, often it has to be said who trade unlawfully and cheat on taxes themselves, used their instruments of persuasion to get the authorities in Bali to start cracking down on foreign owned villas, which they knew by default were unlawful or even illegal across the board. The logic being “Get rid of the foreign owned villas and then foreigners coming to Bali will have no choice but to stay at our hotels, and our villas too”.
So the Balinese authorities duly oblige, forgetting all the false promises made to these foreigners with their implicit knowledge. Told they are doing this for the good of Bali, because these unlicensed villas are cheating on taxes. This is true, but then so do the vast majority of hotels in Bali with the well known “twin book” system, so why not crack down on twin book cheating hotels? As the amount of tax major hotels defraud the island out of is likely to be far higher than the foreign owned villas ever do. Of course the fallout that will come from all of this with western tourist wallets if their fellow countrymen and women lose their life savings has not yet dawned on the wealthy hotel owners and authorities; but then it wouldn’t, as greed clouds the eyes.
The protagonist and informant
Amazingly, the authorities in Bali, who are not known for their investigative powers and record keeping, had a list of foreign owned villas with web sites in waiting, already targeted; clearly someone, probably a westerner, had done the Internet research for them (see: Not So Gay Bali Villas).
So now you know why this is all happening and who is responsible. If you are a foreign “owner” of a villa in Bali, we again urge you to read our Bali Villa Real Estate report as it offers a potential solution to the problem. But if you are caught in the crackdown and lose your life savings or have to stump up a lot of cash to hold onto your dream, just remember where it all came from. Bear in mind the fact the authorities in Badung Regency are talking about closing down private holiday villas as well, just goes to show it is not just about tourist dollar greed but also about anti-western sentiment. Westerners who have done nothing more than bought a villa in Bali for their own use and only their own use from licensed real estate agents with the knowledge of the authorities are to lose everything? So why allow them to buy in the first place?
Tourists have the problem now of identifying which villas are licensed and which ones are not, in order to avoid arriving at the airport with screaming family and heavy bags in tow only to find out the villa driver is not waiting for them and no-one answers the contact villa phone number. But identifying unlicensed villas is made difficult by the fact so many villas which have not, claim to have one! This is made worse by villa rental agents who claim the villas they represent are covered by an operational license when they are not. You see, so many agents have what they call a “group license” themselves, but the authorities have stated these do not cover individual villas; each villa has to have an operational license itself in its own name! So can you work out which villas are at risk and which ones are not? No, of course you can not, and therein lies the danger.
So tourists really need to ask themselves some questions like; a) Should they go to Bali at all? b) Should they stay in a so called luxury hotel in Bali? c) If they book into and prepay for a villa, will it be there when they arrive? We say the easiest and best thing for everyone including the foreign villa “owners” of Bali and the Balinese themselves is go on holiday somewhere else; When and only when the Indonesian Government and Balinese Authorities put in place measures that protect and respect foreigners, should any foreigner think about giving them their hard earned vacation dollars.