· 8 min · Construction Updates
You are paying for something that does not exist yet
This is the central fact of the transaction rather than a criticism, and everything else follows from it. Your money pays for the construction process. You hold a contractual promise instead of a property until the title transfers. If the developer completes the work, you get a discount and a finished villa. If they fail to perform, you become a creditor in a queue.
The good news is that Indonesian regulation sets concrete preconditions a developer must satisfy before they can legally sign an off-plan contract with you. Most foreign buyers have never heard of them. They are the sharpest due diligence tool available, and they are the center of this article.
The genuine benefits
Off-plan pricing typically runs 15–25% below completed comparable stock. That discount is compensation for the risk you are absorbing, and if the project completes it is real money.
Staged payments mean you are not committing full capital at once, which matters if you are timing a currency transfer or a sale elsewhere. Early buyers usually get better unit selection — the corner plot, the better aspect, the quieter position. And in a rising micro-market, you capture appreciation during the build period on capital you have not fully deployed yet.
These are legitimate advantages. They are also exactly what makes buyers stop reading the contract.
What you actually hold before handover
The instrument used for off-plan purchases in Indonesia is the PPJB (Perjanjian Pengikatan Jual Beli), a preliminary binding sale and purchase agreement. The final transfer instrument is the AJB, executed later.
That distinction matters more than any other point in this article. A PPJB gives you the right to demand transfer of the property in future. It does not transfer ownership. Until the final deed is executed and registered, you are financing construction and relying on the developer to perform.
The practical result is that in a dispute over delays, specification changes, land title or developer insolvency, you are a contractual claimant rather than an owner. That legal position is much weaker than most buyers expect when they make their first payment.
The five preconditions — your sharpest diligence tool
Under Indonesian regulation governing housing development (PP 12/2021, amending PP 14/2016), a developer may only enter a PPJB after establishing certainty on five things.
- Land ownership status. The developer’s rights over the land must be settled.
- The subject matter of the agreement. What is actually being sold, defined.
- PBG. The building approval must be issued.
- Availability of infrastructure and public utilities. Roads, drainage, and confirmed electricity and water sources.
- Minimum 20% construction progress. For landed housing, 20% of the total number of units; for multi-unit buildings, 20% of construction volume, evidenced by a supervising consultant or construction management report.
Legal commentary indicates that where these conditions are not met, the PPJB may be null and void.
Read that list again as a buyer. It means a developer selling from renderings on a plot with no permit and no construction is risky because they may be operating outside the framework entirely. “We’re launching at pre-construction prices, permit coming soon” describes the situation these rules exist to prevent.
Ask for evidence of all five, in documents, before any payment. A developer who can produce them has passed a meaningful test. One who deflects has answered your question.
One detail needs clarifying. This framework applies to the sale and purchase of residential housing, while many transactions in Bali are structured as long leases rather than house sales. Ask an Indonesian lawyer directly whether the framework covers your specific leasehold villa deal — and hold these five conditions as your own standard regardless of the answer.
What the contract must contain
The same regulation specifies minimum contents for a PPJB. Use it as a checklist against whatever you are handed.
- Identities of the parties
- Description of the object
- Price and payment procedure
- The developer’s guarantee
- Rights and obligations of both parties
- Handover date
- Building maintenance provisions
- Permitted use of the building
- Transfer of rights
- Cancellation and termination conditions
- Dispute resolution
Off-plan disputes cluster on the items in bold. A contract with no specific handover date, no defined consequence for delay, and no clear statement of your cancellation rights does not protect you. It is a payment schedule with the legal terms left vague.
Note also that a PPJB signed privately, without notarial involvement, remains valid under general contract law but comes with no independent verification of land status, permits, or the object itself. That verification is the point.
Vetting the developer
Three questions carry most of the weight.
Do they hold the land title? The developer may not hold it yet. In that case your payment funds the land acquisition, and you carry the risk that the acquisition does not complete.
What have they actually delivered? Ask for completed projects of comparable scale, then ask your lawyer or agent to contact buyers from those projects. Renders and a portfolio page are marketing. A delivered building with owners who will talk to you is evidence.
What is their operational capacity? A developer running a substantial existing portfolio has more to lose from failure and more resource to finish. A first-time developer with one project has neither.
Structuring payment
Tie every instalment to a verified construction milestone, with verification by someone who is not the developer. “50% on signing” is a transfer of risk to you dressed up as a payment plan.
Deposits belong in notary escrow. A payment routed to a seller’s or developer’s personal account is a red flag regardless of the explanation offered. Indonesia does not have a mandatory escrow regime for off-plan funds comparable to statutory trust account schemes elsewhere, and commentary on consumer protection in this area has repeatedly recommended one. In its absence, you have to negotiate for escrow rather than assume it is provided.
Do not make the final payment until handover is complete and all defects are repaired. The money you still hold at the end of the project is your only real leverage to get the work finished.
Delay is the base case, not the exception
The running joke in the Bali market is not whether a project is delayed but by how much. Plan for it.
Your contract should state the handover date, define force majeure events clearly, and establish what compensation you receive if the developer misses the deadline. Ask what a six-month delay does to your rental projections. If your model assumes income starts in month 18, a delay is a direct financial loss rather than an inconvenience.
Specification, snagging and warranties
Off-plan buyers routinely discover that finishes differ from what was shown. Get the specification schedule attached to the contract in writing, including materials and appliances, with a clause governing substitutions — permitted only at equal or better quality, and with your consent.
Warranty practice in Bali is thin. Retention periods of around three months are common, and the more professional developers offer structural warranties often limited to a year. This is worth negotiating rather than accepting, particularly for pool and roof work, which is where problems surface.
Inspect before final payment. Bring someone independent who knows construction.
If the project fails
This is the scenario the discount is compensating you for, so understand it clearly.
Reporting on Indonesian developer insolvencies describes foreign buyers in guaranteed-return apartment projects ranking behind banks and contractors in the creditor queue, with final recovery well below what was invested. Your PPJB makes you a contractual claimant. Secured creditors are ahead of you.
Nothing in a well-drafted contract fully removes this. What reduces it is buying from a developer who will not fail: land already held, permit issued, construction genuinely underway, track record verifiable, payments staged against progress, and money held in escrow rather than spent on the previous project.
The pre-payment checklist
Everything below should be evidenced in documents before any money moves.
- Land title held by the developer, verified at the land office
- PBG issued — not applied for
- Zoning confirmed for the intended use on the specific plot
- Construction genuinely underway and independently verified
- Infrastructure and utilities confirmed available
- PPJB reviewed by your own independent lawyer, not the developer’s notary
- Handover date, delay compensation and cancellation rights all explicit
- Specification schedule attached, with substitution controls
- Payments staged against verified milestones, held in escrow
- Completed comparable projects identified and, ideally, their buyers contacted
Anything on this list that cannot be evidenced is not a detail to sort out after the deposit.
The honest summary
Off-plan works. Buyers get real discounts, and competent developers in Bali deliver projects every year.
But the discount is priced for the risk you are taking, and that risk is concentrated in a period where you have paid substantially and own nothing yet. The five legal preconditions give you a concrete, checkable standard rather than a feeling about whether a developer seems credible. Use them.
If a developer cannot provide evidence of land title, an issued permit, and actual construction progress, the answer is not to offer a smaller deposit. It is to find a different developer.
This article is general information about off-plan purchasing in Bali and does not constitute legal, tax or financial advice. Regulatory requirements are summarized here, and their application depends on transaction structure, property type and current regulation, all of which change. Confirm what applies to your specific purchase with a qualified Indonesian property lawyer and an independent notary before committing funds.
