Real Estate and Short‑Term Accommodation in Indonesia

Real Estate and Short‑Term Accommodation Compliance in Bali :  PP 28/2025, KBLI Limits, and UMKM Protection

Indonesia’s licensing framework has shifted from discretionary approvals to structured, verifiable compliance. In Bali, that shift is visible at every stage of a project: zoning (KKPR), environmental documentation (SPPL/UKL‑UPL/AMDAL), building permissions (PBG) and building worthiness (SLF), and operational licensing in OSS. Government Regulation 28/2025 (PP 28/2025) connects these stages into a single digital trail. The practical effect is that inconsistencies are flagged and approvals do not progress until they match.

For foreign investors, two realities now define the market:

1. Property is treated as a regulated business activity, not a casual villa transaction.
2. Short‑term accommodation at micro/small scale is a protected UMKM space, while foreign capital is steered toward larger, formally licensed operations through PT PMA structures.

The sections below set out how the system works in 2025–2026 and what that means for strategy, risk, and execution.

What “regulated business” means in practice

Under the current regime, feasibility begins with regulatory fit—not with design, leasing plans, or marketing schedules. A compliant project links:

• PT PMA and KBLI that reflect the actual operating model
• Zoning (KKPR) that allows the intended use on the specific parcel
• Environmental documentation sized to impact and location
• PBG/SLF that match the declared building function and technical standards
• Operational license aligned with sectoral rules (e.g., tourism for short‑stay accommodation)

If any piece is misaligned, OSS detects the gap—often before construction—and either stalls or rejects the application.

PP 28/2025 makes approvals traceable end‑to‑end

PP 28/2025 consolidates risk‑based licensing into an integrated sequence. It tests four points of consistency:

1. KBLI vs. activity – Does the company’s business classification match what is actually being offered?
2. Zoning vs. use – Does the spatial plan permit the intended commercial function?
3. PBG/SLF vs. building function – Do technical approvals cover the way the building will be used?
4. Environmental scope vs. scale – Is the document (SPPL/UKL‑UPL/AMDAL) sized to the project?

Attempts to “build first, license later,” to operate residential approvals as commercial accommodation, or to rely on informal zoning interpretation are now visible in the records. The system is designed to prevent those routes.

Zoning and building approvals drive feasibility

KKPR decides whether the planned use is even possible on the land. Proceeding on assumptions or verbal assurances results in redesigns or dead ends.

PBG governs design and construction to the approved function; SLF confirms the completed building is safe and consistent with the PBG. Without both, income‑generating use is compromised—licensing, insurance, and financing are affected.

KBLI 68111: where it fits and where it does not

KBLI 68111 (Real Estate owned or leased) covers acquiring, holding, leasing, and operating real estate for long‑term rental income (residential or commercial), including shopping centres and mixed‑use assets operated as landlord activities. It does not authorize short‑stay tourist accommodation. Where a project blends real estate and hospitality, the scope must be separated:

• 68111 for the landlord/hard‑asset function (monthly/annual leases; multi‑year commercial leases)
• Tourism/accommodation KBLIs for short‑term stays, with matching zoning, environmental, PBG/SLF, and sectoral licensing

For shopping centres operated under 68111 at medium/large scale, plan for UMKM tenancy allocation with affordable rent/sale terms and ensure it is reflected in design and tenancy policy. PT PMA investment thresholds (> IDR 10 billion, with rules on whether land/building counts by project type) apply per 5‑digit KBLI per site and should be visible in CAPEX and OSS submissions.

Real estate and short‑term accommodation: structural reality for foreign investors

Indonesia separates foreign investor participation from protected UMKM accommodation activity. The boundary is policy‑driven and enforced by the current licensing system.

Core points:

• Daily rental of villas is UMKM space. Short‑term accommodation at micro/small scale is reserved for Indonesian operators.
• Foreign individuals cannot lawfully run daily tourist rentals from personally owned or leased villas. There is no KBLI that grants a personal, foreign capacity to operate short‑stay accommodation.
• A PT PMA is not a single‑villa daily rental vehicle. By design, a PT PMA functions at large‑enterprise scale with the governance and licensing expected of hotels, resorts, branded serviced apartments, or integrated hospitality projects.
• Workarounds (nominees, proxy arrangements, “management only” schemes) are outside the licensing framework. OSS and sectoral reviews cross‑check zoning, building function, and operational claims.
• Recent KBLI adjustments (e.g., 68111 Real Estate, 93114 Sports Field Facilities, 96122 SPA) inform how large projects are categorized and supervised. They do not create a route for foreign individuals to place private villas into the daily rental market.

The result is a stable guideline: personal villas owned or leased by foreign individuals are not part of the short‑stay channel. Compliant alternatives include personal use, longer‑term leasing (monthly or yearly) consistent with approvals, or participation in properly licensed, larger‑scale hospitality developments.

Investor pathways that fit the rules

Foreign capital is directed toward projects that meet enterprise‑scale standards and clear governance:

• Hotels and resorts with tourism KBLIs, matching KKPR, environmental scope, PBG/SLF, and operating licenses
• Branded serviced apartments designed and approved for commercial accommodation, not retrofitted residential buildings
• Integrated hospitality/wellness complexes with unified compliance across asset holding, construction, and operation
• Shopping centres/mixed‑use assets under real estate KBLIs, including documented UMKM space and tenancy policies
• Structured villa estates where units are designed, approved, and licensed as accommodation inventory, not private homes later marketed for nightly stays

These channels align with the Positive Investment List, PT PMA capital requirements, and sectoral rules. They also reduce friction in OSS because the use case, building function, and licenses are consistent.

Documentation and sequencing that prevent rework

A simplified execution sequence:

1. Screening – high‑level spatial fit, access, utilities, setbacks
2. Entity planning – PT PMA structure; map KBLIs to the exact operating model
3. KKPR – obtain zoning suitability before concept design or land commitments
4. Environmental scope – confirm SPPL vs. UKL‑UPL vs. AMDAL; feed obligations into design (wastewater, drainage, access, parking, fire systems)
5. Technical design – drawings/specs that match the declared building function
6. PBG – approval to construct to the declared use and technical standards
7. Construction – maintain an auditable as‑built trail (revisions, tests, commissioning)
8. SLF – building worthiness and conformity to PBG
9. Operational licensing – sectoral permits in OSS aligned with actual operations
10. Launch – onboarding tenants/guests only after licensing and tax setup are complete

Maintain a single compliance register so KKPR, environmental files, PBG/SLF, OSS data, contracts, and public claims stay synchronized.

Common failure points (condensed)

These issues repeatedly delay or derail projects:

• Design or marketing before KKPR → redesigns or refusal
• Title/lease without commercial use → licensing blocked
• Incorrect KBLI selection → OSS mismatch and audits
• Under‑scoped environmental documents → category upgrade midstream
• Building without PBG or changing plans off‑record → SLF denied
• Residential approvals used for commercial accommodation → operational licensing refused
• No UMKM allocation in shopping centres → PBG notes; operational delays
• Platform listing ahead of licensing → higher inspection risk
• Fragmented records (OSS vs. contracts vs. on‑site reality) → submissions held
• Assuming legacy buildings can be “regularized” quickly → structural/fire upgrades needed under current standards

Treat these as non‑negotiable compliance risks and budget time and resources to avoid them.

How to approach villa ownership under current rules

For foreign individuals who hold or plan to hold villas:

• Personal, non‑commercial use remains straightforward.
• Longer‑term leasing (monthly/annual) may be viable if consistent with zoning, building function, and documentation.
• Daily rentals in a personal capacity are not available.
• If the goal is tourism operation, consider joining larger, properly licensed projects where the accommodation inventory, approvals, and governance are designed for short‑stay use from the outset.

This approach removes dependence on interpretations that conflict with UMKM protection and avoids OSS inconsistencies.

Commercial and tax alignment (brief)

Ensure the declared business model matches tax treatment:

• Real estate landlord income (68111) versus hospitality revenue require different reporting and may trigger different VAT and withholding profiles.
• If a related operator runs hospitality inside an integrated development, document arm’s‑length terms and ensure both entities’ KBLIs and licenses support the arrangement.
• Tenant/guest billing must be consistent with the building’s approved function and operational license.

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Practical checklist for 2025–2026 projects in Bali

• Confirm KKPR early; do not proceed on assumptions.
• Choose KBLIs that reflect the actual operating model; separate real estate holding from hospitality activity where applicable.
• Determine environmental category during feasibility; design to it.
• Obtain PBG before construction; keep as‑built documentation ready for SLF.
• For shopping centres, plan UMKM space and tenancy policy from concept stage.
• Align OSS data, contracts, marketing, and on‑site reality.
• Do not attempt to place private villas into the daily rental channel via proxies or management contracts.
• Map PMA investment thresholds correctly per KBLI and site; reflect them in CAPEX and filings.

Indonesia’s current framework is clear. Short‑term accommodation at micro and small scale is a protected UMKM activity; foreign participation sits in the large‑enterprise segment through PT PMA structures with appropriate KBLIs, capital, and licensing. PP 28/2025 and OSS have made every step traceable. Projects that align entity scope, zoning, environmental obligations, building approvals, and operational licensing proceed more predictably. Projects built on workarounds face reclassification, redesign, or operational interruption.

Planning within these boundaries—rather than looking for exceptions—reduces execution risk and enables stable operations in Bali’s regulated environment.

Appendix: Typical KBLI–Operating Model Mapping With Common Licensing Sequences

This appendix provides a practical reference for foreign investors planning property or hospitality projects in Indonesia. It outlines common operating models, the KBLI codes typically associated with each activity, and the licensing pathway normally required under the 2025–2026 compliance framework.

It is intended as a structural guide rather than a substitute for project‑specific analysis, as zoning, environmental category, and building function often vary by site.

1. Real Estate Holding and Long‑Term Leasing

Typical KBLI

• 68111 – Real Estate Owned or Leased

Used for acquiring, holding, leasing, and operating property for monthly/annual rental or commercial tenancy.

Typical Operating Model

• Landlord activities
• Long‑stay residential leasing
• Leasing shops/offices/units in commercial buildings
• Operating shopping centres (medium/large scale) with required UMKM allocation

Common Licensing Sequence

1. PT PMA establishment with KBLI 68111
2. KKPR confirming commercial or mixed-use zoning
3. Environmental document (SPPL/UKL‑UPL/AMDAL depending on size)
4. PBG for the building’s use (e.g., commercial, mixed-use, residential rental)
5. SLF confirming function and safety
6. Operational license registered in OSS for the real estate activity

Notes

• Does not cover daily rentals.
• Shopping centres must incorporate UMKM tenancy obligations.

2. Hotel and Resort Operations (Short‑Term Stays)

Typical KBLIs

• 55111 – Hotels
• 55112 – Resort Accommodation
• 55121 – Non‑Star Hotels/Other Lodging (depending on scale and model)

Typical Operating Model

• Full‑service accommodation
• Resorts with amenities
• Commercial hotel operations designed for daily guests

Common Licensing Sequence

1. PT PMA with tourism KBLIs
2. KKPR allowing accommodation/tourism use
3. Environmental category (often UKL‑UPL, occasionally AMDAL for large-scale)
4. PBG for hotel/resort building function
5. SLF reflecting hospitality use
6. Tourism operational license via OSS

Notes

• Consistency across zoning, PBG, SLF, and declared business model is essential.

3. Serviced Apartments / Branded Residences

Typical KBLI

• 55130 – Serviced Apartment / Accommodation for Short‑Term Use

(Exact wording may vary by year of classification.)

• 68111 when combined with long‑stay leasing operations, depending on the model.

Typical Operating Model

• Mixed inventory of long-stay and serviced units
• Branded residences with hospitality features
• Monthly/annual leasing where daily stays are not offered

Common Licensing Sequence

1. PT PMA with relevant KBLIs based on operating model
2. KKPR confirming commercial or mixed-use accommodation
3. Environmental study proportional to scale
4. PBG for serviced apartment/hybrid building function
5. SLF
6. Tourism license if daily accommodation is part of the model

Notes

• If any part of the inventory is offered as daily accommodation, hospitality KBLIs and corresponding zoning/technical approvals are required.

4. Integrated Hospitality, Wellness, and Mixed‑Use Projects

Typical KBLIs

• 55111/55112 for hospitality
• 68111 for real estate components
• 96122 – SPA (Sante Par Aqua) for spa/wellness facilities
• 93114 – Sports Field Facilities for sports components
• Additional commercial KBLIs depending on retail/F\&B mix

Typical Operating Model

• Multi‑component resort or wellness complex
• Hospitality combined with retail, wellness, sports, or residential leasing
• On‑site service providers operating under compatible KBLIs

Common Licensing Sequence

1. PT PMA with multiple KBLIs; mapping per component
2. KKPR confirming integrated mixed-use/tourism zoning
3. Environmental document (UKL‑UPL/AMDAL depending on impact)
4. PBG covering each functional zone within the development
5. SLF per building or per zone
6. Operational licenses for hospitality, wellness, sports, and commercial functions

Notes

• Consistency across functional zoning and building approvals is essential.
• Components must be documented separately in OSS if operated under different KBLIs.

5. Villa Estates Designed and Approved for Commercial Accommodation

Typical KBLIs

• 55132 – Villa-Based Tourist Accommodation (depending on classification year)
• 55121 / 55112, depending on regulatory interpretation
• 68111 only if the landlord function is separated and long-stay leasing applies

Typical Operating Model

• A professionally managed villa estate
• Nightly stays under tourism licensing
• Centralized management, services, and common facilities

Common Licensing Sequence

1. PT PMA with tourism KBLIs
2. KKPR confirming tourism accommodation zoning
3. Environmental scoping (often UKL‑UPL)
4. PBG for tourism villa function (not residential)
5. SLF confirming commercial accommodation use
6. Tourism operational license

Notes

• Private villas owned by individuals cannot be inserted into this structure unless the villas are part of a purpose‑built, uniformly licensed development.

6. Long‑Term Residential Communities (Non‑Tourism)

Typical KBLI

• 68111 – Real Estate Owned or Leased

Typical Operating Model

• Residential leasing (monthly/annual)
• Community management without short‑term commercial use

Common Licensing Sequence

1. PT PMA with 68111
2. KKPR confirming residential/mixed-use zoning
3. Environmental documents sized to project scale
4. PBG for residential function
5. SLF
6. OSS registration for real estate operation

Notes

• Daily accommodation cannot be offered under residential approvals.

7. Asset‑Holding Companies (Real Estate Ownership Only)

Typical KBLI

• 68110 – Real Estate Activities with Own or Leased Property (General)
• 68111 – Real Estate Owned or Leased (more specific)

Typical Operating Model

• Passive ownership
• Leasing on a long‑term basis
• No hospitality operations

Common Licensing Sequence

• PT PMA establishment
• KKPR consistent with intended land/building use
• Environmental compliance
• PBG/SLF
• OSS registration for landlord function

Notes

• Operators providing hospitality services must use separate entities with tourism KBLIs.

Summary Table

Operating Model	Common KBLI(s)	Daily Accommodation Allowed?	PBG/SLF Must Match Hospitality Use?	Typical Licensing Path
Real estate leasing (long‑stay)	68111	No	No	KKPR → Environmental → PBG → SLF → OSS
Hotel/resort	55111/55112	Yes	Yes	KKPR → Env → PBG → SLF → Tourism License
Serviced apartments	55130 (if short‑term) or 68111 (long‑term)	Only if licensed under tourism	Yes, if short‑term	Same as above based on model
Mixed‑use hospitality	Multiple (551xx, 68111, 96122, etc.)	Yes	Yes	Multi‑KBLI sequence with integrated approvals
Villa estate (commercial accommodation)	55132 / 551xx	Yes (if licensed)	Yes	Tourism KBLIs + full approvals
Private villa (individual foreign owner)	None applicable	No	N/A	Not permitted for daily rentals