Government to Crack Down on Illegal Villas

SEMINYAK, Bali ~ In a bid to deal with sewage problems and an overly strained infrastructure, the government of Bali will crack down on villas licensed as single-family dwellings but being marketed and operated as holiday rentals, officials said.

Currently there are around 1,000 villas that are operating illegally on the island, according to data from the newly launched Bali Villa Association, which only accepts members who are running legal concerns, and whose present membership comprises 45 villas.

“Of all the villas operating across the entire island, only 40 have legal licenses,” association chairman Ismoyo Soemarlan told The Bali Times, adding that as a result Bali was losing out because of lost tax revenues.

The body, a division of the Indonesian Hotel and Restaurant Association, was established in May this year with the goal of assisting illegally operated villas to register as businesses and to carry out a survey of villas in Bali.

Badung Deputy Regent I Ketut SudikertaIn Badung Regency alone – which has the lion’s share of illegal villa operations – the vast majority of villas are operating under the radar, according to the government.

“We believe there are more than 649 illegal villas in our area alone. The owners haven’t reported them to us; they just have a building permit for a residential house, not one for commercial use,” Badung government spokesman Putu Eka Merthawan told The Times.

In 2001, as part of an effort to curb the strain on Bali’s infrastructure and depleting resources like fresh water, the government restricted new investment in hotels and accommodation. The development of major hotel projects stopped – but the building of villa complexes and villa resorts boomed as they could be disguised during development as single-family dwellings and issued a building permit, and then used for commercial rentals.

Vacation villas have become popular with tourists as an alternative to staying at hotels or resorts – as they usually have their own compound, swimming pool and staff, an appealing combination for holidaymakers as it affords a level of luxury rarely found in the West.

But, the government points out, there is no tax income from most unlicensed villas, and as customers are drawn away from legitimate hotels, government revenue diminishes and Bali suffers under the strain of underground tourism that does not contribute to maintaining this island paradise.

Acknowledging the severity of the situation, the government says it has already identified most illegal villas – surveying the regency and gathering proof of rental advertisements on the internet or in local publications.

In addition, the government, along with the Tourism Department, has ordered every district to conduct a type of villa census and compile data on villas in their areas – whether they have a permit for a residential dwelling or a proper license to develop and operate villas as vacation rentals, according to a copy of a letter from Governor Dewa Beratha sent to all districts and seen by The Times.

Illegal villas are subject to immediate closure and fines and may be prosecuted for tax evasion and environmental violations, the government said.

Government sources tell The Times that this is not a quest for the authorities to extort money from illegal villa owners, or a scare tactic – but a genuine effort to clean up Bali as part of its BALI #1 Destination 2011 campaign reported last week by this newspaper.

“The government is serious about doing the right thing,” said one official, speaking on condition of anonymity.

Tourism Department official Nyoman Sudartini confirmed that the department was working with the government and that “there could be many more illegal villas here because we don’t know about a lot of them.”

As previously reported, the government has embarked on an ambitious plan to develop Bali into a world-class destination and therefore requires massive funding – to expand, for instance, Ngurah Rai International Airport beyond its current capacity of handling 1.4 million arrivals a year. Such an effort, insist the authorities, requires that everyone pay their taxes.

Also on the cards is a clean-up of the environment, which officials say is being desecrated by illegal villas as they release untreated sewage into the surrounding areas – which notoriously ends up on the fringe waters of some of Bali’s tourist beaches as an unsightly slick that poses major health risks to swimmers and badly damages the island’s pristine image.

By contrast, legitimate hotels and resorts are required to treat their sewage before being disposed of.

For owners of illegal villas, it is not the end of the road, however.

The Times has learned that there is a program in the works by the government to provide relief for illegal villa owners under a selective amnesty scheme in lieu of shutting down villas.

Under the proposed program, qualifying villa owners would be managed under the brand CMGT and required to operate under strict guidelines – covering sewage, water, electricity, green areas and parking management – that would be monitored electronically and ensure that taxes are paid. Random inspections would also be carried out.

“We realize the negative impact arbitrarily closing villas will have on our delicate economy in Bali,” Badung Deputy Regent I Ketut Sudikerta told The Times.

“The government’s job is to weigh this against our depleting resources, the impact on the environment and loss in tax revenues. We are looking at allowing villas to stay in operation under a special license issued to and managed by  CMGT Resort Properties – provided that these Villas adhere to strict operating guidelines. This will be monitored closely to insure compliance,” he said.

Presently being developed as part of the Bali #1 Destination 2011 program is an island-wide, super-high-speed Wi-Fi internet system that would be available to all villas managed by CMGT, allowing them to swiftly report guest check-ins and tax calculations, said Sudikerta, adding that attempts to bypass the system would result in immediate closure and probable prosecution.

The amnesty program would not be an invitation for developers to continue building illegally, he stressed.

Villa owners may register under the amnesty program before December 25, 2006, at, and details on compliance regulations would follow.

Sudikerta said owners of illegal operations should not be worried about voluntarily registering, as the government was providing them with a chance to stay in business, and “already knows which villas are illegal” due to Bali villas being widely advertised on the internet.

Separately, the government is also to put into place a registration and licensing system for all consultants, realtors and advisors working in the property market in Bali.


By William J. Furney

Managing Editor

The Bali Times

With staff reporter Indra Prayogi


Filed under: Headlines

4 Responses to “Government to Crack Down on Illegal Villas”

  1. Illegally run Bali villas urged to get in line - Travel Tips - Bali Daily, Bali Expats, Bali News - Bali Blog Says:

    […] Drive around Seminyak, Umalas, Canggu and count the villas and new constructions. The hilarious thing, is that in Bali, only 40 villas have a commercial licence! Incredible, to say the least. The Bali government wants some of that revenue and is starting a registration process for villa owners. There will be an amnesty for commercial villas without a proper licence, but this doesn’t mean its okay to build new ones. […]

  2. Mr. Green Says:

    what color is the guys uniform in the picture?

  3. Illegally run Bali villas urged to get in line - Bali Tourism News Says:

    […] Bali’s tropical climate makes things grow like nobody’s business. In Seminyak, its not just the palm trees that sprout up, its the villas. If you don’t own a villa, you are building one it seems. Many people see their villa, as a way to earn money, but fail to register it as a business. The Bali government doesn’t like that, and has a plan for villa owners to get in line.         Drive around Seminyak, Umalas, Canggu and count the villas and new constructions. The hilarious thing, is that in Bali, only 40 villas have a commercial licence! Incredible, to say the least. The Bali government wants some of that revenue and is starting a registration process for villa owners. There will be an amnesty for commercial villas without a proper licence, but this doesn’t mean its okay to build new ones. […]

  4. CKMY Says: