How Real Estate Fraud Happens in Indonesia

Indonesia attracts real estate investors looking for high returns and business opportunities. However, experts at Farsight Management emphasize that the growing demand for property has also led to a rise in fraud cases. The Indonesian real estate market presents various scams, ranging from fake documents and fraudulent listings to questionable developer schemes.

Ghost Villas and Fake Listings

In Indonesia, there has been an increase in fraudulent activities using artificial intelligence (AI) to create fake rental property listings. Scammers use AI to generate attractive advertisements with fake images and descriptions. These listings are then posted on online platforms, reaching a wide audience.

Many of these properties, often referred to as "ghost villas," do not actually exist. Once a potential buyer or tenant transfers funds, the scammer disappears, leaving victims without accommodation and out of pocket. Experts strongly advise caution to avoid falling for such schemes.

Abandoned Properties

Bali has seen a disturbing trend of real estate fraud involving abandoned properties. Scammers advertise such properties as available for rent or sale, often at very low prices to attract potential guests or investors. In reality, these properties are neither available for rent nor maintained in a livable condition.

Once an interested party contacts the scammer, they may be asked to pay a deposit or an initial payment to secure the property. After receiving the money, the "seller" disappears. Victims often only realize they have been scammed when they arrive at a deteriorated, uninhabitable property.

Deposit and Prepayment Scams

Deposit and prepayment fraud is another widespread issue in Bali’s real estate market. Scammers lure potential renters or buyers by offering highly attractive properties at below-market prices.

These fraudsters request large deposits or upfront payments as a guarantee for securing the deal. The result is predictable—victims are left without property and face significant financial and emotional losses, often with little to no chance of recovering their money.

Fake Documents

Forged lease agreements and ownership titles are a common issue in Indonesia. Scammers often use fake identification and legal documents to create the illusion of a legitimate transaction.

Some fake documents are so convincing that even careful individuals may fail to detect them. Victims often feel secure in their purchase, only to later discover that the contract terms were fraudulent and that they never actually owned the property.

Fake Marketing Strategies

This type of fraud involves manipulative real estate advertising and fake positive reviews, mainly targeting tourists and investors. Fraudsters create false listings that contain exaggerated property descriptions, misleading locations, and unrealistic investment returns.

Fake reviews are also common, artificially inflating the desirability of rental villas and misleading tourists who rely on these reviews when choosing accommodations.

Phishing Scams in Emails and Messages

Phishing scams are another widespread and highly dangerous form of real estate fraud in Bali. Scammers impersonate legitimate rental platforms or property owners, sending deceptive emails or messages to potential renters or buyers.

These messages often contain malicious links or requests for personal and financial information, supposedly needed for the rental or purchase process. Because they appear to come from a trusted source, victims may unknowingly expose sensitive data or transfer funds to scammers.

Sublease Fraud

Fraudsters frequently contact property owners or management companies, posing as legitimate tenants. They provide fake personal details, job histories, and references, sometimes even using forged bank statements or rental histories.

Once they gain access to the property, scammers either refuse to pay rent or engage in illegal activities, such as subleasing the property to multiple tenants without the owner’s consent. In some cases, properties have even been used as hubs for criminal operations. Scammers may also damage the property and disappear, leaving landlords with repair costs and unpaid rent.

Fake Construction Companies

Fake real estate developers and construction companies are a major risk for high-net-worth investors. Fraudsters use elaborate methods to appear legitimate, such as forging certificates, creating fake company websites, and even setting up "office locations" or fake construction sites.

These scammers promise high investment returns with minimal risk. They often provide detailed construction plans, architectural blueprints, and project timelines to gain investors' trust. In reality, no construction takes place, and the fraudsters vanish after collecting large sums from investors.

How to Protect Yourself from Real Estate Fraud in Indonesia

Experts recommend conducting thorough due diligence, checking references, verifying employment and income, and ensuring all documents are authentic and accurate. It is crucial to meet business partners in person and carefully verify the credentials of the companies involved.

One major issue in Indonesia is the lack of transparent verification procedures, meaning that even physically visiting a property or seeing legal documents does not guarantee a safe transaction.

For example, in Bali, the PARQ Ubud apartment complex, known as the "Russian Village," was recently shut down after authorities discovered it was built illegally on agricultural land without the necessary permits.

The complex, developed by German national Andre Frey, was marketed as a luxury multi-purpose resort with restaurants, shopping areas, event spaces, a fitness center, and Bali’s largest swimming pool. Investors were promised passive income and rising property values, but the Indonesian government unexpectedly took a firm stance against the project, arresting Frey for violating land use laws.

Authorities in Indonesia have tightened regulations on unauthorized developments and are considering a complete ban on foreign-built properties. If these policies move forward, it will become even more difficult for foreigners to invest in real estate in Bali legally.