To start with, there is already some land rights of a sort. None of the land that these villas are built on is owned by the bules. Don't care what they think they've got, but at the end of the day, the land is still owned by Indonesians.
Any non-Indonesian who builds a house in Indonesia should be aware of the risks in doing so. ONe of those risks is that at some point in the future, they may lose the land or the right to live on it. I think a fair percentage of these people are aware of this, but many are not, or they are in denial that it is a possibility.
The impact of the baby boomers in developed countries world wide 50 years ago was that lots of schools were built and surbubia sprawled. Many of those schools are now empty or closed as the population at that end of the demographic dwindles.
The current boom is in retirement living, which is what is behind a fair portion of the places built in Bali. Give it another 20 years, and that generation will be starting to decline. At some point in the future, there will be an excess of villas and houses, prices will drop perhaps. Co-incidentally many of the structures going up now will just about have had their day by that time, and so perhaps it will be time to demolish?
One of the questions will be whether you could revert back to farming. For a start, that is a skill being lost in Indonesia as younger generations move toward higher education and city life. Also, these areas will no doubt have infrastructure, shops, hospitals etc that have been build up around the housing demand. Can you plonk a rice paddy back into that scene?
So, interesting topic shorty. Certainly food for thought for anyone "investing" in the Bali real estate market.