Leasehold vs Freehold in Bali
the Key Differences & Best Ownership Options
If you’re thinking about buying property in Bali, you’ve probably come across the terms leasehold and freehold. These are two different ways to own property here, and choosing the right one can make a big difference depending on your goals.
In this guide, we’ll break down both options in simple terms—no complicated legal jargon, just the essentials you need to know. By the end, you’ll have a clear idea of which ownership type suits you best.
What is Freehold Ownership?
Freehold means you own the land outright, forever. Simple, right? But here’s the catch: foreigners cannot legally own freehold property in Bali (or anywhere in Indonesia) under their own name.
This type of ownership is available only to Indonesian citizens. If you see a villa advertised as “freehold,” it means that only an Indonesian can buy it under their name.
How Can a Foreigner Access Freehold Property?
Even though a foreigner can’t own freehold land directly, there are legal workarounds, such as:
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- Setting Up a PT PMA (Foreign-Owned Company) – This is a safer option. A PT PMA can hold the land under the “Hak Guna Bangunan” (Right to Build) title, giving you control over the property. However, setting up a company takes time, has minimum capital requirements and involves ongoing costs.
- Hak Pakai (Right to Use) – This is a legal way for foreigners to own a residential property in their own name. Hak Pakai allows a foreigner to buy and use a property for up to 30 years, with extensions available up to 80 years. However, this title applies only to land that is classified for residential purposes, it must be used as your primary residence and there are certain restrictions on selling it to other foreigners.
- Using a Nominee (Not Recommended) – Popular in the past, some foreigners bought land using an Indonesian nominee, but this is very risky and not legally recognised. You don’t actually own the land, and if something goes wrong (and very often it does), you could lose your investment. Do not consider nominee arrangements.
- Leasehold Instead – This is often the best, easiest and safest option for foreigners, which brings us to our next section.
What is Leasehold Ownership?
Leasehold means you lease the land for a set period (usually 25-30 years), with the option to extend. You don’t own the land itself, but you have full rights to use, rent, or sell the lease during that period.
This is the most common way for foreigners to own property in Bali and is fully legal. Many investors prefer leasehold because it’s more affordable than freehold and allows flexibility.
How Leasehold Works
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- A leasehold contract typically lasts 25-30 years.
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- You can negotiate extensions, often up to 80-90 years in total.
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- You can sell the remaining lease to another buyer if you decide to leave Bali.
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- Leasehold properties are cheaper than freehold, making them more accessible and a popular choice for investors and expats.
Pros & Cons of Freehold vs. Leasehold
Let’s compare the two options side by side:
| Feature | Freehold | Leasehold |
|---|---|---|
| Ownership | Forever (but only for Indonesians) | Fixed term (e.g., 30 years) |
| Foreign Ownership | Not allowed (without a company) | Fully legal |
| Alternative for Foreigners | PT PMA (HGB) or Hak Pakai | Standard lease agreement |
| Initial Cost | Higher | Lower |
| Resale Value | Increases over time | Depends on lease length remaining |
| Flexibility | Owns land outright | Can renew lease or sell lease rights |
| Legal Risk | Depends on ownership structure chosen | Legally recognized for foreigners |
Which One is Better for You?
If you’re an Indonesian citizen, freehold is the best option because you own the land permanently. But for foreigners, leasehold is often the safer and more practical choice.
Here’s a simple way to decide:
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- If you want full control and are willing to set up a PT PMA, freehold through a company is an option.
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- If you want a simple, hassle-free and legal way to own property as a foreigner, leasehold is your best bet.
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- If you live in Indonesia, want to own a property in your name, and plan to live there, Hak Pakai could be a good option, but it has restrictions.
Common Myths About Leasehold in Bali
1. “Leasehold means I can’t sell my property.”
Not true! You can sell the remaining lease to another buyer just like you would with freehold property.
2. “Leasehold properties lose all their value after the lease expires.”
Not necessarily. Most leasehold agreements allow extensions, often at pre-agreed rates.
3. “Freehold is always better.”
It depends. If you’re a foreigner, leasehold is often more affordable, flexible, and legally secure.
Final Thoughts
Buying property in Bali is an exciting investment, but it’s important to choose the right ownership type for your needs. Freehold is great if you’re Indonesian, but for most foreigners, leasehold offers a legal, flexible, and cost-effective way to own property in Bali. Hak Pakai and HGB are good alternatives for expats who want the benefits of freehold property ownership, and are prepared to meet the requirements and restrictions of owning under these titles.
If you’re still unsure, it’s always a good idea to speak with a trusted real estate agent or property lawyer who understands Indonesian property laws. That way, you can make the best choice with confidence.
Happy house hunting in Bali!