Leasehold vs Freehold in Bali: How They Work and Which to Choose

Leasehold or freehold in Bali? How each works, who can hold it, how to compare lease prices per year, extensions, taxes and a contract checklist.

Leasehold vs freehold in Bali comes down to what you hold and for how long. True freehold (Hak Milik) is reserved for Indonesian citizens, so foreign buyers choose between a time-limited registered title, such as Hak Pakai (right of use), and a leasehold: a contract to use someone else’s land for an agreed number of years. Below we explain both, how to compare leasehold prices fairly and what to check before you sign.

What does freehold mean in Bali?

In Bali, as in the rest of Indonesia, the only true freehold is Hak Milik (right of ownership, certificate “SHM”). The Basic Agrarian Law (UU 5/1960, art. 20) calls it the hereditary, strongest and fullest right a person can hold over land. It has no end date and can be sold or inherited, but only Indonesian citizens can hold it.

The rules around it are strict:

• Foreigners cannot hold Hak Milik, and neither can Indonesians who also hold another citizenship (art. 21). Ordinary companies, including foreign-owned ones, cannot hold it either.
• Any sale, gift or other arrangement meant to pass Hak Milik to a foreigner “directly or indirectly” is void by law. The land falls to the State, and money already paid cannot be reclaimed (art. 26).
• A foreigner who receives Hak Milik by inheritance without a will or through marital property must transfer it within one year, or the right ends and the land falls to the State (art. 21(3)); a gift or bequest by will to a foreigner is simply void (art. 26(2)).
• If you are married to an Indonesian, your spouse can hold land rights such as Hak Milik in their own name if you have a notarial separation-of-property agreement (PP 18/2021 art. 70). See a notary before you buy.

Hak Pakai and HGB: the closest options for foreigners

Hak Pakai (right of use) is the registered title a foreign individual can hold for a home. It is a real title in your own name, recorded at the land office (BPN, the National Land Agency), but it is not freehold: it has an end date, and keeping it depends on conditions.

• Term: on State land, up to 30 years at first, extendable by up to 20 and renewable by up to 30 more, if you still meet the conditions. Over an Indonesian’s Hak Milik land, up to 30 years, renewable only by a new deed signed with the landowner (PP 18/2021 art. 52).
• Limits: for a house, one plot per person or family of at most 2,000 m² (unless the minister allows more), in the “luxury house” category, with a minimum price in Bali of IDR 5 billion. An apartment is held as a strata title instead and must cost at least IDR 2 billion (Kepmen ATR/BPN 1241/2022, as of October 2026).
• Use: a home to live in, not a business (PP 18/2021 art. 72).
• Who qualifies: the regulation accepts a visa, passport or stay permit; ask your notary or PPAT (land deed official) what the land office asks for in practice. If you stop qualifying, you generally have one year to sell or transfer.

HGB (Hak Guna Bangunan, right to build) can be held by Indonesians and by Indonesian companies, including a PT PMA (foreign-owned company), but not by foreign individuals. Its term follows the same pattern: up to 30 + 20 + 30 years on State land, or 30 years over Hak Milik land, renewable by a new deed with the owner (PP 18/2021 art. 37). A PT PMA must meet investment rules (since October 2025, paid-up capital of at least IDR 2.5 billion and an investment plan above IDR 10 billion per business line and location), and in 2026 Bali stopped taking new foreign-investment applications in 18 business lines, including renting out real estate. Our guide to owning property through a PT PMA has the details.

Both titles end unless they are extended or renewed, and neither extension is automatic. When Hak Pakai on State land ends, the land returns to the State. That time limit is the real difference from Hak Milik. For the full conditions, see our guide to Hak Pakai in Bali.

How leasehold works in Bali

A leasehold is a lease (sewa-menyewa) under the Indonesian Civil Code. The landowner gives you the use of the land, and usually the villa on it, for an agreed period in return for a price that may be paid in one sum upfront. You hold a contract, not a land title: when the term ends, the property goes back to the owner unless you extend.

• The Civil Code defines the lease (art. 1548). A lease that meets the general conditions for a contract (art. 1320) binds both sides like law, and one side cannot cancel it alone except on grounds the law allows (art. 1338).
• The Agrarian Law (arts. 44–45) recognizes leases of land for building, allows the rent to be paid upfront, and lists who can be a lessee: Indonesian citizens, foreigners domiciled in Indonesia, Indonesian companies and foreign companies with a representative office in Indonesia.
• Neither law sets a maximum term. Terms of 25 to 30 years are common in practice, but that is market habit, not a legal limit.
• A private written lease is legally valid, but long leaseholds are usually made as a notarial deed (akta notaris), which gives much stronger proof of what was agreed and when.
• You can also ask the land office to record the lease in the land register and/or on the land certificate (PP 18/2021 art. 90). This does not give you a registered title or certificate of your own, but anyone who checks the certificate, such as a buyer or a bank, will see it.

Because a lease is a contract, you hold exactly what the deed says, and nothing more. That makes the wording of the contract the most important part of any leasehold deal (see the checklist below).

Leasehold vs freehold in Bali at a glance

The table compares Hak Milik, Hak Pakai (the title most foreign individuals look at) and a leasehold. HGB held by a PT PMA has the same kind of time limit as Hak Pakai.

How do you compare leasehold prices in Bali?

Divide the asking price by the number of years left on the lease. The result, a price per remaining year, is the fairest way to compare leaseholds with different terms, because a lower headline price can simply mean fewer years. For land, also divide by the plot size in are (1 are = 100 m²) to get a price per are per year.

Villa B looks cheaper, but every year of use costs far more. (Round numbers for illustration, not market prices.) On every leasehold listing we show the remaining lease term, together with a rough price per lease year for villas and per are per year for land, so you can compare like with like. You can see this on our leasehold villas for sale and leasehold land.

Two more things belong in the comparison: the costs on top of the price (notary fees, and the 10% lease tax if the contract puts it on you), and what you are left with at the end. A title keeps the land, or can be extended or renewed if you still qualify; a lease ends unless it is extended.

How value falls as the term runs down

A lease loses value as it runs, because each year you use is a year the next buyer cannot. As a simple illustration, a 25-year lease bought for IDR 2.5 billion costs IDR 100 million per year. At the same rate it would be worth about IDR 1.5 billion with 15 years left and IDR 500 million with 5 years left. Real resale prices also depend on land values in the area, the state of the building and, above all, the extension terms, so treat this as a rule of thumb, not a forecast.

Lease extensions in Bali: what an extension clause is worth

A written lease ends automatically on its end date, without any notice (Civil Code art. 1570). Do not count on the lease continuing by itself: a real extension comes either from a clause in your contract or from a new agreement with the owner, and without such a clause the owner is free to say no.

Extension clauses come in two broad kinds:

• Terms fixed now. The deed already sets the length of the extension, the price (or a clear formula for it) and the deadline for telling the owner you want it. The owner has agreed to these terms in a binding contract, so this is the strong version.
• Terms to be agreed later. Wording such as “the parties will negotiate an extension at market price” gives you little more than a promise to talk. If you cannot agree on the price, the owner can refuse.

You may also see a “first right of extension” (the owner must offer you a new lease before offering it to anyone else) or a “right of first refusal” (you may match any offer if the owner wants to sell or lease to someone else). These can help, but their value depends entirely on the wording: what triggers them, how long you have to answer and at what price. If the owner ignores one, enforcing it means going to court or arbitration, so it is no substitute for a fixed-price extension.

Other points to settle in the clause:

• Whether it binds the owner’s heirs and any future buyer of the land. The lease itself survives a death or a sale (see below); ask for the clause to say the extension does too.
• Whether you can pay for the extension now. If the owner agrees, fixing and paying for both periods at the start simply makes it one longer lease.
• What happens if you miss the notice deadline.

What happens if the landowner dies or sells the land?

Your lease continues. Under the Civil Code a lease does not end when the landowner or the tenant dies; it passes to the heirs (art. 1575). A sale of the land does not end a lease made earlier either, unless the lease itself allowed that (art. 1576).

In practice this means three things:

• Check that your lease has no clause letting the owner end it if the land is sold.
• Use a notarial deed, which gives much stronger proof of what was agreed and when.
• Consider recording the lease at the land office, so it shows up when a buyer checks the certificate.

Selling, transferring or subleasing a lease

Without the landowner’s permission you may not sublease the property or hand the lease over to someone else, unless the lease already allows it (Civil Code art. 1559). Doing it anyway risks cancellation of the lease and a claim for damages. Subleasing means you stay the tenant and rent the villa out; assigning means a buyer takes your place for the rest of the term.

So if you might rent the villa out or sell the remaining years one day, have both rights written into the lease from the start, so you do not need new consent each time. Renting to holiday guests also raises licensing and tax questions, covered in our guide to the rules for renting out a villa in Bali.

Taxes on leasehold and freehold, in brief

Leasing land or a villa does not trigger BPHTB (land and building acquisition duty), because a lease is not one of the land rights the law taxes. Instead, the lease price carries a 10% final income tax under PP 34/2017. By law that is the landowner’s tax, not yours.

• The 10% is charged on everything the tenant pays under any name, including service or maintenance charges, and on a lease paid upfront it is charged on the full price. A tenant that is an Indonesian company, including a PT PMA, must withhold it; if you lease as a private individual, you normally do not, and the owner pays it himself.
• Make sure the contract states who bears the 10% and whether the quoted price includes it.
• When you buy a title, BPHTB is calculated on the price, or on the government-assessed value (NJOP) if that is higher, minus a tax-free amount of at least IDR 80 million for a first acquisition in that regency (UU 1/2022). Ask your PPAT for the current rate in Badung or Tabanan.
• In a lease, agree in writing who pays the annual land and building tax (PBB).

Notary fees, VAT on new builds and the annual tax are explained in our guide to Bali property taxes and buying costs.

Lease contract checklist for buyers

In a leasehold, the contract is what you own, so it pays to get the wording right. Before you sign, check that the deed answers each of these points clearly:

1. Term: exact start and end dates, not just “25 years”, and when the term starts if the villa is not built yet.
2. Extension: length, price or formula, notice deadline, and whether it binds the owner’s heirs and future buyers.
3. Permitted use: living there, renting it out monthly or yearly, holiday rentals, running a business.
4. Building rights: what you may build, renovate or demolish, who owns the buildings during the lease, and what happens to them at the end.
5. Transfer and sublease: your right to sell the remaining term or sublease without asking again.
6. Who signs: everyone named on the certificate; ask the notary whether a spouse or other family members must also sign or consent.
7. Certificate details: certificate number, owner’s name, plot size and boundaries, checked by your notary at the land office.
8. Zoning: the zone of the plot allows what you plan to do there.
9. Taxes and costs: who bears the 10% lease tax, who pays the annual PBB, and who pays the notary.
10. Ending early and disputes: what happens if either side breaks the contract, which language version prevails, and whether disputes go to court or arbitration.
11. Recording: whether the lease will be recorded at the land office.

We review the certificate and permits with the owner before a listing goes online, but have a PPAT run the official land office check before you sign. Our guide to property due diligence in Bali explains the full set of checks.

Leasehold or freehold: which suits you?

It depends on who you are, how long you plan to stay and what you want the property to do for you. As a rough guide:

• Indonesian citizens: Hak Milik is the natural choice. It is the strongest right and has no end date.
• A holiday home or a few years in Bali: a leasehold lets you pay only for the years you need. Choose a term that covers your plans with some margin, and a clear extension clause.
• Living in Bali long term: if you meet the conditions (a valid immigration document, residential use and, in Bali, at least IDR 5 billion for a house), Hak Pakai gives you a registered title in your own name. A long lease with a fixed-price extension is the alternative.
• Investment and rental income: compare the price per remaining year with a realistic rent, and make sure the lease allows subleasing. Hak Pakai is for living in, not for business; a PT PMA can hold HGB, but it must meet investment and licensing rules.
• Leasing land to build on: the term must be long enough to justify the cost of building, and the lease must give you the right to build and say what happens to the buildings at the end. Check the zoning and permits before you commit.

Whatever you choose, have an independent notary check the certificate and the contract before you pay anything. If you would like help finding a property with a title or lease term that fits your plans, tell us what you need.