2 June 2026
Freehold vs Leasehold in Bali: A Broker Answers the Questions Everyone Asks
Every week someone calls me asking about freehold vs leasehold in Bali. Here is exactly how that conversation goes, and the answers that actually matter before you buy.
I had a call last Tuesday. Guy from Melbourne, done his research, been to Bali three times. First thing he said was: “Zaq, I just need someone to explain the freehold vs leasehold thing properly because everything I read online contradicts everything else.”
I told him that is completely normal. This is the most misunderstood topic in Bali property and half the information out there is either outdated or just wrong.
Here is how that conversation went.
“So can I actually own property in Bali as a foreigner? I keep reading that you can’t.”
You can. What you cannot do is hold Hak Milik, which is the Indonesian freehold land title that is reserved for Indonesian citizens. But there are two fully legal structures that give you genuine, enforceable property rights, and thousands of foreign investors use them every day.
The first is a leasehold, which is called Hak Sewa in Indonesian. The second is through a foreign-owned company called a PT PMA, which can hold a title called Hak Guna Bangunan, the closest thing to freehold available to foreigners. We’ll get to both.
“OK so what actually is a leasehold in Bali? Is it like buying a lease in the UK?”
It is similar in concept but different in structure. A Bali leasehold is a private civil contract between you and the landowner, drawn up and witnessed by an Indonesian notary public. It gives you the right to use, live in, rent out and sell that property for a defined term, typically 25 to 30 years, with a contracted option to renew for a further 25 to 30 years.
So in practice, most investors are looking at a total tenure of 50 to 60 years. That is a long runway.
One thing I always tell people: a Hak Sewa leasehold is not registered with the BPN, which is Indonesia’s national land authority. It is a notarised contract, not a land registry entry. This surprises people who have read that you need BPN registration for security. The security comes from the quality of the notarised agreement, not from a registry entry.
“And what is freehold for foreigners then? Someone told me I could buy freehold using Hak Pakai.”
This is where a lot of confusion comes from and it is an important distinction. Hak Pakai is not a leasehold. It is an official land title issued directly by the BPN, and it does get registered on the land registry. In that sense it is closer to freehold than leasehold is.
But Hak Pakai for individual foreigners comes with strict conditions. You generally need a qualifying Indonesian residency permit such as a KITAS, and the property must meet a government minimum price threshold. In Bali right now, that floor for a standalone house is IDR 5 billion, which is roughly USD $300,000 at current rates. Below that value, individual Hak Pakai is not available to you.
The practical result is that most foreign investors use leasehold for investment properties, and a PT PMA company structure for anything where they want freehold-level security or are building a portfolio.
“So leasehold is cheaper than freehold. But is it actually safe?”
Safe in what sense is the important question.
Is it legally sound? Yes, absolutely, if the agreement is properly drafted by a qualified notary. The key protections to look for in any lease are: a clear renewal clause with pricing defined upfront, an explicit right to sell or transfer the lease without needing the landowner’s permission, and registration of the notarial deed itself even though the lease does not go on the BPN land registry.
What is not safe is a poorly drafted lease. Renewal terms that say “to be agreed at the time” are a red flag. A landowner who could renegotiate the price in 25 years and leave you with no recourse is the actual risk here, not leasehold as a concept.
Every lease agreement my clients sign goes through our independent notary for exactly this reason. We reject leases that do not meet the standard before recommending a purchase.
“OK and what is the financial difference? Why would I choose leasehold if freehold is available?”
This is where it gets interesting. The rental income a villa generates is identical regardless of whether you hold it on a leasehold or freehold. A guest on Airbnb does not pay more because you own the land title.
But the entry price is completely different. A leasehold property in a prime Canggu location will typically cost 20 to 40 percent less than an equivalent freehold title. So your yield on invested capital is substantially higher on leasehold.
To put numbers on it: if a freehold villa is priced at USD $500,000 and generates USD $50,000 per year in net income, that is a 10 percent yield. The same villa on leasehold at USD $300,000 generating the same income is a 16 percent yield. That is the same villa. That is the argument for leasehold in one paragraph.
There is also a practical point about the Bali climate. Buildings here face intense tropical sun, humidity, salt air and monsoon rains. A villa generally needs a substantial renovation every 15 to 20 years. Paying a significant premium to own the land forever when the structure on it will need to be gutted in 15 years is a trade-off worth thinking about carefully.
“What about when I want to sell? Can I actually sell a leasehold?”
Yes. You are selling the remaining term of the lease, and a well-documented leasehold with a solid rental history sells well. In fact, buyers in Bali’s market are increasingly comfortable with mid-lease purchases because they can see occupancy data, revenue track record and management history before they commit. That proof is actually worth something.
The sweet spot for selling is typically year 7 to 10 of a 25-year lease. You have a rental track record, substantial lease life remaining, and you can price accordingly. Wait until year 20 and the remaining term starts to discount the value more heavily.
“And when would you say someone actually needs a PT PMA instead?”
I recommend a PT PMA when someone is buying more than one property, when they want to formally operate their villa as a licensed commercial business, or when they have a very long hold horizon of 30 years or more and want the additional security of a BPN-registered title.
The capital requirement for setting up a PT PMA came down significantly in 2025, from IDR 10 billion to IDR 2.5 billion in paid-up capital. Setup costs are typically between USD $2,000 and $5,000, and there are annual compliance obligations. It is more machinery than a leasehold but for the right investor it is absolutely the right call.
If you are buying your first Bali property on a 25-year leasehold as an investment, you almost certainly do not need one.
“Last question. Is now a good time to buy, or should I wait?”
I get this every call. The honest answer is that the people asking me this question in 2021 who decided to wait are now looking at prices that have moved 30 to 40 percent in the areas that were emerging then.
Based on our analysis of 511 active listings across 80 developers right now, the median entry price sits at USD $290,000 with average gross yields of 10.6 percent. The areas with the strongest appreciation potential, places like Kedungu where infrastructure is moving fast, are still at early pricing. That window does not stay open indefinitely.
If you want to see the full market data before making any decisions, the Bali Developer Report 2026 is free to download. And if you want to have this conversation with me directly, a free 30-minute call is the fastest way to work out whether buying in Bali makes sense for your specific situation.
The Melbourne guy, by the way, bought in Kedungu three weeks later.
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