Investment in real estate in Bali continues to attract foreign buyers. However, when exploring the local market, many are faced with the question: how is it possible to own land and property if Indonesian law prohibits foreigners from direct ownership?
This article will explain what leasehold is, its advantages and limitations, and why this model has become the most practical tool for foreign investors.
What is Leasehold?
Leasehold is a form of property right in which the buyer gains the ability to own and use an asset for a certain period: 25, 30, 50, or even 80 years. The land itself remains the property of the local owner (landlord).
De jure, it is a lease, but de facto — it is full ownership for the agreed period. During this time, the landlord has no right to demand the land back, sell it, mortgage it, or otherwise dispose of it. All conditions are fixed in a notarized agreement.
Why is Leasehold the Only Option for Foreigners?
Indonesian law strictly protects land ownership rights:
For foreign individuals, leasehold remains the only legal form of property ownership. That is why the vast majority of investment projects for non-residents are carried out in this model.
Advantages of Leasehold
Important Nuances
Conclusion
Leasehold in Bali is not a compromise but a convenient and legal tool for foreign property ownership. It provides security, affordability, and strong investment potential. The key is to approach project selection carefully and always take legal restrictions into account.
The material was prepared by Bali real estate agency Global Investment Property and its founder Olga Gorkhiyan.
This article will explain what leasehold is, its advantages and limitations, and why this model has become the most practical tool for foreign investors.
What is Leasehold?
Leasehold is a form of property right in which the buyer gains the ability to own and use an asset for a certain period: 25, 30, 50, or even 80 years. The land itself remains the property of the local owner (landlord).
De jure, it is a lease, but de facto — it is full ownership for the agreed period. During this time, the landlord has no right to demand the land back, sell it, mortgage it, or otherwise dispose of it. All conditions are fixed in a notarized agreement.
Why is Leasehold the Only Option for Foreigners?
Indonesian law strictly protects land ownership rights:
- Freehold (Hak Milik) — full ownership, available only to Indonesian citizens.
- Hak Guna Bangunan (HGB) — an equivalent of freehold, available to foreign legal entities (through registration of a PMA company).
- Hak Sewa (Leasehold) — long-term lease, the only form of ownership available to foreign individuals.
For foreign individuals, leasehold remains the only legal form of property ownership. That is why the vast majority of investment projects for non-residents are carried out in this model.
Advantages of Leasehold
- Security
- For the entire duration of the contract, the investor is legally protected. The landlord cannot terminate the agreement or deprive you of your rights to the property.
- Affordability
- The cost of land and property under leasehold is significantly lower. For example, one are (100 m²) of cliffside land in freehold for 80 years may cost $150,000–200,000, whereas the same plot under leasehold for the same term would be around $100,000–150,000.
- Flexibility
- Lease contracts today are often signed for 30–40 years, which is a comfortable period for investment projects. Extensions are usually possible and relatively inexpensive.
- Return on Investment
- For investment projects, 30 years of ownership is more than enough. The average payback period for projects in Bali is 6–7 years. This means that even within a 25-year leasehold, you can recoup your investment several times over.
- According to Global Investment Property, properly structured leasehold deals can allow investors to achieve payback in as little as 4 years.
Important Nuances
- Contract duration should not exceed 50 years. We do not recommend signing a single contract for more than 50 years: there is already a precedent where an excessively long term was interpreted as an attempt to bypass the freehold ban. It is safer to sign for up to 50 years with a subsequent extension option.
- This is not “family inheritance” but a financial instrument. Investors should treat the property as an asset generating income during the agreed period, not as a home to be passed down to children and grandchildren.
- Capital vs. “walls.” It is far more reasonable to pass on accumulated capital than an aging property. For example, by investing $200,000 in an apartment and saving the income, within 25 years one can accumulate up to $800,000.
Conclusion
Leasehold in Bali is not a compromise but a convenient and legal tool for foreign property ownership. It provides security, affordability, and strong investment potential. The key is to approach project selection carefully and always take legal restrictions into account.
The material was prepared by Bali real estate agency Global Investment Property and its founder Olga Gorkhiyan.