Leasehold vs Freehold Property in Bali: What Foreign Investors Need to Know

Bali has long been a magnet for Australians and international investors — not just for its beaches and lifestyle, but for the opportunity to own a piece of paradise that generates income year-round.

But one of the first questions every foreign investor asks is:

“Can I legally own property in Bali?”

The answer is yes — but the structure of ownership is different from what many are used to back home.

In Indonesia, property ownership typically falls into two main categories: freehold (Hak Milik) and leasehold (Hak Sewa). Understanding the difference between them — and what it means for your investment — is key to building a successful, secure property portfolio in Bali.

Let’s break it down.

1. The Fundamentals: Leasehold vs Freehold

Freehold (Hak Milik) means outright ownership of the land and property indefinitely. In Indonesia, this type of title is reserved exclusively for Indonesian citizens.

Leasehold (Hak Sewa), on the other hand, gives the leaseholder the right to use and profit from the land for an agreed period — usually 25 to 30 years, with the option to extend up to 80 or 100 years in total.

In practice, most foreign investors own Bali property under leasehold, or through a foreign-owned company structure known as a PT PMA.

2. Why Leasehold is the Preferred Route for Foreign Investors

Leasehold ownership is the most common and secure way for non-Indonesian citizens to invest in Bali property. It allows you to enjoy all the practical benefits of ownership — living in, renting out, or selling your villa — without needing to navigate restrictive citizenship laws.

Here’s why it makes sense:

✅ Legal Clarity – Leasehold titles are clearly defined and recognised under Indonesian law, offering full control of the property during the lease term.
✅ Flexibility – You can sell, sublease, or transfer your leasehold interest with the landowner’s consent.
✅ Lower Entry Cost – Leasehold properties typically cost 30–40% less than comparable freehold land.
✅ Long-Term Security – Properly drafted lease agreements often include guaranteed extensions at market rates.

For most investors, a well-structured leasehold provides a secure and profitable ownership pathway — particularly when paired with a reliable developer and property manager.

3. The PT PMA Option: For Long-Term Investors

For investors looking to own multiple properties or operate businesses in Indonesia, setting up a PT PMA (Penanaman Modal Asing) — a foreign investment company — is another route.

A PT PMA allows you to:

• Legally hold land titles (Hak Guna Bangunan) under company ownership.
  
  
• Buy and sell property as part of a registered business.
  
  
• Hire staff, operate rentals, and pay taxes locally.
  
  

It’s a more complex structure — typically suited for serious investors or those building a villa portfolio — but it provides a higher level of flexibility for scaling operations.

At Bali Spaces, we work closely with trusted legal partners and notaries to ensure every investment is structured correctly, whether through leasehold or PT PMA.

4. Why Leasehold Still Delivers Strong ROI

Even without freehold ownership, Bali’s leasehold properties remain among the highest-yielding real estate investments globally.

Because entry prices are lower and rental demand is high, investors can generate annual returns between 18% and 25%.

Let’s take a quick example:

• Investment: 2-Bedroom Villa, Padang Padang – $205,000 USD
  
  
• Lease Term: 30 years (extendable)
  
  
• Net Income: $40,800 USD per year
  
  
• Annual ROI: 20%
  
  

That’s not theoretical — those are actual investor outcomes from our developments.

And when the lease is extendable (as ours always are), the investment remains viable and valuable for decades.

5. The Extension Process: How It Works

Most well-structured leaseholds include the right to extend the agreement at the end of each term. Typically, this looks like:

• Initial Term: 25–30 years
  
  
• First Extension: +20–25 years (based on market rate or pre-agreed formula)
  
  
• Second Extension: +25 years (optional)
  
  

Bali Spaces developments are negotiated with long-term renewal flexibility built in, ensuring investors maintain security and predictable costs.

This approach safeguards your ability to operate, rent, and sell your villa long into the future — without surprise legal complications.

6. Comparing Leasehold and Freehold (At a Glance)

‍

‍

7. Legal & Tax Considerations

When purchasing any property in Bali, clarity and compliance are essential. Here’s how Bali Spaces ensures transparency for investors:

• Notarised Agreements — All leaseholds and contracts are managed through certified Indonesian notaries.
  
  
• Due Diligence — We conduct land checks to confirm ownership status, boundaries, and zoning approvals.
  
  
• Tax Reporting — All villa income is reported under local tax law, with revenue shared transparently with owners.
  
  
• Secure Escrow Process — Investor funds are held in escrow until all legal documents are verified.
  
  

The key takeaway? With the right structure and team, foreign ownership in Bali is not only possible — it’s straightforward and secure.

8. Beyond Ownership: The Lifestyle Benefit

Investing in Bali isn’t just about numbers — it’s about balance. Leasehold ownership allows investors to experience the island lifestyle without committing to permanent residency or citizenship.

You can stay in your villa during part of the year, rent it when you’re away, and still enjoy the financial benefits of ownership.

Many of our investors describe their Bali villa as a “living investment” — one that grows in value while delivering unforgettable experiences along the way.

9. How Bali Spaces Makes It Simple

Navigating foreign investment laws can feel daunting, which is why we handle the entire process end-to-end.

From structuring your purchase to managing the property post-completion, our team ensures every step is transparent, compliant, and optimised for return.

We collaborate with experienced Indonesian legal advisors who specialise in property law for foreigners, so you can focus on what matters most — building wealth and enjoying your time in paradise.

Final Thoughts

For most foreign investors, leasehold ownership offers the best balance of affordability, flexibility, and security.
When paired with Bali’s surging tourism, favourable exchange rates, and strong management infrastructure, it’s easy to see why the island remains a standout investment destination.

Whether you’re buying your first villa or expanding your portfolio, understanding your ownership options is the first step to success.

To explore real investor ROI examples and learn more about Bali Spaces’ turnkey investment model, download our free guide below.

👉 Get The Developer’s Advantage Guide

Your pathway to owning in paradise starts with the right foundation — and we’re here to help you build it.