Bali’s real estate market is world-famous for its tropical villas, strong rental yields, and lifestyle appeal. But before investing, it’s crucial to understand how property ownership works in Indonesia — especially the difference between freehold (Hak Milik) and leasehold (Hak Sewa).
For foreign investors, expats, and high-net-worth individuals, this distinction determines not only what you can buy, but also how secure your investment will be.
What is Freehold (Hak Milik)?
Freehold is the strongest and most complete form of property ownership in Indonesia.
With a Hak Milik title, the owner has full rights to the land and any buildings on it — indefinitely.
However, there’s one major limitation:
Only Indonesian citizens can hold a Hak Milik title.
Foreign investors cannot directly own freehold property unless they establish a foreign-owned company (PT PMA), which allows them to hold land under a different title — Hak Guna Bangunan (HGB), a long-term right-to-build title.
✔ Advantages of Freehold:
- Permanent ownership – no expiry date.
- Full control – build, modify, or rent without landlord approval (within local regulations).
- Inheritance rights – can be passed down to heirs.
✘ Disadvantages of Freehold:
- Not accessible to foreigners unless using a PT PMA structure.
- Higher purchase prices than leasehold.
- Full responsibility for maintenance, taxes, and compliance.
💰 Taxes for Freehold:
- BPHTB (Acquisition Duty): 5% (buyer pays).
- PPh (Seller’s Income Tax): 2.5% of sale price.
- PBB (Annual Land & Building Tax): up to 0.5% of taxable value.
- Luxury Goods Tax: up to 20% for high-value properties.
- VAT/PPN: 11% standard, 12% for certain luxury property sales.
What is Leasehold (Hak Sewa)?
Leasehold means you rent the land for a long period — usually 25–30 years, with options to extend.
This is the most common way for foreigners to legally hold property in Bali.
With leasehold, you own the building during the lease term, can rent it out, and can sell the remaining lease period to another buyer.
✔ Advantages of Leasehold:
- Accessible to foreigners without setting up a company.
- Lower initial cost than freehold.
- Flexible terms – duration can match your investment plan.
✘ Disadvantages of Leasehold:
- Time-limited – ownership reverts to the landowner when the lease expires.
- Depreciation – property value drops as lease end approaches.
- Renewal costs – extensions must be renegotiated and can be expensive.
💰 Taxes for Leasehold:
- PPh (Income Tax on Lease Income): 10% (20% if lessor has no Tax ID).
- VAT/PPN: Effectively 11% when leasing from a commercial entity.
PBB (Annual Land & Building Tax): up to 0.5% of taxable value.
How Foreign Investors Buy in Bali
Because foreigners cannot directly hold Hak Milik, there are two main legal options:
- Leasehold (Hak Sewa) – Simple, legal, and straightforward. Ideal for personal residences, rental villas, or medium-term investments.
- PT PMA + HGB – Set up a foreign-owned company, then buy land under Hak Guna Bangunan (Right to Build). Initial term: 30 years, extendable by 20+20 years. Best for commercial operations or long-term control.
⚠ Avoid nominee arrangements (where a local holds freehold on your behalf). They are legally risky and not recognized by Indonesian courts.
Quick Comparison
Feature | Freehold (Hak Milik) | Leasehold (Hak Sewa) |
Who Can Own? | Indonesian citizens only | Anyone, including foreigners |
Duration | Permanent | 25–30 years (extendable) |
Upfront Cost | Higher | Lower |
Renewal Needed? | No | Yes |
Example Scenarios
Indonesian Citizen (Freehold):
Putu buys a villa in Canggu under Hak Milik. He owns it permanently, can rent or sell at any time, and pass it to his children.
Foreign Investor (Leasehold):
Emma from Australia leases a Seminyak villa for 30 years. She rents it to tourists for income. After 25 years, she negotiates an extension to maintain value.
Key Takeaways
- Freehold = permanent ownership (only for Indonesians or PT PMA companies).
- Leasehold = long-term rental rights (fully legal for foreigners).
- Your choice should match your investment goals, budget, and time horizon.
Always conduct due diligence with a qualified lawyer and notary before signing.
💡 Tips: If you’re considering a high-value or commercial investment, explore the PT PMA route for maximum control and legal security.
