Buying property in Bali continues to attract global attention as the market matures. Many investors are focusing on lifestyle returns and rental income. One decision shapes every outcome early. That decision involves freehold vs leasehold Bali property ownership. In simple terms, freehold means full ownership, while leasehold means renting for a specific period of time.
This guide explains legal structures, financial impact, and practical outcomes for each ownership type. We compare both types of properties side by side so you can better understand both. This way, you can easily make an informed decision when you buy property in Bali.
Freehold vs. Leasehold Property Explained
When buying property in Bali, there are two types of properties you’ll come across as a buyer. One is called freehold, which simply means ownership. The other is a leasehold, where the property is rented.
Freehold (Hak Milik) means you own the land permanently. You get to have full control to sell, rent, or develop it. Foreigners cannot hold freehold directly and must use legal structures.
Leasehold (Hak Sewa Bangunan) means you lease the land for a fixed term. You can get it for 25 to 99 years, with legal rights to use it.
What Is Freehold Property in Bali?
Freehold (Hak Milik) means permanent ownership of land, with full rights to sell, rent, or develop it for eligible Indonesian titleholders. Some investors use legal structures to access similar benefits, though risks remain.
Freehold property pros:
- Freehold ownership offers strong long-term security.
- Permanent ownership without expiration
- Full control over resale, rental, and development
Freehold property cons:
- Foreign buyers face several challenges.
- Direct ownership remains unavailable for individuals
- Legal structures require careful compliance
Freehold Property Taxes
These are the mandatory taxes for freehold property:
- BPHTB (Land and Building Acquisition Tax): 5% of the transaction value, paid by the buyer.
- Income Tax (PPh) on property sales: 2.5% of the selling price, paid by the seller.
- Annual Land and Building Tax (PBB): Up to 0.5% of the property’s taxable value.
- Luxury Goods Tax (PPnBM): Up to 20% for luxury properties.
- Value Added Tax (VAT/PPN): Between 11% and 12%, applied to new property sales from developers.
How Freehold Works in Bali
Consider this example to understand how you can purchase freehold property:
- Set up a foreign-owned company (PT PMA) in Indonesia. This requires an initial capital of IDR 10 billion.
- After completing all the paperwork, the company can purchase property under Hak Guna Bangunan (HGB) or Hak Pakai, not Hak Milik. In this case, the company becomes the legal owner.
- You can then build, rent out, or use the property as part of your business operations.
Investors planning long-term ownership should know what separates premium construction in Bali from costly mistakes in 2026.
Read also: Bali Property Investment in 2026: What Serious Investors Need to Know
What is Leasehold Property in Bali?
Leasehold property grants usage rights for a fixed period. Lease terms typically range from 25 to 30 years, with possible extensions that can total 80–99 years, depending on the agreement. This structure allows foreign buyers to legally control property without owning the land.
Leasehold remains common across all properties.
Leasehold Property Pros:
- Leasehold ownership offers accessibility and flexibility.
- Legal ownership structure for foreign buyers
- Lower upfront investment requirements
Leasehold Property Cons:
- Leasehold ownership includes limitations.
- Ownership ends when the lease expires
- Renewal terms depend on the landowner’s agreement
Leasehold Property Taxes
These are the mandatory taxes you have to pay for leasehold property:
- Income Tax (PPh): 10% of the rental income, or 20% if the owner doesn’t have a tax ID (NPWP).
- Value Added Tax (VAT/PPN): Value Added Tax (VAT/PPN): 11%, applied to new property sales from developers.
- Annual Land and Building Tax (PBB): Between 0.1% and 0.3% of the property’s taxable value, usually paid by the landowner, unless otherwise agreed in the lease contract.
How Leasehold Works in Bali
Here’s a simplified process:
- Search for a villa or land offered under a leasehold title.
- It is advisable to discuss openly the duration of the lease and the possibilities of extension with the landowner. If you are collaborating with a real estate agency such as Magnum Estate, they will take care of the negotiations for you.
- After you have agreed with the property owner on the terms, a legal lease contract is prepared and signed in the presence of a notary.
- Make the payment of the lease amount as per the agreement, either in full or through agreed installments.
- You can extend the lease by negotiating an agreement before the lease expires, or you may decide to transfer the remaining lease to another party.
You may like to know more: How Ownership Structure Impacts Bali Villa Management
Legal Considerations for Foreign Investors
Foreign buyers must follow Indonesian property laws closely. Leasehold offers a clearer legal path. Freehold structures require professional guidance and proper compliance.
Key legal factors include:
- Title verification
- Zoning compliance
- Contract clarity
- Renewal clauses
To reduce risk, it’s worth reviewing how to avoid common legal mistakes when buying property in Bali.
Choosing the Right Option for Your Investment Plan
There are different aspects to each property type. That is why it is important to understand them before deciding.
Leasehold suits investors who want:
- Legal clarity
- Lower purchase costs
- Short to medium-term returns
- Easier property management
Freehold suits investors who want:
- Permanent ownership
- Long-term capital preservation
- Full property control
- Multi-generation assets
Work with a proven Bali villa management company to better understand what’s best for you.
Practical Tips Before You Buy
Smart planning reduces risk and protects returns. Here are some practical tips to remember:
- Review lease terms with legal experts
- Confirm zoning and building permits
- Check remaining lease years carefully
- Understand renewal pricing conditions
Magnum Estate guides buyers through ownership structures with clarity and care.
Conclusion
Freehold vs leasehold ownership serves different investment needs. Neither option suits every buyer. Leasehold properties provide legal access and flexible entry points. Freehold structures offer permanence with higher complexity. In 2026, informed investors focus on structure, location, and contract strength rather than assumptions.
Looking to lease or buy property in Bali in 2026? Speak with Magnum Estate and explore different properties and villas.
FAQs
Is a leasehold in Bali a good investment?
Yes, when lease terms remain long and contracts remain clear. Many investors looking to buy property in Bali achieve solid rental returns.
What is the difference between freehold and leasehold in Bali?
Freehold offers permanent ownership. Leasehold grants time-limited usage rights.
What happens after the leasehold ends in Bali?
Ownership returns to the landowner unless renewal occurs.
What is a 25-year leasehold in Bali?
It represents the minimum common lease period, often with extension options.
What is a good number of years on a leasehold?
Thirty years or more offers stronger resale and rental confidence.
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