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Bali Freehold vs Leasehold Property

When considering purchasing property in Bali, there are two main options: Bali freehold vs leasehold. These terms refer to the type of ownership and the length of time that ownership can be held. In this blog post, we will explore the differences between freehold and leasehold property ownership in Bali and the pros and cons of each option.

Bali Freehold

Hak Milik or Freehold, is the most complete and strongest form of land title ownership in Indonesia.

Freehold ownership in Bali means that the buyer is purchasing the property outright and has full ownership rights to the land and any buildings on it. This type of ownership can be passed down to future generations and can be sold or rented out as desired. One of the main benefits of freehold ownership is the security and stability it provides, as the owner has complete control over the property. Additionally, freehold properties often appreciate in value over time, making them a good investment.

However, it is important to note that there are restrictions on who can purchase freehold property in Bali. Only individuals of Indonesian Nationality are entitled to own land under a Hak Milik title. Consequently, neither limited liability companies (PT/Perusahaan Terbatas) nor foreign individuals may obtain land with a Hak Milik title. In most cases, the property must be purchased by an Indonesian citizen or a foreign national through a local Indonesian legal entity, such as a PT PMA (foreign investment company). This can be a complex process and may require the assistance of legal professionals.

Bali Leasehold

Leasehold ownership in Bali means that the buyer is purchasing the right to use and occupy the property for a specified period of time, usually between 25-30 years. At the end of the lease period, the property is returned to the original owner. One of the main benefits of leasehold ownership is that it is often less expensive than freehold ownership and can be a good option for those who are not able to or do not want to invest in a freehold property.

However, it is important to note that leasehold properties do not appreciate in value like freehold properties do, and at the end of the lease period, the property must be returned to the original owner. Additionally, there may be restrictions on the use and development of the property during the lease period.
In very simple terms, as time passes, your investment in leasehold property depreciates in value, because as the term of the lease gets shorter, the lease is less attractive to a buyer, should you want to sell the remainder of your lease.

Bali Freehold vs Leasehold – Conclusion

In conclusion, both freehold and leasehold property ownership in Bali have their own unique advantages and disadvantages.
Freehold ownership provides stability, control and appreciation but may be expensive and complex. Leasehold ownership is less expensive but has a limited lease period, no appreciation and restrictions on use and development.

Ultimately, the decision between freehold and leasehold will depend on your specific needs, budget and goals for the property. It’s important to consult with a lawyer and real estate professional for the best advice and options for you.

FAQ

Can foreigners buy freehold property in Bali?

No, foreigners cannot buy freehold property in Bali directly. However, there are a few ways that foreigners can invest in Bali real estate, such as:

  • Setting up a local PT PMA Company with 100% foreign ownership, which can then purchase property on behalf of its foreign owners.
  • Leasing out properties from locals under long-term contracts.
  • Purchasing a leasehold property.

Which is better for me: freehold or leasehold property?

The best type of property for you will depend on your individual needs and budget. If you are looking for a long-term investment and have the budget for it, then freehold property is a good option. However, if you are on a tighter budget or only need the property for a short period of time, then leasehold property may be a better option.

What are the costs associated with leasehold property?

In addition to the property price, leasehold properties may have annual lease fees and other maintenance costs.

Are leasehold properties a good investment?

Leasehold properties can be a good investment, particularly if you’re looking for short-term gains or don’t plan to reside in Bali permanently.

Can I extend the lease on a leasehold property?

Some leasehold properties offer the option to extend the lease, but it’s essential to review the terms of your lease agreement.

What due diligence should I conduct before buying property in Bali?

Before buying property in Bali, it’s essential to conduct due diligence, including checking property titles, permits, and any encumbrances, with the assistance of a qualified attorney or expert.

14 Comments. Leave new

  • jiwo prasetyo
    July 14, 2023 8:35 am

    bagus untuk wisata

    Reply
  • I have decided to rent a villa in Bali for 3-6 months after reading your post. Many thanks

    Reply
  • If the lessee dies does the property revert back to the owner for example 25 year lease lessee dies after 5 years does the property go back to the owner if 1) is leased jointly by 2 parties 2) is leased by deceased party only assuming both are foreigners

    Reply
    • Whether the property reverts back to the owner upon the lessee’s death depends on the terms of the lease agreement. If the lease is held jointly by two parties, the surviving lessee may be able to continue the lease agreement. However, if the lease was solely in the name of the deceased party, the lease agreement may be terminated, and the property may revert to the owner. The estate of the deceased lessee may have specific rights under the lease agreement, such as the right to sublet the property or to terminate the lease early.

      Reply
  • Please advise what associated costs for purchasing a freehold property is, for examples legal fees and statutory fees

    Reply
  • What happens if you want to change sponsors on a free hold property???

    Reply
    • In Bali, changing sponsors on a freehold property typically involves certain legal procedures. This may include documentation related to the transfer of ownership and registration with the relevant authorities. It’s advisable to seek guidance from legal professionals familiar with Indonesian property regulations to ensure compliance with all necessary requirements.

      Reply
  • Stephen Pereira
    March 20, 2024 6:08 am

    If the main signature on a lease holder contract is a foreigner can Indonesian be an added signature. If so and the dies does the Indonesian have to right to remain or sell the lease hold if the expire date is not reached

    Reply
    • Regarding your question about adding an Indonesian signature to a leasehold contract where the main signature is a foreigner, it is possible. Including an Indonesian signature can provide additional security and compliance with local regulations.

      However, if the foreigner named on the leasehold contract passes away before the leasehold period expires, the rights and obligations regarding the lease would depend on the specific terms outlined in the contract and Indonesian law. Typically, the leasehold rights may not automatically transfer to the Indonesian signature, especially if they were added as a secondary signer.

      In such cases, it would be advisable to seek legal advice from a qualified Indonesian lawyer who specializes in property law to understand the rights and obligations of all parties involved, including any options for the Indonesian signer in the event of the foreigner’s death.

      Reply
  • Can leasehold agreement be terminated? If so what are the conditions?

    Reply
    • Yes, Bali leaseholds can terminate at expiry (set date) or potentially early with written notice and following terms in your lease agreement.
      Common scenarios include:
      – Mutual Agreement: Both parties agree to end the lease early.
      – Breach of Contract: Significant violations by either party, such as non-payment or property damage.
      – Force Majeure: Events like natural disasters or changes in law may allow termination.
      For specifics, consult a lawyer specializing in Balinese property law.

      Reply
  • When tje Land is the object of the leashold and a house is build on this land by the second party, what happens when leasehold expires? Is there a right for getting paid out for the costs of the house? Or owner of the land gets the house for free?

    Reply
    • Upon lease expiration, the land owner regains full ownership of the entire property, including the house built by the lessee.
      Compensation for the house is not guaranteed. There might be a clause in the lease agreement outlining compensation, but it’s not standard.

      Reply

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