Freehold vs Leasehold Property in Bali: Which One Is Better for You?
Buying property in Bali has become a dream for many foreigners who want to enjoy the island’s tropical beauty, vibrant culture, and investment opportunities. However, before making any property purchase, it is crucial to understand the legal ownership structures available in Indonesia — particularly the difference between Freehold (Hak Milik) and Leasehold (Hak Sewa).
At The Bali Lawyer, we specialize in helping clients navigate the complex landscape of property law in Bali. Whether you’re a foreign investor, business owner, or individual seeking a holiday home, understanding how ownership types work can help you make the right decision and protect your investment legally and securely.
Understanding Property Ownership in Indonesia
Unlike many other countries, foreigners cannot directly own freehold land in Indonesia. The Indonesian legal system restricts full land ownership (Hak Milik) to Indonesian citizens only. Foreign buyers, however, can legally obtain rights to use, lease, or control land through other ownership titles such as Hak Pakai (Right to Use) or Hak Sewa (Leasehold).
Knowing the distinction between freehold and leasehold property in Bali is essential to avoid legal complications and ensure that your investment complies with local regulations.
What Is Freehold Property (Hak Milik)?
Freehold property, known as Hak Milik, is the strongest form of land ownership in Indonesia. This title grants the owner full and indefinite rights over the property and the land it occupies. However, only Indonesian citizens are eligible to hold a Hak Milik certificate.
For locals, a freehold property means complete control and the right to transfer, sell, inherit, or use the land as collateral. For foreigners, though, owning land under a Hak Milik title is not legally permitted.
Despite this restriction, foreigners sometimes attempt indirect ownership methods, such as using an Indonesian nominee. While common, this approach carries legal risks and is not recommended without proper legal structuring. The Bali Lawyer provides expert consultation to ensure any property arrangement is fully compliant and secure.
What Is Leasehold Property (Hak Sewa)?
Leasehold property in Bali is legally accessible to foreigners. Under this arrangement, the land or property is leased for a specific period, usually ranging from 25 to 30 years, with the option to renew depending on the agreement between both parties.
When you lease property in Bali, you are not buying the land itself but rather the right to use and occupy it for the agreed duration. Leasehold properties are often attractive for expats, entrepreneurs, and investors who want to live, operate a business, or rent out villas in Bali without dealing with ownership restrictions.
At the end of the lease term, the rights revert to the landowner unless renewal clauses are activated. Our legal team at The Bali Lawyer helps draft, verify, and register lease agreements that protect your interests and guarantee renewal options whenever possible.
Key Differences Between Freehold and Leasehold Property in Bali
| Aspect | Freehold (Hak Milik) | Leasehold (Hak Sewa) |
|---|---|---|
| Ownership Rights | Full ownership by Indonesian citizens | Temporary right to use for a fixed term |
| Eligibility | Only Indonesian nationals | Open to foreigners and legal entities |
| Duration | Unlimited | Usually 25–30 years, with renewal options |
| Transferability | Freely transferable and inheritable | Transfer depends on agreement and lease terms |
| Control | Full control over property | Limited to lease agreement conditions |
| Legal Risk for Foreigners | High if using nominee structure | Low, as it’s fully legal for foreigners |
| Investment Perspective | Long-term and secure | Suitable for medium-term stay or business use |
Advantages of Freehold Property
For Indonesian citizens or entities that qualify, freehold properties offer several advantages:
Permanent Ownership – The land belongs to you indefinitely.
Greater Security – You have complete legal control over the property.
Flexibility – You can modify, sell, or lease your property without restrictions.
Inheritance Rights – The property can be passed down to future generations.
Investment Value – Freehold properties generally appreciate faster due to scarcity and demand.
However, because foreign nationals cannot hold Hak Milik titles, alternative ownership structures must be considered.
Advantages of Leasehold Property for Foreigners
Leasehold property in Bali provides a legal and practical path for foreigners to enjoy living and investing on the island. Some of its key advantages include:
Legally Accessible – Foreign individuals and companies can lease property without violating Indonesian land laws.
Lower Initial Investment – Leasehold properties often require less upfront capital than freehold ones.
Flexibility in Location – You can lease land in prime areas or beachfront locations that might be unavailable for purchase.
Renewable Agreements – Many leases include renewal clauses, allowing you to extend your stay or operation.
Ideal for Business – Perfect for setting up villas, restaurants, or rental properties targeting the tourism market.
The Bali Lawyer ensures all leasehold agreements are structured properly to protect your renewal rights and long-term use of the property.
Which One Is Better: Freehold or Leasehold?
The answer depends on your citizenship, purpose, and long-term goals.
For Indonesian citizens or mixed-nationality couples where the property is purchased under the Indonesian spouse’s name, freehold (Hak Milik) offers the best long-term ownership benefits.
For foreigners, leasehold (Hak Sewa) provides a safe, legal, and effective option for property use, investment, or business operation in Bali.
While leasehold does not grant permanent ownership, it allows foreign investors to enjoy the same lifestyle and income opportunities as locals for several decades, especially when structured with professional legal support.
Legal Alternatives for Foreigners
Even though foreigners cannot own freehold land directly, Indonesian law provides other legal avenues to control or use property, including:
Hak Pakai (Right to Use) – Available for foreigners holding a valid stay permit (KITAS or KITAP), this title allows property use for residential purposes for up to 80 years (initially 30 years plus renewals).
PT PMA Ownership – A foreign-owned company (PT PMA) can hold property under Hak Guna Bangunan (Right to Build) or Hak Pakai, enabling business-related property use.
Lease Agreements (Hak Sewa) – The most common and straightforward option for foreigners to enjoy property use and income generation in Bali.
Our legal experts at The Bali Lawyer help identify the best and safest method to structure your ownership or lease based on your visa status and investment plan.
Important Legal Steps Before Acquiring Property in Bali
Verify Land Ownership – Always confirm the legal status of the land through the National Land Agency (BPN). Ensure the land is free from disputes, encumbrances, or overlapping claims.
Check Zoning Regulations – Ensure the property’s location matches your intended use (residential, commercial, tourism, or agricultural).
Draft a Legal Agreement – Work with a licensed notary or lawyer to prepare and verify your lease or ownership documents.
Due Diligence – Conduct a full legal due diligence process to assess property titles, certificates, and any potential risks.
Register the Agreement – Properly register your lease or usage rights with relevant authorities to secure legal protection.
The Bali Lawyer handles all these steps professionally, ensuring that your property investment in Bali complies fully with Indonesian law.
Common Mistakes to Avoid
Using a Nominee Agreement Without Legal Support – This may seem easy but is risky and can lead to disputes or loss of ownership rights.
Not Registering the Agreement – Unregistered leases or property titles are not legally recognized.
Ignoring Renewal Clauses – Always ensure that renewal rights are clearly stated in the lease.
Skipping Legal Verification – Buying or leasing property without due diligence can expose you to hidden ownership issues.
Our legal team ensures every document is reviewed, registered, and compliant with Indonesian property law.
How The Bali Lawyer Can Help
At The Bali Lawyer, we specialize in property law, business formation, and land ownership matters in Bali. Our services include:
Property title verification and due diligence
Drafting and registering leasehold and Hak Pakai agreements
Legal consultation on foreign ownership structures
Assistance with PT PMA formation for business property ownership
Full compliance with Indonesian land and investment regulations
With our deep local knowledge and legal expertise, we help you make informed, safe, and compliant decisions when investing in Bali real estate.
Understanding the difference between freehold and leasehold property in Bali is essential before making any investment decision. While freehold ownership offers long-term security for Indonesian citizens, leasehold and Hak Pakai titles provide foreigners with safe and legal access to Bali’s thriving property market.
By working with The Bali Lawyer, you can ensure that every step of your property transaction — from due diligence to registration — is handled legally, transparently, and professionally.
Whether you’re planning to buy, lease, or invest in Bali property, contact The Bali Lawyer today for expert guidance and legal support. Your dream property in Bali begins with the right legal foundation.