Safe Land Leasing in Bali for Foreigners: A Complete Legal Guide
Leasing land in Bali has become a popular option for foreigners looking to invest, build a villa, or start a business without navigating Indonesia’s land ownership restrictions. While foreigners are not permitted to own freehold land in Indonesia directly, leasing land offers a legal, viable alternative. However, the process must be approached with caution and legal guidance to ensure full compliance with Indonesian regulations.
At The Bali Lawyer, we provide expert legal services in Bali to help clients lease land securely and lawfully. In this comprehensive guide, we explain how foreign individuals or businesses can lease land in Bali, including the steps involved, key legal considerations, and how to avoid common pitfalls.
Understanding the Legal Landscape: Why Lease Instead of Buy?
Indonesia’s agrarian law prohibits foreign individuals from owning freehold land (Hak Milik). However, foreigners are allowed to lease land through legal instruments such as Hak Sewa (Right to Lease) or through a PT PMA (foreign-owned company) structure, which can hold a Hak Guna Bangunan (Right to Build).
This legal limitation makes land leasing the most straightforward and common method for foreigners to secure land use rights in Bali, particularly for long-term residential, commercial, or investment purposes.
Legal Land Titles Foreigners Can Use
Before entering into a lease agreement, it’s important to understand the types of land rights allowed under Indonesian law. The most relevant for foreign lessees are:
Hak Sewa (Right to Lease): A contractual right allowing the lessee to use land for a specified period, usually 25–30 years, extendable.
Hak Guna Bangunan (HGB): A right to build and use buildings on land owned by someone else. Can be held by an Indonesian legal entity, including a PT PMA.
Hak Pakai (Right to Use): This is granted to individuals (including foreigners under certain conditions) for residential purposes. It’s less common than Hak Sewa or HGB.
Each land title has different implications, so choosing the right structure is crucial for your intended use.
Steps to Lease Land in Bali Safely
To lease land in Bali legally and securely as a foreigner, follow these step-by-step procedures:
1. Find Suitable Land and Conduct Due Diligence
Start by identifying a piece of land that suits your needs. This may involve hiring a property agent, but it’s essential to follow this with a full legal due diligence:
Verify the land certificate (ownership, zoning, and boundaries)
Check if the land has clear legal title (Hak Milik, SHM)
Ensure the land is not under dispute or pledged as collateral
Verify land-use zoning matches your intended purpose (e.g., residential, commercial, tourism)
Our legal team at The Bali Lawyer will perform detailed due diligence to protect you from fraud and legal complications.
2. Negotiate Lease Terms
Once the land is cleared legally, you must negotiate key terms of the lease:
Lease duration (typically 25–30 years, with possible extensions)
Payment structure (upfront, installments, or annual rent)
Rights and restrictions (e.g., building rights, transferability)
Responsibilities for maintenance, taxes, and permits
Extension clauses and renewal conditions
Always put everything in writing with clear legal language. Oral promises are not enforceable in court.
3. Draft a Legally Binding Lease Agreement
The lease agreement must be drafted in accordance with Indonesian laws and preferably in bilingual format (Bahasa Indonesia and English). This ensures the agreement is recognized by the court system.
The contract should include:
Complete details of the lessee and lessor
Legal land description and certificate number
Lease period and payment terms
Rights to build or sublease (if applicable)
Dispute resolution clause
Notarization and registration procedure
We always recommend signing the lease before a notary (PPAT) and registering the agreement at the Land Office (BPN).
4. Register the Lease at the Land Office (BPN)
To strengthen your legal position, it’s best to register the lease at the Badan Pertanahan Nasional (BPN). While not mandatory for Hak Sewa, registration can serve as evidence in case of future disputes or claims.
If you are leasing through a PT PMA, and intend to obtain a HGB title, this step becomes essential to secure your building permit (IMB/PBG) and other licenses.
5. Secure Building and Business Permits if Applicable
If you intend to build on leased land or use it for commercial purposes (e.g., villa rental, café, co-working space), you will need to apply for:
PBG (Persetujuan Bangunan Gedung) – Building Approval Permit
SLF (Sertifikat Laik Fungsi) – Certificate of Feasibility for operating
NIB (Business Registration Number) – If opening a company
These documents require alignment with land-use zoning and lease documentation. Our firm can guide you through every application step to avoid delays and rejections.
Lease Land Through PT PMA: Is It Right for You?
If you plan to lease land for commercial use or long-term investment, consider setting up a PT PMA (foreign-owned company). This entity allows you to legally obtain HGB title and operate a licensed business in Bali.
Benefits include:
Greater legal protection
Opportunity to build and own structures
Eligibility for business licenses and tax registration
Potential to sublease or transfer rights under corporate structure
Establishing a PT PMA involves approvals from BKPM, obtaining an NIB, and complying with reporting requirements. Our legal experts assist with full company formation and land acquisition strategies.
Common Risks and How to Avoid Them
Foreigners face several risks when leasing land in Bali without legal assistance:
Fake land titles and unregistered ownership
Verbal lease agreements without legal enforceability
Zoning violations that prevent building or business use
Overpriced leases or hidden terms
Unauthorized brokers or agents
To minimize these risks, always involve a registered Indonesian legal professional like The Bali Lawyer. We handle document checks, lease drafting, negotiations, and official registration to ensure full compliance and legal protection.
Taxes and Costs to Consider
Leasing land in Bali involves several financial obligations beyond lease payments:
Income Tax (PPh): Paid by the lessor, typically 10% of the total lease value
Lease Registration Fee (if registered at BPN)
Notary and Legal Fees
Permit Application Fees (PBG, SLF, etc.)
We provide transparent cost breakdowns and tax structuring advice for your leasing project.
Long-Term Extensions and Renewals
Most lease agreements include options to extend for another 20–30 years. It is important that these clauses are:
Written in the original lease contract
Clear in renewal terms, price adjustments, and process
Enforceable under Indonesian law
Be cautious of vague verbal commitments. We help ensure your lease includes properly structured extension rights to protect your long-term investment.
Can You Sublease or Sell Leased Land?
Technically, you cannot sell leased land because you do not own the land. However, if your lease agreement permits it, you may sublease or transfer the lease rights to another party. This is especially useful if you’re leasing through a company or commercial project.
Legal advice is essential in structuring these rights within your lease.
Why Choose The Bali Lawyer?
As a Bali-based legal team specializing in land law, property, and foreign investment, The Bali Lawyer is your trusted partner for land leasing. We offer:
Land certificate and title verification
Custom lease drafting and review
Lease registration and notarization
Permit and license assistance
Legal protection throughout the process
Whether you’re an investor, retiree, or entrepreneur, we ensure your lease is legally secure and aligned with your goals.