Can a Foreigner Own Property in Bali? Freehold vs Leasehold Explained

The resurgence in Bali real estate for sale has been nothing short of extraordinary in recent years. Thanks to its natural beauty, amazing climate, and friendly locals, more and more people are waking up to the island's potential as a top holiday destination and property investment hotspot.

According to the Investment Coordinating Council (BKPM), investments in Bali real estate have grown by an impressive 28.5% in just the past two years – and this is largely thanks to the Covid-19 pandemic recovery. As soon as the Indonesian borders opened to tourists, travelers and investors from around the world flocked back to Bali, helping to fuel this growth.

An often-asked question is “Can a foreigner own property in Bali?” The short practical answer would be ‘Yes’, but one needs to ask further whether to get a leasehold in Bali or a freehold of Bali real estate.

Indonesia has a unique system of land ownership titles. In the past, only Indonesian citizens could buy property on the island freehold and with full ownership rights. However, the Indonesian government has been working to attract more foreign investment by relaxing foreign ownership regulations. The relaxed foreign ownership regulations are part of the Indonesian government's effort to attract more foreign investment to the island. This influx of investment can help boost the Balinese economy and create more jobs for locals.

A Freehold title is the strongest and fullest title that can be obtained. However, this exclusive right is reserved only for Indonesian citizens and Indonesian legal entities entirely owned and controlled by Indonesian citizens. Foreign individuals are not able to directly own freehold land in Indonesia. Freehold property can be extended and renewed indefinitely, can be put on as a mortgage, can be sold, and can be inherited.

A leasehold title refers to a type of property ownership in which the owner holds the right to use an empty plot of land or the building(s) on someone else’s land for a set period of time, as outlined in the lease agreement. This title is typically granted for a period of 25 years, and it can be extended multiple times up to 70 or 80 years. Both domestic and foreign individuals or entities can hold this ownership title. While the leaseholder has the right to use and develop the land according to their wishes, they do not have ownership rights and must adhere to any government regulations and requirements.

Leasehold is the best on-budget choice to own a property in Bali. You can still sublease, rent, sell, or use the property to your advantage during the contract period. However, transferring rights requires approval from the lessor if the lessor holds Hak Milik over the property.

The only caveat of having a leasehold property is the limitations due to the rights attached to individuals rather than a legal entity. These include limitations on how many properties each person can own, contracts that need to be renewed, and loss of residency permit also means loss of right over leasehold. Failure of contract renewal means the land right automatically returns to the lessor.

Unlike a leasehold which has time and quantity limitations, a freehold property offers more freedom and flexibility. Freehold is a suitable option if you are looking to invest a considerable amount of capital long-term.

A foreigner who wishes to own a freehold estate can do so by establishing a PT. PMA, which will become the vessel to obtain the land right (the HGB). Because it is technically owned by a legal entity, the individual limitations that applied to the leasehold do not apply anymore.

A freehold estate still requires extension and renewal because HGB lasts for 30 years, then renewable for 20 years. However, you can always apply for a new permit as many times as you like. You can also apply for different types of permits. In other words, you can own the property forever, as long as you renew the permit. This legal flexibility is an advantage that is not possible under a leasehold contract.

So, if someone asked, “Can a foreigner own a property in Bali?” With freehold property, the answer is yes. Even if it is not in the form of Hak Milik, you can effectively own the estate.

The only disadvantage of having a freehold Bali property is the higher cost. However, it is a worthwhile investment in the long run as you will be able to enjoy the property appreciation value.

Bali's property market continues to thrive, with high returns on investment and booming tourism industry. As Indonesia strengthens politically and economically, investing in Bali property is a smart choice for both short and long-term gains.

Additionally, the legal process for buying property in Bali is straightforward and hassle-free, making it easier than ever to purchase your dream home or vacation rental.

With its stunning beaches, rich culture, and vibrant nightlife, Bali attracts thousands of foreign tourists, digital nomads, and long-stay expats, as well as Indonesian nationals. By investing in a property in Bali, you will not only see a financial return but also enjoy all that the island has to offer as a vacation destination. Contact us today to learn more about investing in Bali real estate. We'll be happy to answer any of your questions and help you get started on your investment journey.