Blog

Bali has long been a dream destination for travelers, digital nomads, and investors looking to enjoy tropical living while benefiting from property value growth. However, foreigners cannot own freehold land in Indonesia, which has made leasehold property in Bali one of the most popular options for those wanting to invest or live long-term.

Before committing to a leasehold, it’s essential to understand how these agreements work, what risks to look out for, and why long-term rentals can sometimes be the more practical option. At Bali Coconut Living, we help expats and investors navigate Bali’s property landscape with secure villa rentals, professional management, and personalized service.

Understanding Leasehold Properties in Bali

A leasehold property, known locally as Hak Sewa, allows a foreigner or local to lease land or a villa for a specific period, typically 25 to 30 years, with potential extension options. Unlike Hak Milik (freehold), leasehold does not grant land ownership but gives the right to use the property for the lease duration.

Foreigners can also access property through Hak Pakai (right to use) or Hak Guna Bangunan (right to build) under a PT PMA company, depending on the intended use and investment type. Understanding these distinctions is key to ensuring that your property rights are legally protected.

Key Elements to Review Before Signing

Before you sign a leasehold property deal in Bali, make sure to review these important elements carefully:

• Ownership Verification: Confirm the legitimacy of the land certificate and ensure the seller is the rightful owner. Check for any disputes, shared ownership, or company authorization if applicable.

• Lease Terms: Clarify the duration, renewal process, and what happens after the lease expires. Most leaseholds run 20–30 years, so ensure renewal terms and pricing are stated clearly in the agreement.

• Zoning and Land Use: Confirm the property is zoned correctly for your intended purpose, residential, commercial, or mixed-use. Using land outside its designated zone can lead to legal issues.

• Building Permits and Access: Verify that all permits (IMB or PBG) are valid and that the villa has proper access to public roads, water, and electricity.

Having these documents reviewed by a qualified notary (PPAT) or legal consultant is essential for a safe and compliant transaction.

Common Pitfalls and How to Avoid Them

While leasehold deals in Bali can seem straightforward, there are several common risks that buyers and tenants should be aware of:

• Unauthorized Sellers: Always confirm that the person offering the lease has the legal right to do so. Ask for a certified copy of the land certificate and ensure the seller’s name matches the registered owner. Avoid middlemen who cannot provide official documentation.

• Incomplete Legal Review: Many buyers skip hiring a qualified legal advisor, which can lead to costly mistakes. Always work with a notary (PPAT) or lawyer experienced in Bali’s property laws to review contracts, zoning, and permits before signing.

• Outstanding Liabilities: Check that the property is free of unpaid taxes, disputes, or encumbrances. Ask for proof of tax payments (PBB) and ensure there are no ongoing legal claims against the land or villa.

• Ambiguous Renewal Terms: Some agreements lack clarity on renewal costs or rights after the initial lease term ends. Make sure renewal options are written into the contract with fixed or clearly defined terms.

Conducting thorough due diligence and working with reputable professionals can help you avoid years of complications, financial risk, and legal uncertainty.

Financial and Tax Considerations

Owning a leasehold property involves more than just paying for the lease. You should also budget for:

• Applicable Taxes: This includes PPh (income tax), VAT, and PBB (annual land and building tax).

• Additional Costs: Legal fees, notary costs, and ongoing maintenance or renewal expenses.

• Cost Responsibilities: Clarify which expenses fall on the lessor versus the lessee to avoid disputes later.

Understanding these financial obligations helps you plan your investment more accurately.

Lifestyle Perspective: Leasehold vs Long-Term Rentals

While owning a leasehold property in Bali can sound appealing, it also ties you to a single location for decades and comes with ongoing legal and financial commitments.

For many expats and long-term residents, long-term villa rentals offer greater freedom. You can move between popular areas like Canggu, Seminyak, or Ubud, enjoy the same lifestyle benefits, and avoid the complexities of ownership. Rentals are also ideal for those who want flexibility as their needs and lifestyles evolve.

People Also Ask

What should I know before signing a leasehold property deal in Bali?

Always verify ownership documents, lease terms, and zoning permissions. Work with a trusted legal consultant before signing.

How can foreigners legally lease property in Bali?

Foreigners can legally lease through Hak Sewa (leasehold) or by establishing a PT PMA company for Hak Guna Bangunan or Hak Pakai rights.

What are the risks associated with leasehold properties in Bali?

Risks include unclear renewal terms, dealing with unauthorized sellers, or leasing properties with unpaid taxes or invalid permits.

What are the benefits of long-term rentals compared to leaseholds?

Long-term rentals provide flexibility, cost control, and freedom from legal complexity while offering the same comfort and lifestyle.

Make Your Move the Right Way

Owning or leasing property in Bali can be rewarding, but it also involves legal steps and financial details that require careful attention. For many expats, renting a villa long-term is a simpler and more flexible choice that allows them to enjoy the island lifestyle without stress or complicated ownership.

At Bali Coconut Living, we make settling in Bali easy with secure long-term villa rentals, full villa management, and personalized guest services. We help you find the right villa and take care of every detail so you can focus on living your Bali dream. Looking for a worry-free way to settle in Bali? Contact Bali Coconut Living today to explore our curated long-term rental villas and start your journey with ease.