Bali has long been a dream destination for many, and offers a unique blend of natural beauty, tropical climate, and vibrant culture. In recent years, the island has also become one of the best places for property investment in Southeast Asia. However, one of the biggest questions that prospective buyers face is: Should you choose a Leasehold or Freehold property? To understand the difference between these two options is crucial to making the right decision when investing in Bali.
Let’s take a look at the following explanation.
What is Leasehold Property in Bali?
Leasehold property means that you have the right to use the land or villa for a set period of time – usually 25-30 years, with the option to extend. You don’t own the land outright, but have the right to build, operate or live in it for an agreed period of time.
Why consider leasing?
- Generally more affordable upfront.
- Ideal for short to medium term investments or expats planning to stay in Bali for a limited period of time.
- Provides access to premium locations that may be too expensive to purchase outright.
Although you won’t own the land indefinitely, leasehold arrangements are popular in Bali due to their lower barrier to entry and high potential for returns when used as a vacation rental or long-term lease.
What is Freehold Property in Bali?
Why consider freehold?
- Strong long-term investment with full control.
- Property can be passed on to future generations.
- Greater stability and peace of mind for long-term occupancy.
However, under Indonesian law, only Indonesian citizens can own a hak milik. Foreigners must set up a PT PMA (foreign investment company) or work with a trusted Indonesian to gain access to freehold property.
Legal Considerations for Foreign Investors
In Bali, foreigners cannot directly own freehold land. However, many investors work with a trusted agent or set up a PT PMA (Foreign Investment Company) to gain access to freehold property. Another common approach is to opt for a long-term leasehold arrangement, which can be extended as agreed. It is very important to consult a legal expert before making any commitments.
Advantages of Leasehold Property
- Lower upfront investment compared to freehold.
- Easier to secure premium properties in popular areas like Canggu, Seminyak, or Ubud.
- Lower risk if you’re planning to stay for a fixed period.
- Provides opportunities for strong returns from short- or long-term rentals.
Advantages of Freehold Property
- Enables long-term security and control.
- Property can be passed down to heirs.
- Capital appreciation potential is higher for long-term holdings.
- No restrictions posed by a lease agreement.
What to Consider When Choosing Between Leasehold and Freehold
The right option depends on your personal situation and investment strategy:
Budget
Leasehold is ideal for those with a smaller upfront investment, while Freehold suits those seeking long-term value.
Investment Horizon
Leasehold works well for short- or mid-term returns, whereas Freehold is ideal for long-term or multi-generational ownership.
Risk Tolerance
Freehold offers long-term stability, whereas Leasehold may carry renewal and lease extension considerations.
Both leasehold and freehold properties have their benefits and limitations in Bali. Leasehold is ideal for investors seeking lower upfront costs and a flexible timeframe, making it popular among expats and digital nomads. Meanwhile, freehold provides long-term stability and the ability to pass down a valuable asset across generations.
At the end of the day, your choice depends on your financial situation, investment horizon, and lifestyle needs. Whichever route you consider, it’s essential to work with a trusted real estate partner who understands Bali’s complex property laws and can guide you every step of the way.
Looking for expert advice?
Contact ORA Properties today for a personalized consultation and find the ideal Bali investment for you, whether leasehold or freehold. Let’s make your Bali dream a reality!