Bali remains one of Southeast Asia’s most attractive real estate markets — but before buying, investors must understand how property ownership actually works.
Indonesia’s property law distinguishes between Freehold (Hak Milik), Leasehold (Hak Sewa), and Right to Build (Hak Guna Bangunan / HGB). For foreigners, the difference determines what you can legally own — and for how long.
This guide from DDA Real Estate breaks down the key ownership types, benefits, legal nuances, and taxes to help you invest safely and strategically in 2025.
| Ownership Type | Indonesian Term | Who Can Own | Duration |
|---|---|---|---|
| Freehold | Hak Milik | Indonesian citizens only | Unlimited |
| Leasehold | Hak Sewa | Foreigners & PT PMA | 25–80 years |
| Right to Build | Hak Guna Bangunan (HGB) | Foreigners via PT PMA | 30 + 20 + 30 years |
Freehold = permanent ownership. Leasehold = time-bound usage. HGB = corporate right to build and manage property legally under a PT PMA.
Freehold is Indonesia’s strongest form of property title. It grants full and perpetual ownership, including the right to sell, gift, or inherit the land.
However, only Indonesian citizens can legally hold Hak Milik. Foreigners cannot own it directly — even through marriage or long-term residence.
Example:
A Balinese citizen buys land in Canggu under Hak Milik. They can freely build, transfer, or sell the property at any time.
Nominee ownership (using an Indonesian’s name to hold Freehold land) is not legally recognized and can be voided by court decision.
Leasehold grants full usage rights for a specific period (usually 25–30 years, renewable up to 80 years). The lessee can live, rent, and operate business activities (with the proper licenses).
Advantages:
Example:
An investor leases a 2-bedroom villa in Uluwatu for 30 years at $280,000. It earns $2,000 per month on Airbnb — about $24,000 annually. After 10 years, the remaining 20-year lease can be resold for $200,000, providing strong ROI and partial capital return.
For most expats and digital nomads, leasehold offers the perfect balance between control, income, and legality.
HGB (Hak Guna Bangunan) is the ownership type most often used by foreign investors with a registered PT PMA. It allows the company to build and operate property on state or private land for up to 80 years (30 + 20 + 30).
Key benefits:
HGB is ideal for investors building multiple villas, resorts, or rental complexes under a company structure.
| Feature | Leasehold (Hak Sewa) | Freehold (Hak Milik) | HGB (Right to Build) |
|---|---|---|---|
| Ownership | Usage right | Full title | Build & manage right |
| Eligible Owner | Foreigners / PT PMA | Indonesian citizens | Foreigners via PT PMA |
| Duration | 25–80 years | Unlimited | 30 + 20 + 30 years |
| Transferability | Yes (if registered) | Yes | Yes |
| Renewal | Negotiable | N/A | Renewable |
| Inheritance | Per contract | Automatic | Transferable within PT PMA |
| Ideal For | Expats / investors | Locals | Corporate projects |
| Property Type | Ownership | Entry Price | Annual ROI | Buyer Profile |
|---|---|---|---|---|
| 1BR Apartment (Canggu) | Leasehold (30 yrs) | $145,000 | 9% | Digital Nomad |
| 2BR Villa (Uluwatu) | Leasehold (30 yrs) | $280,000 | 10% | Investor Couple |
| 3BR Villa (Jimbaran) | Freehold | $520,000 | 11–12% | Local Buyer |
| Wellness Retreat | HGB / PT PMA | $800,000 | 12% | International Group |
Leasehold remains the top option for foreign investors seeking solid ROI without legal complexity
| Type | Tax | Note |
|---|---|---|
| Lease Income | 10% final withholding | Payable monthly |
| Sale of Lease Right | 5% final tax | On transfer value |
| Villa Operation | 10–11% VAT / PPN | Applies to rentals via PT PMA |
Understanding these taxes helps forecast true net ROI and ensures compliance with Indonesian fiscal law
Leaseholds are not automatically renewed — each extension is treated as a new contract, re-registered at the Land Office (BPN).
Typical structure: 30 + 20 + 30 years
Each renewal requires:
Always include renewal clauses in your first contract — and verify the lessor’s ownership remains valid when extending.
Even experienced investors can fall into traps when dealing with Indonesia’s unique property laws. Below are the five most common (and costly) mistakes foreigners make — and how to avoid them.
This is the single most dangerous practice in Bali’s property market.
Some agents still suggest registering land under a local nominee’s name (an Indonesian citizen) to bypass ownership restrictions.
You then sign a “private agreement” promising that the land is really yours.
The problem:
Real example:
Several foreign buyers in 2022 lost villas in Canggu after nominee partners re-registered the land to their own families.
The foreigners couldn’t appeal — courts ruled that “foreign ownership under nominee names is void ab initio.”
Solution: Always buy via a PT PMA (foreign-owned company) or a properly notarized leasehold (Hak Sewa) contract.
Too often, buyers transfer large deposits before checking whether the seller truly owns the land.
Each property in Indonesia has a unique land certificate issued by BPN (Badan Pertanahan Nasional) — either SHM (Hak Milik) for locals or HGB (Hak Guna Bangunan) for companies.
Risks:
Before paying anything, request a Land Book Copy and certificate verification from BPN. DDA Real Estate can perform this check within 2–3 days.
Just because your neighbor built a villa doesn’t mean it’s legal.
Every plot on Bali falls under a specific zoning category (RTRW) — residential, tourism, commercial, agricultural, or green zone.
Building or renting in a green zone (protected agricultural area) is strictly prohibited.
Even if your villa exists, it cannot obtain licenses like PBG (Building Permit) or Pondok Wisata (rental permit).
Risks:
Always ask for the official zoning confirmation letter from the Dinas Tata Ruang before signing any contract.
A common misunderstanding among foreigners is thinking that once a lease agreement is notarized, it’s automatically valid.
In reality, all leasehold agreements (Hak Sewa) must be registered at the Land Office (BPN) to have legal force.
If not registered:
Registration ensures your rights are recognized by the state and visible in the land’s legal history.
Many investors believe that when their 25- or 30-year lease ends, it will automatically renew.
That’s not how it works in Indonesia.
Each lease extension is treated as a new legal agreement, requiring:
If renewal clauses aren’t written clearly, the landowner can raise the price dramatically — or refuse extension entirely.
When drafting the initial lease, include explicit renewal terms and attach them as a registered addendum. DDA Real Estate can ensure your contract includes these protections from day one.
Never sign or pay without verification.
Every safe transaction in Bali starts with:
By avoiding these five mistakes, you protect your capital, your property rights, and your long-term peace of mind.
Read also: “Land verification in Bali: legal tips for buyers and investors”, “How to Check a Developer on Bali”, “Tips for First-Time Homebuyers in Bali”.
These rules apply to both individuals and PT PMA leaseholders — clarity in contracts is your legal protection.
DDA Real Estate specializes in safe, transparent, and fully compliant property transactions for foreigners and investors in Bali.
Our services include:
Invest with clarity, security, and confidence — that’s the DDA Real Estate way.
