Authored by the expert who managed and guided the team behind the Bali Property Pack
Yes, the analysis of Bali's property market is included in our pack
Choosing between freehold land and lease extensions in Bali can make or break your property investment, especially with price differences of up to $100,000 per are depending on your decision. This comparison breaks down the real costs, legal structures, and long-term implications to help you make an informed choice between outright ownership and leasehold arrangements in Bali's competitive property market.
If you want to go deeper, you can check our pack of documents related to the real estate market in Bali, based on reliable facts and data, not opinions or rumors.
Freehold land in prime Bali areas costs $100,000-$200,000 per are upfront, while leasehold extensions typically run $15,000-$25,000 per are annually.
Over 30-70 years, leasehold can become more expensive than freehold due to renewal negotiations and market price increases, making freehold the better long-term investment for inheritance and resale value.
| Factor | Freehold (via PMA) | Leasehold |
|---|---|---|
| Upfront Cost | $100,000-$200,000 per are in prime areas | $15,000-$25,000 per are annually |
| Extension Risk | None | Always present, not guaranteed |
| Taxes/Fees | Buyer 5% BPHTB, Seller 2.5% PPh, 1-2.5% Notary | Lessor 10% income tax, 1-2.5% Notary |
| Resale Value | Maintains/appreciates over time | Declines as lease term shortens |
| Bank Lending | Yes, up to 70% via PMA structure | Rarely accepted as collateral |
| Inheritance Rights | Secure transfer to heirs | Limited to remaining lease term |
| Building Rights | Broad development rights | Subject to lease agreement terms |
Fact-checked and reviewed by our local expert
Daniel Rouquette 🇫🇷
CEO & Co-Founder at Villa Finder
What is the current price per are for freehold land in prime Bali locations?
As of September 2025, freehold land prices in Bali's most sought-after areas range from $100,000 to $200,000 per are (100 square meters).
In prime coastal zones like Canggu, Seminyak, and Uluwatu, you'll pay between $1,000 and $2,000 per square meter for freehold land. This translates to $100,000-$200,000 per are in these premium locations where beachfront proximity and established infrastructure command top prices.
Developing areas like Ubud, Seseh, and Pererenan offer more affordable freehold options at $30,000 to $80,000 per are. These emerging neighborhoods still provide good investment potential while requiring a lower initial capital outlay compared to established beachfront zones.
The price variation depends heavily on exact location, road access, proximity to the beach, and existing development density. Properties within walking distance of popular beach clubs or with direct ocean views command premium pricing even within the same general area.
How much do lease extensions typically cost annually in these same areas?
Lease extension costs in prime Bali areas typically range from IDR 15 million to IDR 25 million per are per year, equivalent to approximately $1,000 to $1,700 per are annually.
In high-demand zones like Canggu, Pererenan, and Seminyak, annual lease extension rates are often fixed at the upper end of this range when negotiated upfront as part of the original lease agreement. Pre-negotiated extensions provide cost certainty but still represent significant ongoing expenses.
Without pre-agreed extension terms, renewal costs can escalate dramatically based on prevailing market rates at the time of extension. Landowners may demand substantial increases, particularly if the area has appreciated significantly during the initial lease period.
It's something we develop in our Bali property pack.
Extension negotiations typically occur 2-3 years before lease expiration, giving both parties time to assess market conditions and agree on renewal terms.
What lease durations are standard in Bali and how often do extensions get approved?
| Lease Type | Initial Term | Extension Options |
|---|---|---|
| Standard Residential Lease | 25-30 years | 2-3 extensions possible |
| Commercial Development | 30 years | Up to 70-80 years total |
| Villa Investment | 25 years | 25+25 structure common |
| Land Banking | 30 years | Extensions market-dependent |
| Resort Development | 30 years | Multiple 25-year extensions |
| Residential Complex | 25-30 years | Subject to negotiation |
| Beachfront Property | 25 years | Premium for extensions |
What are the total costs comparing freehold purchase versus leasehold over 30, 50, and 70 years?
A detailed cost comparison reveals significant differences between freehold and leasehold over extended periods, with leasehold potentially becoming more expensive due to market appreciation and renewal negotiations.
For a prime 1-are plot currently valued at $150,000 freehold, the upfront costs include the purchase price plus 5% BPHTB buyer's tax ($7,500), 2.5% seller's tax, and 1-2.5% notary fees ($1,500-$3,750). Total initial investment: approximately $165,000.
The same plot on a 30-year lease at $1,500 per are annually would cost $45,000 upfront, but extensions at market rates could push total costs to $150,000-$300,000 over three decades. If land values double, extension costs will likely increase proportionally.
Over 50 years, leasehold costs could reach $300,000-$500,000 when accounting for market appreciation and renegotiation premiums. A 70-year leasehold scenario might total $500,000-$700,000, significantly exceeding the original freehold purchase price.
Freehold buyers also benefit from asset appreciation, potentially doubling their investment value over 30-50 years, while leasehold investors face depreciating assets as lease terms shorten.
How do upfront payments compare between freehold purchases and lease arrangements?
Freehold purchases require substantially higher upfront capital, with nearly all costs paid at closing, while leasehold arrangements spread payments over the initial lease term.
A freehold transaction demands 100% of the land value plus associated taxes and fees upfront. For a $150,000 plot, you'll need approximately $165,000 ready for immediate payment at the notary office.
Leasehold arrangements typically require the entire initial lease payment upfront, but this represents a much smaller immediate outlay. A 25-year lease might cost $37,500 upfront ($1,500 annually x 25 years) compared to the $165,000 freehold cost.
Some leasehold agreements allow staged payments during the first few years, but most landowners prefer lump-sum payments for the entire initial term. Extension payments, when due, usually require another substantial lump sum rather than continued annual payments.
The lower upfront cost of leasehold can free up capital for property development, furnishing, or additional investments, making it attractive for investors with limited initial capital but good cash flow prospects.
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What taxes and fees apply differently to freehold versus leasehold transactions?
Tax obligations vary significantly between freehold and leasehold transactions, with freehold buyers facing higher upfront tax burdens but clearer ongoing obligations.
Freehold buyers pay 5% BPHTB (Land and Building Rights Acquisition Tax) on the transaction value, calculated on either the declared price or government-assessed value, whichever is higher. On a $150,000 purchase, this equals $7,500 in buyer taxes.
The seller in a freehold transaction pays 2.5% PPh (Income Tax) on the sale proceeds. Notary and legal fees typically add another 1-2.5% of the transaction value, shared between buyer and seller based on negotiation.
Leasehold transactions don't trigger BPHTB for the lessee, but the lessor pays 10% income tax on lease payments (reduced to 5% if they have an NPWP tax number). Notary fees of 1-2.5% may still apply for lease documentation.
Annual property taxes (PBB) apply to freehold owners based on the property's assessed value, typically 0.1-0.3% annually. Leasehold arrangements may shift this responsibility to the lessee depending on the lease agreement terms.
What resale values can I expect after 10, 20, or 30 years for each option?
Freehold properties maintain and typically appreciate in value over time, while leasehold assets depreciate as the remaining lease term shortens, creating vastly different resale scenarios.
A freehold property purchased for $150,000 could reasonably be worth $300,000-$450,000 after 30 years in a desirable Bali location, assuming modest annual appreciation of 2-4%. The asset retains full value since ownership is permanent.
Leasehold properties with 30 years remaining sell at near full value, but those with 10-15 years left typically sell for 40-60% of comparable freehold prices. Properties with less than 10 years remaining become difficult to sell unless extension agreements are already secured.
After 20 years, a leasehold with 5-10 years remaining might sell for only 20-40% of its initial value, while the same freehold property has likely doubled in value. This creates a massive wealth gap between the two ownership structures.
Market skepticism toward leasehold renewals means buyers heavily discount properties without guaranteed extensions, even if the location remains highly desirable.
How do financing options differ between freehold and leasehold properties?
1. **Indonesian Bank Lending for Freehold Properties** - Banks offer mortgages up to 70% of property value - Only available for Indonesian citizens or PT PMA company structures - Interest rates typically 8-12% annually for property loans - Loan terms extend up to 20-25 years maximum - Requires proof of income and Indonesian tax obligations2. **Leasehold Financing Limitations** - Indonesian banks rarely accept leasehold as collateral - Diminishing asset value makes lenders reluctant - Most leasehold purchases require full cash payment - Foreign buyers have virtually no local financing options - Private lending may be available at higher interest rates3. **PT PMA Structure Benefits** - Allows foreigners to access Indonesian bank financing - Enables HGB (Building Rights) titles for better lending terms - Requires minimum investment amounts and ongoing compliance - Provides legitimate legal structure for property ownership - May qualify for development financing for larger projects4. **Alternative Financing Sources** - Singapore and Hong Kong banks offer overseas property loans - Private equity and family office funding for larger developments - Seller financing occasionally available for established properties - Joint venture structures with local Indonesian partners - Cryptocurrency-backed lending emerging in some markets5. **Cash Purchase Advantages** - Eliminates currency exchange risks and loan approval delays - Provides stronger negotiating position with sellers - Avoids ongoing interest payments and loan servicing requirements - Simplifies legal structure requirements for foreign buyers - Allows faster closing timelines in competitive marketsWhat legal restrictions apply to foreigners for each ownership type?
Foreign ownership restrictions create complex legal requirements, with different structures needed for freehold versus leasehold arrangements under Indonesian law.
Freehold land (Hak Milik/SHM) can only be directly owned by Indonesian citizens or legal entities. Foreigners must use PT PMA (foreign investment company) structures to obtain HGB (Building Rights) titles, which provide similar security to freehold ownership.
The PT PMA route requires minimum investment amounts, ongoing compliance with Indonesian corporate law, annual reporting requirements, and maintaining proper business licenses. This adds $3,000-$8,000 annually in legal and accounting costs but provides legitimate ownership.
Leasehold arrangements (Hak Sewa) allow foreigners to hold lease agreements directly in their personal names for up to 25-30 years with extension options. This provides simpler legal structure without corporate requirements or ongoing compliance burdens.
It's something we develop in our Bali property pack.
Nominee arrangements, where Indonesian citizens hold freehold titles on behalf of foreigners, carry significant legal risks and are not recommended by reputable legal advisors. These structures lack legal protection and can result in complete loss of the property.
What risks exist if landowners refuse lease renewals or inflate prices?
Lease renewal risks represent the most significant threat to leasehold investments, with landowners holding substantial leverage during extension negotiations that can dramatically impact investment returns.
Landowners can legally refuse lease extensions unless contractually guaranteed, leaving lessees with depreciating assets and limited recourse. Even with extension clauses, terms may specify market-rate pricing, allowing substantial cost increases.
Price inflation during renewals often reflects current market values rather than historical costs. A lease signed at $1,000 annually per are might face renewal demands of $3,000-$5,000 per are if land values have tripled during the initial term.
Negotiation delays can create uncertainty that affects property development plans, rental income, and resale opportunities. Some landowners intentionally create pressure by waiting until close to lease expiration before beginning discussions.
Legal remedies for unreasonable lease terms are limited, and Indonesian courts generally favor landowners in disputes. International arbitration clauses in lease agreements provide some protection but add complexity and cost to dispute resolution.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Indonesia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do maintenance and building rights differ between ownership types?
Maintenance responsibilities and development rights vary significantly between freehold and leasehold arrangements, affecting long-term property management and improvement potential.
Freehold owners bear full responsibility for all maintenance, repairs, and property taxes, but enjoy complete autonomy over renovation and development decisions within local zoning regulations. Major renovations, extensions, or rebuilding projects can proceed without seeking landowner approval.
Leasehold agreements typically assign maintenance responsibility to the lessee during the lease term, but major structural changes or significant renovations require written approval from the landowner. This can create delays and additional costs for property improvements.
Building rights under leasehold depend entirely on lease agreement terms. Some leases permit extensive development, while others restrict modifications to protect the landowner's long-term interests. Always review building rights clauses carefully before signing lease agreements.
Property insurance requirements may differ, with some lease agreements mandating specific coverage levels or requiring the landowner as an additional insured party. Freehold owners have complete flexibility in choosing insurance coverage and providers.
Environmental compliance and permitting responsibility generally falls to the property occupant regardless of ownership structure, but freehold owners have more control over timing and scope of compliance measures.
Which option makes more sense for inheritance and passing property to children?
Inheritance planning strongly favors freehold ownership due to permanent title security, while leasehold arrangements create generational wealth transfer challenges due to time-limited ownership rights.
Freehold properties (via PT PMA structures) can be permanently transferred to heirs without restriction if properly structured under Indonesian ownership rules. The property maintains its value and development potential across generations, creating lasting family wealth.
Leasehold properties can sometimes be inherited for the remaining lease term, but expiration dates create automatic wealth erosion. A 30-year lease inherited after 15 years only provides 15 years of remaining value to the next generation.
Estate planning becomes complex with leasehold properties, as extension negotiations may fall to heirs who lack the original lessee's knowledge of local conditions, relationships with landowners, or negotiating experience.
It's something we develop in our Bali property pack.
For multi-generational wealth building, freehold ownership through legitimate PT PMA structures provides the only pathway to maintain property value and control over decades. This makes freehold the clear choice for family legacy planning and long-term wealth preservation.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Choosing between freehold and leasehold in Bali requires careful consideration of your investment timeline, capital availability, and risk tolerance.
While leasehold offers lower upfront costs, freehold provides superior long-term value retention, inheritance rights, and financing options that make it the preferred choice for serious property investors.
Sources
- Bali Villa Realty - Cost of Property in Bali
- Exotiq Property - Bali Land Price Trends
- Exotiq Property - Real Estate Prices in Bali
- Bali Home Immo - Lease Extension in Bali
- Bali Villa Realty - Lease Duration Guidelines
- Better Place - Extending Leases in Bali
- Exotiq Property - Leasehold Title Bali
- Casenta Property - Property Taxes 2024
- Exotiq Property - Property Taxes in Bali
- Emerhub - Leasehold vs Freehold Properties