If you’re thinking about buying property in Bali, you’ll hear the term “leasehold” a lot.
But what does it actually mean?
Is it a smart choice, or does it come with too many risks?
Whether this is your first time investing in Bali or you’re just starting your research, this guide will explain everything you need to know about leasehold property.
Let’s dive in!
What Is Leasehold Property?
Leasehold means you don’t own the land or property outright.
Instead, you lease it for a set period—usually 25 to 80 years. This is common in Bali because Indonesian laws don’t allow foreigners to own freehold property directly.
With leasehold, you have the right to use the property during the lease period.
You can live there, rent it out, or even sell the remaining lease to someone else.
This begs a question: if you don’t own the property, is leasehold a safe investment? Let’s find out.
Is Leasehold a Safe Investment?
Let’s be real—buying property abroad can feel overwhelming, especially when you hear terms like “leasehold.”
But don’t worry.
In Bali, leasehold properties are actually one of the safest ways for foreigners to invest, as long as you know what to look for.
The key is having a clear lease agreement. This document should explain the lease terms, your rights, and what happens when the lease ends.
Pair that with a trusted advisor and a lawyer who knows Bali’s property laws, and you’re off to a strong start.
If you’re unsure whether leasehold is the one for you or not, let’s explore the benefits that make leasehold such a smart move.
Why Leasehold Property Can Be a Smart Move
Leasehold property is popular with foreigners in Bali for good reasons. Here’s why:
- Lower Initial Costs
Leasehold properties often come at a significantly lower cost than freehold properties, which are only available to Indonesian citizens or through complex business setups like a PT PMA.
Because you’re not paying for the land itself, the initial investment is more accessible, especially if you’re buying a villa for rental purposes or a second home.
- High Rental Income Potential
Bali’s rental market is booming, and leasehold properties in popular areas like Canggu, Seminyak, or Ubud offer strong returns on investment through short-term vacation rentals.
Bali’s tourism industry attracts a steady flow of visitors, making it an attractive location for rental properties, especially villas.
Even if you don’t plan to live in Bali year-round, you can still generate a solid rental income by leasing out the property when you’re not there.
Also read Ultimate Guide: How to Start an Airbnb Business in Bali.
- Flexibility at the End of the Lease
When the lease ends, you can often extend it or sell the remaining lease to someone else. Many agreements include renewal options, giving you more control over the future.
But before you jump in, it’s important to consider the drawbacks too.
The Downsides of Leasehold
Like any investment, leasehold has its downsides. Here are the main ones:
Lease Expiration
When the lease ends, the property goes back to the landowner unless you renew it. This means you could lose the property if no extension is agreed upon. It’s smart to plan for renewals early.
Decreasing Value
As the lease term shortens, the property’s value tends to decrease. Buyers may hesitate to buy a leasehold with only a few years left—which could make selling more difficult. Extending the lease can also come at a higher cost, depending on the market.
Market Competition
As more properties enter the market, standing out can be a challenge. It’s crucial to invest in upgrades or unique features to ensure your property remains attractive and profitable over time.
Related article: Must-Have Amenities for High-Occupancy Rental Properties in Bali
Understanding Leasehold Legalities
Leasehold agreements are designed to make property investment possible for foreigners. Here’s what you need to know:
- What You’re Leasing
You’re leasing the rights to use the property—not the land itself. Think of it like renting but with long-term security. The land still legally belongs to the landowner.
- Lease Terms and Duration
Most leasehold agreements in Bali last between 25 and 80 years. Your contract should clearly state the start and end dates to avoid any confusion.
- Renewal Options
Check if your agreement includes an option to extend the lease after it ends. Some contracts allow automatic extensions, while others require renegotiation.
- Property Use and Restrictions
The contract should specify how you can use the property—whether for personal living, renting, or other purposes. Make sure you understand any restrictions on renovations or modifications.
- Involvement of a Notary
A notary in Indonesia ensures agreements comply with the law and are legally binding. They’ll draft and certify your leasehold contract, verify the landowner’s identity, and explain the terms so both parties are protected.
Related article: How to Find the Right Notary.
- Land Certification
Ensure the land is classified under titles like “Hak Milik” (ownership title) or “Hak Guna Bangunan” (building use title), which are legal for leasehold purposes.
- Taxes and Fees
Foreigners may need to pay taxes on rental income or other uses of the property. Consult with professionals to understand your obligations.
We get it—this might feel like a lot to handle.
But the good news is, with the right team by your side, you don’t have to navigate it alone.
At Bali Villa Realty, our team will take care of everything—from checking the property, negotiating terms, and ensuring all legalities are in order—so you don’t have to worry about the details.
Whether you’re ready to invest or still searching for the best options, we’re happy to help. Book your consultation now to get answers to your questions and get your free personalized investment plan in Bali.
How to Maximize Your Leasehold Investment
So, how can you ensure your leasehold investment in Bali remains profitable over time? There are several strategies you can adopt to maximize returns while mitigating risks.
- Choose High-Demand Areas
Investing in a leasehold property in popular tourist destinations like Canggu, Seminyak, or Uluwatu can help ensure high occupancy rates if you rent the property.
These areas have a strong demand for vacation rentals, making it easier to generate income.
- Invest in Renovations
This picture below shows how different home upgrades can make a property worth more.
Adding an extra bedroom increases value the most by 11.2%, followed by a loft conversion at 10.8%.
Fig. How renovation increases property value (Source: Finbri)
While the data is important, how much a renovation boosts a property’s value isn’t the same for everyone. It depends on things like:
- Type of renovation: Big changes can add more value than smaller fixes.
- Property location: Homes in popular or high-demand areas might see bigger value increases from renovations than those in less desirable spots.
- Market conditions: If the real estate market is strong, renovations might add more value compared to times when the market is slow.
The key is to choose renovations that match what buyers or renters in the area want and plan carefully to make sure you’re getting good value for the money you spend.
Is Leasehold Right for You?
Leasehold property is a great option if you’re looking for an affordable way to invest in Bali with strong rental income potential.
But it’s important to understand the downsides, especially around lease expiration and future costs.
The success of your investment depends on choosing the right property, managing it well, and planning ahead.
If you’re ready to explore your options, schedule a free consultation with one of our real estate advisors. We’ll guide you through the process with personalized investment plan suits to your needs.
