Why Foreign Buyers Must Understand Property Ownership in Bali

Buying property in Bali can be confusing for foreign buyers.

Unlike many countries, Indonesian law does not allow foreigners to directly own freehold land (Freehold / Hak Milik).

As a result, foreign buyers must enter the market through alternative legal ownership structures, most commonly:

• Leasehold (Hak Sewa)

• Hak Pakai (Right of Use)

Both options are legal and widely used in Bali, but they differ significantly in usage rights, risks, costs, and suitability.

👉 Choosing the wrong ownership structure can lead to financial loss, restricted rights, or even the inability to resell the property.

Leasehold vs Hak Pakai in Bali – A Simple Guide for Foreign Buyers

Quick Verdict: Leasehold vs Hak Pakai (For Foreign Buyers)

For most foreigners buying property in Bali, the safest and most practical option is usually Leasehold (Hak Sewa).

Hak Pakai may only be suitable if all of the following conditions are met:

• You hold a valid KITAS residence permit

• You plan to live in Bali long-term

• You fully understand renewal and resale restrictions

• Investment returns are not your primary goal

👉 For investment purposes, rental income, or future flexibility, Leasehold is generally the smarter choice.

Legal Risks Foreign Buyers Must Understand

In Bali, the biggest problems foreign buyers face are not the properties themselves, but incorrect legal structures.

Common high-risk issues include:

• ❌ Nominee ownership structures – illegal and not legally enforceable

• ❌ Short lease terms without written renewal clauses

• ❌ Using Hak Pakai without a valid or renewable KITAS

• ❌ Improper land zoning (green zone / non-residential land)

• ❌ Private payments not recorded by a notary
  

👉 Before signing any documents, always verify:

• Land zoning and spatial planning (PUPR)

• Legal title registration (BPN)

• Tax obligations

• A clear exit strategy

Source:
Indonesian Ministry of Agrarian Affairs and Spatial Planning / National Land Agency (ATR/BPN) https://www.atrbpn.go.id/

When Hak Pakai May Be the Right Choice

Hak Pakai (Right of Use) may be suitable if you:

• Live in Bali long-term

• Hold a valid KITAS

• Use the property as your primary residence

• Do not rely on rental income

• Accept resale limitations

👉 For most foreign investors, Hak Pakai is not the ideal solution.

Leasehold vs Hak Pakai – Key Differences for Foreign Buyers

What Is Leasehold (Hak Sewa)?

Leasehold is the most common property structure used by foreigners in Bali.

It is essentially a long-term legal lease agreement.

Key characteristics:

• Term: Typically 25–30 years, with negotiated extensions

• Usage: Residential or rental

• Renewal: Best included in the initial contract
  

Advantages:

• Lower upfront cost compared to Hak Pakai

• Wide market availability

• Ideal for rental villas and investment properties
  

Disadvantages:

• Not permanent ownership

• Value decreases as lease shortens

• Renewal depends on landowner negotiations

What Is Hak Pakai (Right of Use)?

Hak Pakai literally means “Right of Use” under Indonesian law and is available to foreigners under specific conditions.

Key characteristics:

• Term: Up to 30 years, extendable, with a possible total of up to 80 years

• Usage: Residential or commercial

• Registration: Must be formally approved and registered
  

Advantages:

• Greater long-term stability than Leasehold

• Officially registered ownership structure

• Can align with KITAS / KITAP residency
  

Disadvantages:

• Higher cost and more complex procedures

• Limited property availability

• Subject to policy changes

Which Ownership Structure Is Right for You?

Investors / Rental Villas:
👉 Leasehold is usually the best option (flexible, lower cost)

Retirees / Long-Term Residents:
👉 Hak Pakai offers greater stability and residency alignment

Family Long-Term Planning:
👉 Hak Pakai provides longer-term security

Common Mistakes You Must Avoid

• Using nominee ownership structures (high risk)

• Failing to include renewal clauses in contracts

• Relying only on verbal promises from agents

• Ignoring land zoning and planning regulations

The Role of Fresh Leaf Consulting

Fresh Leaf Consulting supports foreign buyers throughout the entire process by:

• Helping you choose between Leasehold and Hak Pakai

• Aligning ownership structure with your goals, budget, and legal safety

• Coordinating lawyers, notaries, land checks, and contract execution
  

👉 Before signing any agreement, we strongly recommend speaking with a qualified advisor. Contact us for professional guidance.