A leasehold in Bali means that a foreigner rents land from a local owner for an agreed term and is entitled to use the plot and the house that stands, or will be built, on it. The land stays with the owner. The Basic Agrarian Law (UUPA) sets no term for such a lease: the parties decide it, and in practice contracts are most often for 25 to 30 years. A lease is not registered with the land authority as a right to land, so it cannot be used as security for a bank loan, and it can be transferred to someone else only with the owner's consent. This article explains what a leasehold rests on, how it differs from the right of use (Hak Pakai) and what to check in the contract before paying.
How a purchase in Bali works is described in the article on the process of buying property in Bali, and taxes in the article on property taxes in Bali.
Contents:
- What a leasehold is in Indonesia
- How a leasehold differs from the right of use
- Term and extension
- What to check in the contract
- What happens at the end of the term
- Price and taxes
- Who a leasehold does not suit
- What has changed in the rules
- Frequently asked questions
- Find property in Bali
What a leasehold is in Indonesia
Foreigners cannot own land outright (Hak Milik): that right is available only to Indonesian citizens. So "buying a villa in Bali" in practice means obtaining one of the rights to land that the law allows a foreigner: a right of use, a lease of land or ownership through an Indonesian company with foreign capital. A leasehold is a lease.
In Indonesian law, this kind of lease is called the right to lease land for building (Hak Sewa untuk Bangunan, Article 44 of the UUPA). The tenant pays the owner rent and is entitled to use the owner's land in order to build on it and own the house. A building that the tenant has built belongs to the tenant.
The main features of a leasehold:
- the subject of the lease is freehold land (Hak Milik) owned by another person;
- the term is set by the parties to the contract, not by law;
- the rent is usually paid for the whole term at once or in instalments;
- the contract is drawn up before a notary.
A leasehold is not a registered right to land. It cannot be used as security for a bank loan, and it can be transferred to someone else only with the landowner's consent.
How a leasehold differs from the right of use
Several forms of ownership are open to a foreigner in Indonesia. A leasehold is the simplest, but less protected than the others.
| Feature | Leasehold (Hak Sewa) | Right of use (Hak Pakai) |
|---|---|---|
| Basis | A lease contract with the landowner | A right to land registered by the land authority |
| Term | Set by the parties | On state land up to 30 years, extension up to 20 years, renewal up to 30 years; on private land up to 30 years with renewal |
| Registration | No | Yes |
| Bank security | Not possible | Possible for a registered right |
| Who can hold it | Under the law, foreigners resident in Indonesia | Foreigners resident in Indonesia, if the conditions are met |
The rules on the right of use are set out in Government Regulation No. 18 of 2021. The "up to 80 years" figure is made up of three periods of 30, 20 and a further 30 years, each granted by a separate decision. This figure applies to the right of use on state land. On private land, the right of use is granted for up to 30 years and then renewed.
Under the UUPA, a tenant may be a foreigner who is resident in Indonesia. Tourists and non-residents also take leases in practice, but whether it can be arranged in your case has to be confirmed with a notary.
Term and extension
The law sets no maximum term for a lease, so the contract determines it. In practice, notaries and agents quote terms of 25 to 30 years.
What matters about the term:
- a lease with no fixed term is, according to legal researchers, invalid for a foreigner: the term must be stated in the contract;
- an extension is not guaranteed: it has to be written into the contract as an option with a fixed price or a method of calculation;
- the term shortens every year, so the resale price depends on how many years are left.
A worked example. A plot is leased for 30 years for $90,000. After 20 years, 10 years remain, and the proportionate value of the remaining term is about $30,000. The actual resale price depends on the condition of the house and on demand, but the term remains the main factor.
"A leasehold buyer is paying not for the land but for the term. So in a contract you look first at three things: how many years are left, whether it can be extended and at what price," says a notary from Denpasar.
What to check in the contract
Before paying, check the following:
- The landowner. Ask for the certificate of ownership (Sertifikat Hak Milik) and make sure it is issued in the name of the person who is leasing the plot. Check with the land authority whether there is a charge or a dispute.
- The family's consent. If the plot belongs to a family, the contract needs the consent of the spouse and the other co-owners.
- The zone of the plot. Find out which zone the land is in. According to consultants, a plot in an agricultural (green) zone cannot be used for building without a change of designation. The zone requirements differ for a home and for tourist letting.
- The building permit. If you need to build, find out how the permit (PBG) is obtained and who is responsible for getting it.
- Term and extension. The term must be fixed. The extension option must state the term and the price or the method of calculation.
- Transfer of the right. Find out how you will be able to sell the lease and whether the owner's consent is needed. The law requires the landowner's consent for a transfer of the lease.
- What happens to the house at the end. State in the contract who owns the building when the term ends and whether it must be demolished.
- Payment. How much is paid at once and how much after conditions are met. Do not hand over the whole sum before the documents have been checked.
- Tax. The landowner pays tax on the rent. Who actually bears the tax is set out in the contract.
- Access. The plot needs a road, water and electricity, and the right of way over neighbouring plots must be documented.
The contract is drawn up in Indonesian, and you need a translation into English to check the terms. A notary's attestation of only the date of a document the parties have signed themselves (waarmerking) is not a substitute for a notarial deed: ask for a full deed.
What happens at the end of the term
When the lease ends, the land stays with the owner. There are then three possibilities:
- an extension on the terms of the contract, if one is provided for;
- a new contract at the market price, which by then may be higher;
- return of the land, in which case the contract determines the fate of the house: demolition, transfer to the owner or compensation.
If an extension is not provided for in the contract, the owner may refuse or name any price.
Price and taxes
The price of a leasehold depends on the district, the size of the plot, the term and whether there is a house. It is a calculation for the whole term, not a payment for each year.
The tax burden on the tenant is usually small:
- the landowner pays tax on the rent; according to PwC's summary, this is a final tax of 10% of the rent;
- when building a house, the tenant obtains a permit and pays the related charges;
- the contract sets out who pays the tax: sometimes it is passed on to the tenant, in which case the price effectively rises by 10%.
Who a leasehold does not suit
- Those who need to pass property on by inheritance without restriction: a lease is limited by its term.
- Those who plan to take a bank loan secured on the property: a leasehold cannot be pledged.
- Those who want to sell in the last years of the term: the price falls along with the remaining term.
- Those who cannot check the landowner's documents: an error in the documents can make the lease invalid.
- Those who expect to build a villa on any plot: the zone and the permit determine whether building is allowed.
What has changed in the rules
- In 2021, Government Regulation No. 18 replaced the previous rules on land rights for foreigners and set the terms of the right of use at 30, 20 and 30 years.
- In 2025–2026, according to consultants, the Bali authorities restricted construction on agricultural land and rice fields. Reports differ on the scale and status of the restrictions, so check the plot's zone and the decisions currently in force before buying.
Frequently asked questions
For how long can you lease land in Bali?
The law sets no term; the parties decide it. In practice, leases are most often for 25 to 30 years.
Can a lease be extended?
Yes, if the extension is written into the contract. Without such an option, the owner may refuse or name a new price.
Do I own a house that I build on leased land?
A building constructed by the tenant belongs to the tenant for the duration of the lease. What happens to it at the end of the term is set by the contract.
Can a lease be pledged at a bank?
No. A leasehold is not registered as a right to land and cannot be the subject of a pledge.
Is the owner's consent needed to sell a lease?
Yes. A lease can be transferred to another person only with the landowner's consent.
Find property in Bali
If you are considering a villa or a plot in Bali, browse the listings in the Bali.Realestate catalogue. Before buying, check the remaining term of the lease, the terms of extension and the landowner's documents.