Leasehold vs Freehold: What’s Better for Property Investment in Bali?

Introduction: Where Should a Bali Investor Begin?

Bali is one of the most attractive destinations for property investment in Southeast Asia. However, Indonesia’s legal system differs significantly from European standards.

One of the first questions investors face: Leasehold or Freehold? What do these terms mean, how do they differ, and which is more advantageous?

1. What Is Leasehold and Freehold: Legal Fundamentals

• Freehold is full ownership of the property. Foreigners cannot legally own land under freehold in Indonesia directly but can access it through structures like a local nominee or a registered PMA (foreign investment company).
• Leasehold is a long-term lease of land or property, usually for 25–30 years, with the option to extend. This format is fully legal and accessible to foreign buyers.

Leasehold is simpler and safer for non-residents, while freehold offers broader control but comes with legal limitations.

2. What Can You Actually Buy Under Leasehold and Freehold?

• Leasehold is most commonly used for purchasing apartments in apart-hotels, completed villas within a complex, or units with professional pool management.
• Freehold typically applies to land plots and custom-built villas acquired through a nominee structure or PMA company.

Leasehold dominates the market: around 80% of new developments are based on this format. Freehold is an option usually explored by experienced investors.

3. Ownership Duration and Resale Potential

• Leasehold provides rights for 25–30 years and can be extended. The lease can be sold, inherited, or gifted during the term.
• Freehold offers perpetual ownership, but for foreigners, it involves a nominee structure or corporate setup, which introduces legal risks.

Leasehold properties can be resold at any point during the lease term — choosing a property in a liquid location is key.

4. Risks and How to Protect Your Interests

Leasehold Risks:

• Minimal if the contract is properly drafted.
• Can be notarized with the full value registered.

Freehold Risks:

• Requires a nominee or creation of a PMA.
• Potential loss of control if nominee relationships change.

As a result, leasehold often proves to be safer and more transparent when supported by a reputable developer.

5. ROI and Investment Attractiveness

• Leasehold properties in apart-hotels or managed complexes generate stable passive income of 8–12% annually.
• Freehold villas, with the right management, can yield higher returns, but require active involvement, additional upkeep, and marketing efforts.

For beginners, leasehold offers a lower entry barrier and fewer risks. For seasoned investors, freehold can be a strategic long-term asset.

Conclusion: What Should an Investor Choose in 2025?

The right option depends on your goals, budget, and level of involvement.

Leasehold is ideal if you want:

• A transparent entry point as a foreigner
• Hassle-free registration
• Passive income from year one

Freehold is the better choice if you’re looking for:

• Perpetual ownership
• Higher capital involvement
• Legal complexity and local partners

Projects like PGD Aparthotel in Canggu offer high-quality leasehold solutions with built-in management and yields of up to 12% annually, making them an excellent entry point for new investors.