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RULeasehold vs Freehold in Bali: Differences, Terms, Extensions, Risks
Leasehold is a right to use land and the building on it for a fixed term, typically 25 or 30 years with an option to extend. Freehold is full ownership of land and building, but in Bali it is only available to Indonesian citizens and certain legal structures (PT PMA). For a foreigner the safe path is leasehold with a clearly defined extension, or purchase through a PT PMA company.
Terms and extensions. A standard leasehold runs for 25 or 30 years. The contract includes an extension option for another 20-25 years. Critical point: extension is not automatic, it requires a separate agreement with the landowner. The extension price should be fixed in the original contract or calculated at the market rate at the time of extension. The first option is safer.
Legal nature. With leasehold you do not own the land - you lease it from the owner (usually an Indonesian) for a long term. The right is secured by a notarial deed (Akta Sewa Menyewa) and registered with BPN (land registry). With freehold via PT PMA, the company becomes the holder of the Hak Milik (SHM) certificate. This requires incorporating and maintaining a local entity, tax reporting, and compliance with foreign capital share limits.
Leasehold risks. The main risk is refusal to extend. If the landowner refuses to sign the extension when the term expires, you lose access to the property. Protection: fix the extension price and terms in the main contract, include penalties for refusal, and build in an option to acquire shares in the PT PMA. The second risk is the land being sold to a third party without notifying the leaseholder. This is addressed by notarial notification and registration of the right.
Freehold via PT PMA risks. Higher entry complexity: company setup (~$3-5k), annual audits, taxes, hiring an Indonesian director. If the business is not operational or rules are breached, the company can be liquidated and property rights lost. Suitable for serious investments and commercial letting.
How to choose. For personal stay and rental over 5-15 years - leasehold with secured extension. For long-term portfolio, commercial rental, and resale - PT PMA freehold. Balila helps select the right structure for your case and guides the transaction through to registration.
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