Defining freehold and leasehold in Bali, and Indonesia as a whole, is not as straightforward as it is in the U.S. or Australia. In Indonesia, there are various forms of property ownership, each represented by different types of land titles and certificates. Understanding these is crucial for potential buyers, as each type of title and certificate carries specific rights and constraints.
In this article, we will explain the 6 most common types of property ownership in Indonesia.
Freehold
Freehold in Bali means owning a title or deed to a land and everything on it. Below are the types of freehold ownership in Indonesia.
Hak Milik (HM) – Right to own
This is the highest form of land title in Indonesia, granting complete ownership rights. However, only individual Indonesian citizens can hold this title, making it unavailable to foreign nationals, foreign-owned companies, and even domestic companies. Properties under Hak Milik can be sold, transferred, inherited, or mortgaged.
Hak Guna Usaha (HGU) – Cultivation Rights
Granted to locals and legal entities, including foreign ones, HGU allows you to use land for agricultural purposes. It’s a 25-year title extendable for another 35 years and is monitored by the National Land Agency.
Hak Guna Bangunan (HGB) – Right to build
The HGB title lets you own a building on land that belongs to someone else, like the state or an Indonesian person. It’s available to legal entities such as PT PMA, but not to individual foreigners.
For foreigners looking to own land in Indonesia, setting up a PT PMA company is a way to obtain an HGB title. However, creating a PT PMA involves tons of paperwork and a significant starting capital of at least IDR 10 billion (about USD 600 thousand). This makes it a viable option primarily for investors with substantial funds.
Holders of the HGB title can use their building for both personal and business purposes. They can also sell, buy, or inherit the title. The National Land Agency (PBB) grants this title for 30 years, and it can be extended up to 80 years.
Hak Pakai (HP) – Right to use
The Hak Pakai title allows Indonesians and foreign nationals with residency permits to own property, but it includes several restrictions:
- For foreigners, you must own either a KITAS (temporary residence permit) or KITAP (permanent residence permit)
- You can only own land that already has a building on it.
- The title is for residence purposes. So, if you plan to use the property for business, you will face some limitations.
- You must buy at least IDR 5 billion for a building on land and IDR 2 billion for an apartment.
- You are limited to purchasing just one property.
Because of these restrictions, only a few foreigners in Bali choose the Hak Pakai option.
Hak Milik Atas Satuan Rumah Susun (HMSRS) – Strata Title
Also known as Strata Title, this allows ownership of units in multi-story buildings like apartments, without extending rights to the land. Foreigners with valid residency permits can own these units, subject to a 49% limit on the total foreign-owned area in a building or complex.
Leasehold
Hak Sewa
Leasehold (Hak Sewa) in Bali refers to a freehold title holder leasing their land to someone else for a certain time.
Different from freehold, leasehold title doesn’t come with a deed. The legal foundation of a leasehold is the lease agreement. It is an agreement between the freehold owner and the lease buyer, made official by a licensed notary, making the agreement a rock solid legal basis of the property ownership.
This property ownership is the most popular choice for foreign resident-seekers or investors in Bali, as this title comes with the least limitation compared to other property titles. Indonesian citizens with Hak Milik, foreign-owned companies (PT PMA), or foreign individuals can obtain Hak Sewa.
If you’re working with a smaller budget, leasehold is a great choice. The costs are much more affordable compared to freehold property. Plus, you don’t need a KITAS (work permit) or a PT PMA company to lease property in Bali.
There’s no fixed rule on how long a lease can be in Indonesia. In Bali, leases typically last between 20 to 30 years, but we have seen and even sold properties with leases up to 99 years!
Conclusion
Understanding freehold and leasehold in Bali is different from other places. Getting a freehold title in Indonesia has more rules and limits, especially for foreigners. If you have a lot of money and want to invest in Bali, some freehold choices might be right for you. Leasehold is good for anyone wanting to live in Bali or for investors looking for extra income, no matter their budget.
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