Lease or buy properties in Bali

Hak Milik or Freehold is the most complete and strongest form of land title ownership in Indonesia. Only individuals of Indonesian Nationality are entitled to own land under a Hak Milik title. Consequently, neither limited liability companies (PT/Perusahaan Terbatas) nor foreign individuals may obtain land with a Hak Milik title. Subject to zoning restrictions, the Hak Milik title owner can use the land for any purpose, although it does not entitle the owner to exploit the natural resources found on or under the land. The title has no limit and may be sold, gifted, exchanged and bequeathed and may also be used in the form of a mortgage.

Foreigners may, however, acquire land under a Hak Milik title in another form of entitlement called Hak Pakai or Right of use.

For more details about property ownership by foreigner, you can check our article here: http://ppbali.com/can-foreigners-buy-property-bali...

Leasehold, on the other hand, means that after a certain period of time, the property and whatever improvements the leaseholder may have made, revert to the owner.

In very simple terms, as time passes, your investment in leasehold property depreciates in value, because as the term of the lease gets shorter, the lease is less attractive to a buyer, should you want to sell the remainder of your lease.

The terms and conditions of any extension to a lease, are usually built into the original agreement. Most lease agreements have some sort of extension option, although you should be careful to fully understand the means by which the extension may be activated. Sometimes the extension can only be activated by mutual agreement, which means that the time at which extension discussions can begin, it must also be agreed upon mutually by the landowner and the leaseholder. This can lead to problems if the landowner does not agree to give an extension at the time the leaseholder requires it.

Leasehold still has some advantages (and in some areas these days such as Seminyak, freehold is difficult to obtain), the main advantage being that it is a more affordable option.

For example, if there were two identical villas side by side, one leasehold over a 40 year period and the other freehold, the leasehold villa would generally be about 2/3rds of the price of the freehold option.