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Lease or buy properties in Bali

How does real estate ownership works in Indonesia?
Purchasing land freehold allows you to enjoy over time, land value appreciation, which has been fairly dramatic in Bali in past years. With freehold, any appreciation in the value of the property, either through improvements you have made to it, or through the rise in land prices, you gain the benefit of any increase in value.

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Per Are per year.
Average cost of leasehold land in touristic area in Canggu
$ 1000
For 25 years lease
Average cost of a 3bd villa in Canggu
$220 000
Years
Average ROI for leasehold properties with bnbprofits
7.52
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How does real estate ownership work in Indonesia?
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.

Freehold
Leasehold
What are the benefits of Freehold
A freehold property is when the owner has no time limit for his ownership period. A foreigner can own a property through PT PMA, a foreign limited liability company in Indonesia.
Benefit from land appreciation
Bali land prices show dynamic and steady value growth for over a decade
Real Ownership
Freehold is outright ownership of the property and land on which it stands. A freehold property is when the property owner has no time limit for his ownership period.
Line of Credit
Freehold properties can be used as an instrument for obtaining a real estate credit line in your bank
What are the benefits of Leasehold
Leasehold (Hak Sewa) means you have a lease from the landlord to use the property for up to 30 years. The leaseholder has a contract with the landlord, defining rights and responsibilities of either side.
High Returns
Less investment over same revenue comparing to Freehold properties. Higher margins with faster returns.
Pay Less
30 years leasehold contract lets you benefit from your investment profitability at fraction of cost.
Extension Options
Ability to extend your lease for another 10 years at the market value.
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F.A.Q.
Frequently Asked Questions regarding Leasehold Properties in Bali
Do I have the right to sell my lease?
Yes, you have full control of the leasehold title if you do not wish to continue leasing it, but the less years left on the lease, the less the property value.
Do I have restrictions on selling, if I can in fact sell the lease?
As far as our understanding, you are entitled to sell the lease agreement at anytime, but if the leaseholder departs from Indonesia permanently, the property must be sold or transferred within one year after departure. If the foreigner or his family does not use the property for more than 12 consecutive years, then the foreigner forfeits the "being domiciled" status, for the purpose of owning residential property.
Can I pass the lease to my family member?
Yes, you can pass the lease title to your family & 'will' it to a family member, as you own the rights of the lease for the duration that you paid for. The landowner cannot break the lease agreement with you and must fulfill the terms and conditions of the lease agreement.
Can I sublease the property or rent it out?
Yes, you can rent / sublease the property when you are not staying in it, so it can also be a very lucrative investment. However, if you do decide to rent out the property as a short-term/holiday rental, you must first acquire a Pondok Wisata (rental license).
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