Bali, often known as a dream vacation spot, is also becoming a hotspot for people looking to invest in real estate. But if you’re a foreigner thinking about investing in Bali’s property market, deciding between owning a property outright (freehold) or renting it for a specific period (leasehold) can be pretty tricky. In this detailed guide, we’ll dive into the ins and outs of these two property types in Bali to help you make a smart choice.
What Is Freehold Property?
Freehold property, called “hak milik” in Indonesia, is like the gold standard of property ownership. When you own a freehold property, you have full and absolute control over both the land and any buildings on it. That means you can use it, develop it, rent it out, sell it, or pass it on to your family without any restrictions.
In Bali, most freehold properties are owned by Indonesian citizens. However, there are some ways for foreigners to get a hold of freehold properties, like using nominee arrangements or setting up a local company (PT PMA).
What Is Leasehold Property?
Leasehold property, known as “hak sewa” or “hak pakai,” is a bit different. It involves a rental agreement between the property owner and the buyer. When you buy a leasehold property, you’re essentially renting it for a set period, often between 25 to 30 years, with an option to extend. Leasehold properties can be for living in or for business, and they usually cost less upfront compared to freehold properties.
Foreigners can buy leasehold properties in Bali fairly easily. Just remember that the terms of lease agreements can vary, so you should carefully read and understand what you’re getting into.
Which One Should You Choose, Freehold or Leasehold Property?
Deciding between freehold and leasehold property depends on several key factors:
- How Long You Want to Own It: If you want a property for the long haul and the option to pass it down to your kids, go for freehold. Leasehold properties are better if you’re okay with a set time frame and don’t need it for generations.
- Your Budget: If you’re working with a tight budget, leasehold properties are usually the more wallet-friendly option upfront. Freehold properties often cost more because you get to keep them indefinitely.
- Investment Goals: If you’re looking for property appreciation, freehold is generally the safer bet. They tend to increase in value more steadily over time. Leasehold properties can still make money, but they might need more active management due to shorter lease terms.
- Flexibility: With freehold, you have more freedom to do what you want with the property, like changing it or using it differently. Leasehold properties come with more restrictions.
- Legal Stuff: Buying property in Bali as a foreigner comes with rules. For leasehold, it’s usually straightforward. But if you’re eyeing freehold, things can get complicated with nominee arrangements or PT PMA structures. It’s crucial to get professional advice to navigate this.
- Buying Property in Bali as a Foreigner
If you’re a foreigner looking to invest in Bali’s property market, keep these points in mind:
- Leasehold Properties: It’s relatively easy for foreigners to buy leasehold properties in Bali. However, make sure you understand all the terms in the lease agreement before you commit.
- Freehold Properties: Owning a freehold property as a foreigner is doable but complicated. It often involves setting up a local company (PT PMA) or using nominee arrangements. Make sure you do your homework and get legal guidance to follow Indonesian property laws.
In the end, choosing between freehold and leasehold property in Bali depends on your unique goals, budget, and long-term plans. Both options have their pros and cons, so do your research, seek professional advice, and be diligent. Your decision will determine whether you get your own slice of Bali’s paradise that matches your personal and investment goals.
When you’re ready to take the next step or have questions about buying property in Bali, don’t hesitate to consult Seven Stones Indonesia. Our expert team can guide you through the process and ensure you make the right choices for your property needs. Your dream Bali property is just a consultation away.