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January 19, 2024
Real Estate Tips & Insights

What is a freehold title in Bali ? (Ultimate 2024 Guide)

If you have done some research in the internet about freehold titles in Bali you are most likely a bit confused, as you may have read seemingly conflicting statements like the ones below:

“Foreigners can buy freehold property in Indonesia!”

and

“Only Indonesians can own freehold property in Indonesia?”

Which statement is true and which one is false? 

Read on and learn what you always wanted to know about the freehold property title in Bali. 

Spoiler alert: Both of the above statements are actually true!

Meaning Of A Freehold Title

A freehold title defines ownership of real estate in perpetuity or “free from hold”. It is a title without any limit in time for its owners and heirs and is considered the most absolute or highest form of property ownership. 

A freehold owner is entitled to sell, lease, mortgage or otherwise use or dispose of his land. Anything built on the land is part of the freehold rights of the landowner. 

In Indonesia, the title that comes closest to freehold is called ‘Hak Milik’ or ‘Right to Own’. It is the highest property title under Indonesian law and has no time limit. It is only available to Indonesian citizens! This title is registered with the national land agency and it qualifies as collateral to obtain loans from Indonesian banks. 

This is in contrast to a leasehold title, which is limited by a fixed term and thus has an expiry date, is not registered with the national land agency and doesn’t qualify as collateral for a bank loan.

Note that the maximum size for a person to own land under ‘Hak Milik’ is 5.000 m2!

Here are the two most important facts you need to know about freehold titles in Indonesia:

A foreigner is not entitled to own freehold in Indonesia. Only Indonesian citizens may own freehold or ‘Hak Milik’ titles.

BUT: foreigners with a residential permit can buy one freehold property per person and convert it to a title called ‘Hak Pakai’ or ‘Right of Use’, which bestows many benefits of a freehold title to his foreign owner. 

Meaning Of A ‘Hak Pakai’ or ‘Right of Use’ Title

What exactly is a ‘Hak Pakai’ title? 

This is a title that is available for foreigners that have a temporary or permanent residential permit like a KITAS or KITAP, a retirement visa – you need to be at least 55 years old - or one of those new visas for digital nomads. 

A ‘Hak Pakai’ title very much behaves like its correspondent title for local and foreign companies, i.e., the so called ‘Hak Guna Bangunan’ or ‘Right to Build’ title. This means, the Indonesian law treats resident foreigners very much like it treats local or international companies that operate in the country! That’s not the case in most other Asian countries.

Here is how it works: once you have signed your sale and purchase deed in front of a notary, the notary will process the ‘Hak Milik’ certificate and downgrade its rights to ‘Hak Pakai’ and issue it on your name.

There are certain conditions for that to happen. Most importantly, there needs to be a legitimate building on the land – you cannot buy empty land under a ‘Hak Pakai’ title! Secondly, the land can cannot be larger than 2.000 m2. There is also a minimum size that varies from regency to regency.  And last but not least, you can only own one ‘Hak Pakai’ title per person or per family. In Bali, the minimum price for a property to qualify for a ‘Hak Pakai’ title is IDR 5 billion or approximately USD 325.000,-.

Remember, the intention of the law is to enable foreign residents in Indonesia to own a house to live in and not to speculate in real estate!

Once the ‘Hak Pakai’ certificate is out on your name, the former ‘Hak Milik’ title typically ceases to exist, unless you chose to issue the ‘Hak Pakai’ on top of the ‘Hak Milik’ title. This is an option, that may make sense in certain conditions, which we are not discussing here. Contact one of our real estate experts if you would like to know more about this option.

Your new ‘Hak Pakai’ title will carry an initial term of 30 years. This term can be extended with the government against a fee at the end of the first term and you will get an additional 20 years on your title. Note: this is not the same as a leasehold title, where you have to pay for the extension. The extension of the ‘Hak Pakai’ title consists of a small government fee!

Once the 50 years are over, you can apply for a renewal of the title from the government and extend that by another 20 years. And so on. You probably won’t live long enough to experience all that!

But here comes the important point: if you ever decide to sell your villa, you can either sell the ‘Hak Pakai’ to another foreigner or you can sell to an Indonesian and upgrade the title again to the former right of a ‘Hak Milik’ title! Thereby, you are profiting from any increase in value of freehold land. Isn’t that fantastic?

Once you have understood all the benefits of ‘Hak Pakai’, there is really no reason at all why you shouldn’t buy a freehold property and convert it to a ‘Right of Use’, if you qualify for it.

Pros And Cons Of A Freehold Title In Bali

There really aren’t any negatives when buying freehold property in Bali

Most Indonesians would only buy freehold or ‘Hak Milik’ titles because they have no expiry date and can be passed on to their heirs. For Indonesians, leasehold is only a consideration if there is no freehold available and if the investment is for a purely commercial purpose. 

As a foreigner with a residential permit, buying freehold and converting it to ‘Hak Pakai’ as explained above, really only has one negative aspect when compared to leasehold and that is its price! Obviously, freehold is much more expensive than a 25 year leasehold title for the same size of land. In fact, the freehold will cost you about four times the price of a 25 year leasehold piece of land!

Things are a bit different for a foreigner. Without a valid stay permit for Indonesia, freehold is simply not an option for you and you have to stick to leasehold or form a foreign investment company to buy freehold and convert it into a ‘Hak Guna Bangunan’ or ‘Right to Build’ title. 

However, being a resident allows you to buy one freehold property and convert it to a so called ‘Hak Pakai’ or ‘Right of Use’ title. In that case, buying a freehold title has a lot of pros and really only one negative: Price! 

The price of freehold and leasehold land obviously differ greatly. To get an understanding of how they are related pricewise, consider freehold the equivalent of a 100 year lease. That means that a typical 25 year lease should be trading for about 25% of an equivalent freehold title. 

What does that mean in practice? 

Here is an example: assume 10 are freehold land in Canggu is selling for IDR 1 billion per are, which is approximately USD 67.000. So the entire plot would thus cost you USD 670.000. Now take the same piece of land with a 25 year lease and you would be paying ‘only’ USD 167.500! That’s a difference of a whopping USD 502.500 and for that amount you can build a supervilla with all the bells and whistles. 

So if your plan is to commercialize the villa in an already expensive location and your budget only allows you to buy a leasehold title, never mind. If you can get a decent return on that investment.

Types of Freehold Properties in Bali

Buying a Freehold Villa

If you are in the market of buying a freehold villa, you will find that most listings are resales and some are new villas. It is rather rare to find off-plan villas. Here is a list of our freehold villas for sale in Bali.

With resale villas, one of the most obvious issues is that you ensure that the build quality is up to standard. Try to find out why the owner is motivated to sell. Is there perhaps an issue with the building? In any case, it is best if you have a professional builder to inspect the villa and review the soundness of its structure (foundations, roofs, walls etc.) and identify any defects that you better have remedied by the owner before you buy. After all, once you have signed, there will be no warranty to protect you. 

If you are buying a new villa, or one that is under construction you are normally getting some form of warranty that extends typically for no longer than 3 months after handover. Try to negotiate a longer warranty, particularly for your roofs and swimming pools.

Buying Freehold Land

If you can’t find that dream villa, then and then only consider building your own four walls and buy a suitable piece of land for that purpose. 

If you do so, you need to ensure sure that you will be able to build what you have in mind on your land. Is the current zoning allowing you to build a residence or a commercial property or is it green zone that doesn’t allow any building on the land?

Check this using a notary or come and ask our team of real estate bali agents, as we have access to the official zoning maps of the government.

Cost Of Buying A Freehold Property In Bali In 2024

In Bali, the price of land is typically expressed per are. An are measures 100 m2, which is equivalent to 0.0247 acres. Freehold land prices are normally quoted in Rupiah per are.

In the most expensive areas of Canggu, freehold land will cost anywhere between IDR 600 million and 1.5 billion per are. 

Here is an example: let’s say you are buying 500 m2 for IDR 1 billion per are. This will result in a price of IDR 5 billion for the entire plot, which corresponds to USD 330.000. Not exactly cheap, right?

Whilst this price represents the upper scale of freehold prices in Bali, you can find much better bargains a bit further away from the centre of Canggu, where prices drop dramatically and are less than half!

Want to know more about how much real estate is going for in Bali, then read this article.

Best Areas To Buy A Freehold Property In Bali

Canggu

Bali’s best top location has seen land prices going through the roof in the last 5 years. But there are still good opportunities to find attractive leasehold properties, land and villas in Canggu.

In Canggu you can find anything from tiny townhouses to large villas and apartments with an ocean view. 

The advantage of Canggu lies in its dense infrastructure of trendy cafes, restaurants, shops and co-working spaces (link to co-working article). This attracts tourists and digital nomads and new residents alike and creates the buzz – and traffic – this village is known for.

Should you ever decide to rent out your villa, Canggu will be an easy location to quickly find a suitable tenant as demand exceeds supply.

The Bukit

The Bukit, or Bali’s barren southern peninsula has been dubbed a second Canggu. It’s a hotspot for surfers and digital nomads alike and has seen a lot of growth recently. Here the choice of empty land is still vast and prices are half of those in Canggu.

The infrastructure is catching up fast and there are a few clubs that belong to Bali’s top ten. 

Ubud

Bali’s centre for art and culture is another attractive location to find good leasehold properties. 

You may not want to be in Ubud village itself as it is getting pretty crowded. But the villages around Ubud offer all that you may be missing in the South of Bali: rainforests, rice fields, waterfalls, rivers and more.

  

The further away you move from Ubud, the lower the land prices.

If that is more to your taste,  check out these leasehold property listings and villas around Ubud.

FAQ

What does a freehold property mean in Bali?

A freehold property is defined as real estate that is ‘free from hold’. It is a title that has not expiry date and is yours forever!

Can foreigners buy freehold property in Bali?

Foreigners with a valid residential stay permit in Indonesia are allowed to buy one freehold home on their own name by way of converting the freehold title to a so called ‘Hak Pakai’ or ‘Right of Use’ title. There are certain restrictions regarding size, price and use of such titles for foreigners. 

Conclusion

The Indonesian ‘Hak Milik’ title is very much the same as a freehold title in common law jurisdictions. It is the highest land title and has no time limit. It is yours forever and allows you to sell it, lease it, mortgage it and pass it on to your heirs. 

This title can only be owned by Indonesian citizens – not by foreigners! But note that foreigners living in Indonesia on a residential permit are allowed to buy one freehold property as their home by converting the title to a so called ‘Right of Use’ title. Not many foreigners are aware of that privilege. If you want to know more checkout our  blog article “Buying property in Bali.

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