If you are a foreigner looking at a villa in Bali, you are not choosing between “buying” and “renting”. You are choosing between legal structures that give you very different rights, and the labels on a listing do not always match what the documents say. Indonesian property terms such as Hak Milik, Hak Sewa, Hak Pakai and Hak Guna Bangunan each describe a specific right with its own holder, term and limits. Getting the terminology right before you pay a deposit is one of the simplest ways to reduce avoidable risk.
Foreigners cannot directly own Indonesian freehold land (Hak Milik). Their main options are a leasehold (Hak Sewa) or another lawful lease contract, a registered right-to-use title (Hak Pakai) for eligible foreign individuals holding the required immigration documents, or property rights such as Hak Guna Bangunan held by a qualifying Indonesian PT PMA company. The best structure depends on immigration status, intended use, duration and legal compliance.
Can Foreigners Own Property in Indonesia?
The short legal answer, as at October 2026, is that a foreign individual cannot hold Hak Milik freehold land in Indonesia. That rule comes from the Basic Agrarian Law, formally Undang-Undang Pokok Agraria No. 5/1960 (often shortened to UUPA), the framework administered by the national land agency, ATR/BPN. Article 21 of the UUPA states that only Indonesian citizens can hold Hak Milik, with limited exceptions for legal entities specifically designated by the government. Article 26 then provides that a sale, gift or other transfer that directly or indirectly passes Hak Milik to a foreigner is void, and the land falls to the state.
Buying a property does not change that. Neither does holding a residence permit, being married to an Indonesian, or registering a company. Nine years in Bali have taught me that most buyer confusion starts here, because listings use English words like “freehold” and “ownership” loosely, while Indonesian law is precise about who holds what.
What does freehold mean in Indonesian law?
Freehold in Indonesia means Hak Milik, the strongest and fullest land right available, evidenced by a certificate called Sertifikat Hak Milik (SHM). Hak Milik has no expiry date and can be inherited, sold and mortgaged. It is a right over land; buildings generally follow the land unless arrangements separate them.
What can a foreign buyer legally acquire instead?
Foreign buyers work with three main pathways, and it helps to keep the holder of each right clearly in mind:
A tenant under a lease (Hak Sewa or another lease contract): you sign a lease with the landowner, usually as a notarial deed. You hold contractual rights against the lessor, not a registered land title. A foreign individual with a registered right (Hak Pakai): an eligible foreign individual holding the required immigration documents holds a right to use land for a residential home, registered with ATR/BPN (the Ministry of Agrarian Affairs and Spatial Planning / National Land Agency). An Indonesian company with foreign shareholders (PT PMA): the company, not the foreigner, holds registered rights such as Hak Guna Bangunan (HGB) or company-held Hak Pakai. The foreigner owns shares in that company.
That last distinction matters more than most buyers realise. Owning 100% of the shares in a PT PMA is not the same as personally holding a land certificate. Your rights run through the company, and the company must stay compliant to keep its rights secure.
Freehold vs Leasehold vs Hak Pakai vs HGB
Here is the side-by-side comparison I wish every buyer saw before their first viewing. All statements are general and reflect the position as at October 2026; actual terms depend on the underlying land, the specific grant and the contract.
| Feature | Hak Milik (SHM) | Hak Sewa (leasehold) | Hak Pakai (right to use) | HGB held by a PT PMA |
|---|---|---|---|---|
| Legal nature | Full, perpetual land right | Contract between lessor and lessee | Registered right to use land | Registered right to build on and use land |
| Registered holder | Indonesian citizen or designated entity | Landowner stays on title; lessee holds contract | Eligible foreign individual or entity | The Indonesian company |
| Foreign individual eligible? | No (UUPA Art. 21) | UUPA Art. 45(b) names foreigners domiciled in Indonesia; a non-resident’s lease needs its legal basis confirmed | Yes, if eligibility conditions are met | Not personally; only as company shareholder |
| Residency or company conditions | Indonesian citizenship | Statutory Hak Sewa refers to domicile in Indonesia; other lease contracts depend on their lawful basis and terms | Required immigration documents (visa, passport or residence permit), plus residential-use and minimum-price conditions | Valid PT PMA, licensed business activity, capital and investment rules |
| Term | Unlimited | As negotiated; 25–30 years is common in Bali | Commonly 30 + 20 + 30 years on state or HPL land; differs over Hak Milik land | Commonly 30 + 20 + 30 years on state or HPL land; differs over Hak Milik land |
| Extension mechanism | Not needed | Contractual only; must be negotiated or pre-agreed | Application to ATR/BPN; conditional, not automatic | Application to ATR/BPN; conditional, not automatic |
| BPN registration | Yes | No; a notarial lease does not itself create a registered land title | Yes | Yes (SHGB) |
| Personal residential use | Yes (owner) | Yes, within contract terms | Yes; this is its primary purpose for foreigners | Only if consistent with company purpose and law |
| Potential business use | Subject to zoning and licensing | Only if contract, zoning and licences allow | Not automatic for a foreign individual | Possible within licensed KBLI, zoning and permits |
| Resale or assignment | Free among eligible holders | Assignment usually needs lessor consent | Transfer only to eligible holders | Company can sell the right, or shares can be sold |
| Inheritance | Yes, to eligible heirs | Depends on contract; lease does not end by death under the Civil Code | Possible, but ineligible heirs must dispose of it within one year | Shares pass under succession rules; company keeps the title |
| Key risks | Nominee schemes are void and dangerous | Legal basis, expiry, renewal price, lessor disputes | Loss of eligibility, transfer limits, minimum price rules | Compliance cost, licensing gaps, company governance |
A foreign individual can hold a lease (subject to its legal basis) or qualifying Hak Pakai, but cannot personally hold HGB; HGB can be held by Indonesian citizens or a qualifying Indonesian legal entity, including a PT PMA. None of these is Hak Milik freehold for the foreigner.
Three points in that table cause most of the misunderstandings I see. First, some marketing material describes HGB held by a PT PMA as “freehold through a company”. It is not. HGB is a time-limited right to construct and own buildings on land, and the registered holder is the company. If the company is dissolved, loses its licences or fails to renew, the right is at risk regardless of who paid for the villa.
Second, leasehold and Hak Pakai are often presented as interchangeable. A lease is a private contract, and your protection depends on the deed and the lessor. Hak Pakai is a registered right recorded by ATR/BPN, but it comes with eligibility conditions you must keep meeting.
Third, the familiar “30 + 20 + 30 years” figure applies to Hak Pakai and HGB granted over state land or land under Hak Pengelolaan (HPL). Where either right is granted over someone else’s Hak Milik land, Government Regulation No. 18/2021 sets a different framework: up to 30 years, then potential renewal through a new deed with the landowner’s agreement. The land category on the certificate decides which rules apply.
Hak Milik: Why Freehold Is Restricted
Hak Milik sits at the top of the Indonesian land hierarchy. UUPA Article 20 defines it as the strongest and fullest hereditary right a person can hold over land, subject to the social function of land. Article 21 limits holders to Indonesian citizens and designated legal entities. As at October 2026, there is no investment visa, residence permit or company structure that converts into personal foreign freehold.
The UUPA does recognise that foreigners can end up connected to Hak Milik without buying it. Article 21(3) covers foreigners who acquire Hak Milik through inheritance without a will or through mixed marital property, and Indonesian citizens who lose their citizenship. In those situations, the holder must relinquish the right within one year; otherwise the right lapses and the land falls to the state, while third-party rights on it continue. That is a disposal obligation, not a pathway to ownership.
I’ve seen this mistake more times than I can count: a buyer pays for land, an Indonesian friend or staff member’s name goes on the SHM, and a lawyer drafts a side agreement, loan agreement or power of attorney to “protect” the foreigner. Article 26 of the UUPA makes arrangements that directly or indirectly pass Hak Milik to a foreigner void. In practice the land office treats the registered holder as the holder of the right. If that person dies, their heirs may claim it. If they divorce, the land may be drawn into a property settlement. If they become insolvent, creditors may pursue it. If they decide to sell or mortgage, the foreigner’s side documents may give little or no enforceable protection.
“A nominee deed does not give a foreigner lawful ownership of Hak Milik, and it is not reliable protection for anyone involved. It just moves the risk around.” — Jack, Bali property adviser
Family arrangements deserve a careful, separate note. An Indonesian citizen married to a foreigner does not automatically lose their land rights. The risk arises because, without a marital property agreement, property acquired during marriage can become joint marital property, and the foreign spouse cannot hold a share of Hak Milik. A prenuptial or postnuptial agreement that separates property can allow the Indonesian spouse to hold Hak Milik in their own name. The Constitutional Court’s judgment of 27 October 2016, No. 69/PUU-XIII/2015, confirmed such agreements can be made during the marriage. These agreements need proper notarial drafting and registration, and they create genuine separate ownership by the Indonesian spouse, not hidden ownership for the foreigner. Get advice from an independent Indonesian lawyer before relying on any family structure.
Leasehold (Hak Sewa): Rights and Limitations
Hak Sewa is a contractual right to use land or a building owned by someone else, in exchange for rent. UUPA Article 44 describes the right to lease land for building purposes (Hak Sewa untuk bangunan). Article 45(b) lists who may hold it, and for foreigners the wording refers to foreigners domiciled in Indonesia. In Bali, most “leasehold villas” you see advertised are documented by a notarial lease deed, with the landowner remaining the registered holder of the SHM.
That statutory wording matters if you live in Perth or Auckland. In practice, some lettings of an existing villa are drafted as ordinary lease contracts under the Indonesian Civil Code (sewa-menyewa, from Article 1548) rather than as statutory Hak Sewa for building purposes. Whether that route is available for your deal is a transaction-specific legal question, not a general exemption from the UUPA domicile wording. It depends on what the deed actually grants, whether you will build, and how it is drafted. If you are not domiciled in Indonesia, ask an independent Indonesian lawyer to confirm in writing the lawful basis of the proposed lease before you pay.
Indonesian law does not set one universal lease term for these contracts. A negotiated initial term of 25 to 30 years is common market practice in Bali, but leases of 10, 20 or 40 years exist, and the enforceability of very long terms and pre-agreed extensions should be reviewed by a lawyer. The term written in the deed and the term actually left are two different numbers. A new 30-year lease from the landowner is a very different asset from a 30-year lease signed in 2014 that a seller is now assigning to you with 18 years remaining.
How lease extensions actually work
An extension is a contractual promise, and it is only as strong as its wording. A lease that says the lessee “has priority to extend” gives you a right to negotiate first, not a fixed price. A lease that grants an option with a defined rent per are or a formula (for example, a stated price adjusted by an agreed index) gives you more certainty. Look for the notice window, the person who must receive notice, what happens if the lessor refuses, and whether the extension price is fixed, formula-based or “at market rate”. Sounds great on Instagram, but here’s the reality: a villa marketed as “25 + 25 years” usually has 25 years locked in and the second 25 depending on a future negotiation.
What if the landowner sells or dies?
The Indonesian Civil Code helps lessees here. Article 1576 provides that sale of the leased property does not end the lease unless the parties agreed otherwise, and Article 1575 provides that a lease does not end on the death of either party. Even so, practical risk remains. Balinese land is often held by extended families, and heirs may not know about, or accept, a lease signed by an elder. A good lease binds heirs and successors expressly, requires the lessor to disclose the lease to any buyer, and restricts the lessor from mortgaging the land in ways that could prejudice you.
What happens to buildings when the lease ends?
When a Bali lease expires without a valid extension, the lessee’s right to occupy generally ends, and many contracts state that the buildings pass to the landowner, sometimes without compensation. Some leases allow removal of movable items; others require handover in good condition. Before you build or renovate, check this clause, because a villa you spent heavily on can become the lessor’s asset on expiry.
These are the lease points I would want reviewed before signing anything:
- Legal basis: confirm whether the deed is statutory Hak Sewa or another lease contract, and that it suits your domicile and plans.
- Lessor identity and authority: confirm every person named on the SHM, plus any heirs or family members with a claim, signs or consents.
- Term and start date: record the exact start and end dates, and calculate remaining years if you are buying an assignment.
- Payment structure: know whether rent is paid fully upfront or in instalments, and what happens if instalments are missed.
- Extension option: check the notice period, price or formula, and the consequence of lessor refusal.
- Assignment and subletting: confirm you can transfer the lease or sublet without unreasonable lessor consent, and whether fees apply.
- Permitted use: make sure residential and, if needed, commercial accommodation use is allowed by the contract.
- Building rights: confirm you may build or renovate, and who holds responsibility for PBG approvals.
- Death and succession: state that the lease binds both parties’ heirs and that your rights pass under your estate.
- Mortgages and encumbrances: restrict the lessor from encumbering the land and require disclosure of existing charges.
- Expiry and surrender: spell out what happens to buildings, fixtures and any compensation at the end.
- Dispute resolution: name the forum, governing language and the controlling version if bilingual.
One more practical point from running my own villa: the lessor relationship is ongoing. Your neighbour across the wall may be the person whose consent you need in 20 years. A respectful, transparent relationship from day one is worth as much as a well-drafted clause.
Hak Pakai: Right-to-Use Property for Foreigners
Hak Pakai is a registered land-use right that eligible foreign individuals holding the required immigration documents may hold under Indonesian law. The UUPA introduces it in Articles 41 to 43, and Government Regulation No. 18/2021 on Hak Pengelolaan, Land Rights, Apartment Units and Land Registration sets out how it is granted, extended and renewed. Unlike a lease, Hak Pakai appears on a certificate issued by ATR/BPN, so your right is recorded in the national land registry in your own name.
For foreigners, Hak Pakai is primarily a residential tool. PP 18/2021, in its provisions on residential houses for foreigners (Articles 69 to 73), allows foreigners holding immigration documents to own a house or residence. A landed house may be held on Hak Pakai over state land, Hak Pakai over HPL land, or Hak Pakai over Hak Milik land under an agreement with the owner. The right is meant for living in, not as a general investment licence.
Apartments follow a separate route. Under PP 18/2021 Article 71(2), apartment units that foreigners may own are those built in designated areas: special economic zones, free trade and free port zones, industrial estates and other economic areas, with the detail set by implementing rules. Confirm with your PPAT how those rules apply to the specific building. A foreigner who buys a qualifying unit receives a unit title certificate (Sertifikat Hak Milik atas Satuan Rumah Susun, or SHMSRS) and shares in the common parts, but does not personally become the holder of the HGB or Hak Pakai over the land the building stands on.
As at October 2026, Hak Pakai over state or HPL land is commonly granted for up to 30 years, extendable for up to 20 years and renewable for up to a further 30 years, while Hak Pakai over Hak Milik land runs up to 30 years and is renewed through a new deed with the landowner’s consent. Extensions and renewals depend on applications, continued eligibility, proper use of the land and approval. That is why an advertised 80-year entitlement cannot be assumed; it is a maximum framework, not a promise.
Minimum purchase values also apply. ATR/BPN Decree 1241/SK-HK.02/IX/2022 (issued September 2022) sets minimum prices for homes foreigners may acquire, varying by province and by property type. The figures published in that decree for Bali are IDR 5 billion for a landed house and IDR 2 billion for an apartment unit. Treat those as the decree’s published thresholds, not a guarantee of the current position: before you sign, ask your PPAT to confirm in writing that no later amendment or implementing rule changes the figure for your property. Implementing rules also limit the number of plots and land area a foreigner may hold for residential purposes.
Hak Pakai also requires the property itself to fit. A villa sold as a business, agricultural land, or land that cannot be lawfully converted to a Hak Pakai title will not qualify simply because a buyer wants it to. The conversion or grant process runs through a PPAT and the local land office, and timelines vary by regency.
Do I need a KITAS or KITAP?
A KITAS (Kartu Izin Tinggal Terbatas) is a limited stay permit; a KITAP (Kartu Izin Tinggal Tetap) is a permanent stay permit. PP 18/2021 Article 69 refers to foreigners holding immigration documents, and its elucidation explains that this covers a visa, a passport or a residence permit. KITAS or KITAP is therefore not written there as a universal prerequisite. As a practical observation rather than a national rule, I’ve seen some notaries and land offices ask for a residence permit anyway, and what one office accepts may differ from another. Check with the Directorate General of Immigration and your PPAT which document will be accepted for your transaction before you pay.
Holding the right immigration document only gets you through the first gate; the property must still meet the price, type, plot and land rules. The reverse is equally true: buying a home does not automatically give you a residence permit, visa, citizenship or business privilege. Those are separate applications under immigration law.
Can Hak Pakai be sold or inherited?
Hak Pakai can be transferred, but only to a buyer who is eligible to hold it, such as another qualifying foreigner or an Indonesian citizen, who might then convert it according to applicable rules. That narrows your resale market. Under PP 18/2021 Article 50, a holder who no longer meets the eligibility requirements must release or transfer the right to an eligible party within one year. If that does not happen, the right is extinguished by law. The same one-year rule applies to an heir who is not eligible to hold it.
Loss of eligibility has to be established against the applicable conditions. It should not be inferred simply because you spend part of the year back in Australia. If your circumstances are changing, get advice on whether your status is actually affected, and plan your exit and your estate before you buy, not after.
PT PMA and Hak Guna Bangunan Explained
A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is an Indonesian limited liability company with foreign shareholding, licensed to carry out approved business activities. It is an Indonesian legal entity, so it can hold certain land rights that a foreign individual cannot. The most relevant is Hak Guna Bangunan, evidenced by an SHGB certificate.
Hak Guna Bangunan (HGB) is a registered right to construct and own buildings on land that the holder does not own as freehold. Under PP 18/2021, HGB follows the same duration framework described above for Hak Pakai, and extensions are conditional on continued compliance and approval.
Can a PT PMA own freehold?
No. A foreign-invested company is not among the entities Article 21 of the UUPA allows to hold Hak Milik. When a seller says “freehold via PT PMA”, the actual structure is usually that the company holds HGB, often converted from the seller’s SHM through a land-office process. The foreign investor owns shares; the company holds the SHGB; ATR/BPN records the company as the right holder. If you sell, you either sell the HGB from the company to a buyer, or sell the company’s shares.
Setting up a PT PMA is a business decision, not a property paperwork step. You register through the OSS (Online Single Submission) system, select the correct KBLI codes (Indonesia’s standard business classification), obtain the business identification number (NIB) and risk-based licences, register with the tax office, and then comply with ongoing obligations. Those include quarterly investment activity reports (LKPM), monthly and annual tax filings, payroll and social security if you employ staff, and corporate housekeeping. The investment rules themselves are published by the Ministry of Investment and Downstreaming/BKPM.
The capital rules changed in 2025, and older guides are often out of date. As at October 2026, BKPM Regulation No. 5/2025 (issued in October 2025) sets a general minimum issued and paid-up capital of IDR 2.5 billion for PT PMA companies, down from the previous IDR 10 billion. Article 27 also attaches conditions to how that paid-up capital may be used, so it is not money you deposit for the paperwork and withdraw the following week.
Separately, the regulation keeps an investment-value test: generally more than IDR 10 billion per KBLI per project location, excluding land and buildings. The exceptions matter for this topic. Article 26(5) includes land and buildings in the calculation for accommodation activities, so a villa operator’s land and buildings can count towards the figure. Article 26(6) draws further distinctions for property businesses, which means a development-and-sale model may be calculated differently from an accommodation operation. Paid-up capital and the investment-value test are different tests, and neither is the price of a villa. Meeting them does not by itself grant permission to run a particular accommodation business.
Government Regulation No. 28/2025 on risk-based business licensing replaced the earlier 2021 framework and governs how OSS assigns risk levels, licences and standards to each activity. For a villa rental business, the KBLI you choose determines which standards, certifications and supervision apply. Holding lawful rights to use the premises, through an appropriate registered right or lease, being in the right zone and holding an accommodation licence are three different things. You need all three, plus a building with valid PBG and SLF, before operating lawfully.
Does a single rental villa justify a company?
In my opinion, rarely. Let’s run the numbers properly: if annual accounting, tax filing, LKPM reporting, legal maintenance and licensing upkeep cost even a modest amount each year, that cost sits on top of maintenance, staff and marketing for a single property. A single villa may also struggle to meet the investment value required for the chosen KBLI. A PT PMA tends to make sense for genuine, multi-unit accommodation operators with a business plan, local management and budget for compliance. For a holiday home you use a few weeks a year, it is usually the wrong tool.
“A PT PMA is a business you have to run every month. If you only want a house, you are buying a company you do not need.” — Jack, Bali property adviser
Which Ownership Structure Fits Your Plans?
No structure is universally best. The right answer depends on who you are, what you plan to do with the property and how long you plan to hold it. This table is a starting point for a conversation with your lawyer, not a substitute for one.
| Buyer scenario | Candidate structure (conditional) | Residency or business conditions | Ongoing compliance | Critical checks | Reasons to reject |
|---|---|---|---|---|---|
| Occasional holiday home | Lease, if title and lessor are clean | Art. 45(b) refers to domiciled foreigners; lawyer to confirm the lease’s lawful basis for a non-resident | Lease terms, PBB-P2 allocation, maintenance | Remaining term, extension wording, building handover clause | Unclear lessor authority, unconfirmed legal basis, or short remaining term at a long-term price |
| Foreigner buying a home to live in | Hak Pakai, if eligible and property qualifies | Immigration document under PP 18/2021 (visa, passport or residence permit) that the land office will accept | Maintain eligibility, renewal applications | Minimum price for province and type, land category, plot limits | Property cannot be converted, price below threshold, required document not accepted locally |
| Non-resident seeking a villa lease | Notarial lease deed on a confirmed legal basis | Lawyer to confirm, for this transaction, whether statutory Hak Sewa or a Civil Code lease applies | Contract monitoring, local manager if renting | Assignment and sublet rights, permitted use | Seller insists on nominee freehold or cash outside the deed |
| Genuine accommodation business | PT PMA holding HGB or a lease | Correct KBLI, capital and investment tests, zoning | LKPM, tax, licences, staff obligations | Zoning for tourism, PBG, SLF, OSS licence status | Zoning prohibits accommodation, investment thresholds unachievable |
| Multi-property operator | PT PMA with professional management | Licensed activity per location | Full corporate and tax compliance | Investment value per location, staffing, insurance | Business case relies on unlicensed operation |
| Resale planned within 10 years | Long-remaining lease or eligible registered right | Buyer pool must also be eligible | Document trail kept current | Years remaining at your intended exit, transferability | Exit market too narrow or lease too short to resell |
If you want a simple way to work through it, use this decision order:
- Decide whether the property is for personal use or a genuine business.
- Confirm your eligibility: the legal basis of a lease for your domicile, the immigration document accepted for Hak Pakai, or company and investment capacity for a PT PMA.
- Check the underlying land title and whether it can lawfully support your structure.
- Confirm permitted use under zoning and the contract, including any rental intention.
- Calculate the remaining term and the realistic cost of extending or renewing.
- Test capital and running costs against your budget for the whole holding period.
- Plan your exit: who can legally buy from you, and how many years will remain.
Walking away is the right decision when the title cannot be verified, the zoning does not allow your intended use, the renewal cost is unaffordable or unknowable, or the deal depends on a nominee or unlicensed operation. In my experience, the buyers I’ve seen walk away from doubtful deals have rarely regretted it, while a rushed deposit on an unverifiable title can cost you everything you put in.
Australians and New Zealanders often ask whether their nationality changes anything. Under Indonesian land law it generally does not; the rules apply to foreigners as a category. What changes outcomes is immigration status and domicile, the purpose of the purchase and whether you are acting personally or through a company. An Indonesian citizen, by contrast, can hold Hak Milik directly, which is why mixed-nationality couples need clear advice on how title is held.
Purchase Costs, Taxes and Leasehold Economics
Headline percentages online are often quoted without saying which transaction triggers them. A lease is not taxed like a transfer of registered land rights, and a share sale in a PT PMA is not taxed like a land sale. Here is a cost framework, as at October 2026; actual figures depend on regional regulations, the property and your adviser’s calculation.
| Cost item | Leasehold (Hak Sewa) | Registered right (Hak Pakai or HGB) | Notes as at October 2026 |
|---|---|---|---|
| Price or lease premium | Upfront or instalment rent | Purchase price | Negotiated; minimum price rules apply to foreign Hak Pakai homes |
| BPHTB (acquisition duty) | Not generally triggered by a lease | Owed by the acquirer; for a sale, Law No. 1/2022 Art. 49(a) ties the taxable moment to signing the binding sale agreement (PPJB) | Rate capped at 5%; Article 46(5) sets a non-taxable allowance of at least IDR 80 million for the taxpayer’s first acquisition in the region; proof of payment is needed before the PPAT signs the transfer deed |
| Seller or lessor income tax | Lessor’s final tax on rent | Seller’s final tax on transfer | Commonly 10% on land and building rent and 2.5% on many transfers; who bears the cost can be negotiated, but liability and withholding follow the tax rules |
| Notary or PPAT fees | Notary fee for the lease deed | PPAT fee for the transfer deed | PPAT honoraria are capped at 1% of transaction value under PP 24/2016 |
| Legal due diligence | Independent lawyer | Independent lawyer | Fee varies by scope; budget for it before paying a deposit |
| BPN administration | Limited | Registration, conversion and checks | Based on official schedules plus processing costs |
| PBB-P2 (annual land and building tax) | Statutory taxpayer per the assessment; reimbursement often allocated in the lease | Statutory taxpayer per the assessment, commonly the right holder | Law No. 1/2022 covers persons with rights over land, benefiting from land, or owning, controlling or benefiting from buildings; NJOP minus a non-taxable NJOP (at least IDR 10 million), a 20–100% assessment percentage, rate capped at 0.5% |
| Company costs | Only if leasing via a company | Required for HGB via PT PMA | Incorporation, accounting, tax, LKPM and licences each year |
| Extension or renewal | Negotiated with lessor | Application fees and possible charges | Never assume today’s price will apply in 25 years |
Keep three ideas apart: when a tax obligation arises, when it must be paid, and who pays for it under your contract. For a sale, Law No. 1/2022 Article 49(a) treats signing the PPJB as the taxable moment for BPHTB, so the obligation can arise before the final transfer deed. In practice, the PPAT will not sign the transfer deed until proof of BPHTB payment by the buyer and the seller’s 2.5% transfer tax is produced. Payment deadlines and validation steps are set by implementing and regional rules, so get your PPAT to confirm the timing for your regency in writing. A contract can shift the economic cost, but not the legal liability.
The same logic applies to annual and lease taxes. For PBB-P2, the statutory taxpayer is whoever the law and the assessment notice (SPPT) identify, which is not always the certificate holder; a lease may simply require the tenant to reimburse it. Check the SPPT and local rules rather than assuming. On leases, the 10% final tax on land and building rent is the lessor’s tax; where the tenant is a designated withholding agent, such as a company, the tenant must withhold it, while an individual tenant usually leaves the lessor to pay it. The Directorate General of Taxes publishes guidance at pajak.go.id, and your tax adviser should confirm how it applies to your deal.
Let’s run the numbers properly: suppose, hypothetically, you pay IDR 3 billion for a brand-new 25-year Bali lease. That works out at IDR 120 million per contracted year (3,000,000,000 ÷ 25) before maintenance, tax, insurance, management or any building costs. Now imagine you want to sell after 10 years. A buyer is looking at 15 years remaining. Even if they valued each year at the same IDR 120 million, the lease would be worth about IDR 1.8 billion on that simple basis. In reality, buyers often discount further because short remaining terms carry renewal uncertainty and are harder to finance or resell. The building may also have aged. This is purely an illustrative calculation, not a valuation.
Now a separate, equally hypothetical registered-right example. Assume a foreign individual buys a qualifying Bali landed house under Hak Pakai for IDR 6 billion, that the BPHTB assessment base equals the price, and that this is the buyer’s first acquisition in the regency, so the IDR 80 million allowance applies. BPHTB at an assumed 5% would be roughly (6,000,000,000 − 80,000,000) × 5% = IDR 296 million. If PPAT fees were set at 1%, that adds up to IDR 60 million. The example excludes legal review, BPN and conversion fees, any VAT if buying from a VAT-registered developer, any luxury-goods sales tax that may apply to high-value residences, agent commission and PBB-P2 arrears. The assessment base, allowance and rate must be checked against the actual regional regulation and the PPAT’s quote.
Why a cheaper lease is not always a cheaper purchase
A villa listed at IDR 2.2 billion with 14 years left can be more expensive per year than one at IDR 3.5 billion with 28 years left. Divide the price by the years remaining, add the cost of any work needed, and then look at extension wording. And keep rental income in perspective. Gross rental revenue is what guests pay. Net operating income is what remains after platform commissions, management fees, staff, utilities, maintenance, vacancy, taxes and licence costs. From running my own villa, the gap between those two numbers turned out larger than I first expected, and many first-time owners I speak with have found the same. I cannot tell you what any particular villa will earn, and you should be wary of anyone who claims to know.
Can You Rent Out a Leasehold or Hak Pakai Villa?
This is where many buyers mix up separate questions. Having the legal right to occupy a villa does not mean you may sublet it, and being allowed to sublet does not mean the building may be used as commercial accommodation or that you are authorised to run a hospitality business. Each question has its own answer and its own documents:
- Right to occupy: comes from your lease or Hak Pakai certificate and covers you living in the property.
- Right to sublet: comes from the lease contract, which may forbid, permit or condition subletting.
- Permitted building use: depends on spatial planning and zoning, plus a building approval (PBG, Persetujuan Bangunan Gedung) and a certificate of fitness for use (SLF, Sertifikat Laik Fungsi) consistent with the use.
- Authority to operate a business: requires a licensed entity registered in OSS under the right KBLI, with standards and permits for its risk level under PP 28/2025.
- Tourism and local requirements: may include regional accommodation registration, tourism tax obligations and local community or banjar arrangements.
Hak Pakai held by a foreign individual is designed for residential use and does not by itself give that individual permission to run a short-stay rental business. Where commercial accommodation is lawful, it generally needs a properly licensed operator, which for a foreigner usually means a PT PMA or an arrangement with an Indonesian licensed operator, subject to legal advice.
Location makes a real difference, but not a uniform one. Parts of Canggu and Seminyak have dense tourism development, yet zoning still varies plot by plot, and some land there remains in green or agricultural zones. In Ubud, rice-field views are often exactly why a plot is protected from development. A row of villas listed online in the same street does not prove that the plot you are looking at is zoned for accommodation. First thing I check on any villa is whether the zoning, PBG and SLF match what the seller says the villa is used for.
An Airbnb-style listing, a booking calendar or a spreadsheet of past income is not proof of legal eligibility. Those numbers may come from an operation that was never licensed. If a seller’s main pitch is the rental income, ask for the business licence, the KBLI, the PBG and the SLF before you discuss price.
“Guest reviews prove a villa is popular. They prove nothing about whether it is allowed to take guests.” — Jack, Bali property adviser
Property Ownership Rules Across Indonesia
The national categories, meaning Hak Milik, Hak Sewa, Hak Pakai and HGB, apply across the country under the UUPA and PP 18/2021. What varies is local: minimum prices for foreign residential acquisitions under Decree 1241/SK-HK.02/IX/2022 (September 2022), regional spatial plans, local tax regulations, tourism permissions and how the local land office processes applications. Rather than guess provincial price figures, the table below compares the concrete checks that tend to matter in each place.
| Location | Common foreign interest | Typical structure questions | What to check locally |
|---|---|---|---|
| Bali (Canggu, Seminyak, Ubud) | Leasehold villas, foreigner-owned homes, rental villas | Lease legal basis, Hak Pakai conversion from SHM, PT PMA for rentals | Plot zoning, LP2B agricultural protection, tourism permits, banjar arrangements |
| Jakarta | Apartments, executive housing | Whether the building qualifies for foreign unit ownership; SHMSRS issued | Land right under the building (HGB or Hak Pakai) and its expiry, building management |
| Lombok | Coastal land leases, tourism projects | Lessor authority over family or customary land | Coastal setbacks, land-claim history, special economic zone rules where relevant |
| Surabaya | Business-related housing and apartments | Company-held rights versus personal Hak Pakai | Apartment land right, city spatial plan |
| Bandung | Residential homes and apartments | Hak Pakai eligibility of the specific plot | Hillside and green-zone restrictions |
| Yogyakarta | Long-stay residential, cultural areas | Whether the land is available for foreign-held rights at all | Special Region land status, including Sultanate and Duchy land, local agrarian policy |
Minimum prices for foreign home purchases differ by province and by property type. The decree’s published Bali figures are covered in the Hak Pakai section above; for any other province, ask your PPAT to confirm the figure in the decree’s schedule for your property type and whether any later implementing rule applies. Never apply a Bali landed-house figure to an apartment, or to another province.
Picking a location is where personal preference meets legal reality. A Canggu villa that suits a surfer, an Ubud home that suits a retiree and a Lombok coastal lease each carry different zoning, renewal and resale questions, and budgets stretch very differently across them.
If you are still deciding between Canggu, Ubud or somewhere quieter, a short questionnaire about your budget, intended use and rental expectations can help narrow the options.
Treat any shortlist as a starting point for due diligence, not an endorsement of title or zoning.
Due Diligence Before Signing a Property Contract
Generic checklists miss the point that each structure carries different risks. Here is the order I would follow, adjusted for leasehold, Hak Pakai or company-held HGB:
- Get the certificate details. Obtain a copy of the SHM, SHGB or Hak Pakai certificate, including certificate number, holder name, land area and, for HGB or Hak Pakai, the expiry date and underlying land category.
- Run an official BPN check. Have a notary or PPAT conduct a certificate check at the local land office to confirm the holder, cadastral boundaries, registered mortgages (Hak Tanggungan), blocking notes and disputes. Compare the cadastral map with what is on the ground.
- Verify identity and authority. Confirm the ID of every holder and, for inherited land, all heirs. Spouses may need to consent for joint marital property. For a company seller, check its deed of establishment, director authority and shareholder approval.
- Check zoning and agricultural status. Confirm the regional spatial plan zoning for your intended use, whether the land is protected agricultural land (LP2B) and whether conversion is lawful and complete. Do not rely on a seller’s promise that conversion “will be easy”.
- Check the building. Confirm the PBG covers the building as built and that an SLF has been issued where required. Unapproved extensions, pools or extra bedrooms can create compliance problems later.
- Review the contract thoroughly. For a lease, check its legal basis, extension, termination, assignment, subletting, death of either party, default, building surrender and resale clauses. For a registered right, check the PPJB or sale agreement, payment escrow, conditions precedent and when BPHTB will fall due.
- Confirm buyer eligibility. For Hak Pakai, confirm your immigration document is accepted and the property meets the minimum price and type rules. For a PT PMA, confirm the company’s OSS registration, KBLI, capital, LKPM filings and licences.
- Calculate taxes and costs. Get written calculations for BPHTB, seller tax, PPAT or notary fees, BPN charges, PBB-P2 arrears, and annual running and compliance costs.
- Use independent professionals. Engage an independent Indonesian property lawyer and a qualified notary or PPAT as appropriate, plus a tax adviser, before transferring funds. Your adviser should not be paid by the seller.
“The certificate tells you who holds the land. The zoning map tells you what you can do with it. You need both before you need the contract.” — Jack, Bali property adviser
The Ownership Structure I Would Choose
This is my personal view, not legal advice. If I were buying a holiday home without living here, I would look for a well-drafted lease with a confirmed legal basis, a long remaining term, a lessor with clear authority and an extension clause with a defined price formula. If I were living here, held an immigration document the land office accepts and had a qualifying budget, I would seriously consider Hak Pakai because the right is registered in my own name. I would only form a PT PMA if I genuinely intended to run an accommodation business with enough scale to justify the capital, investment and compliance obligations.
When I left Perth for Bali, I had the same instinct most Australians have: I wanted something that felt like owning a house back home. Building and running my own rental villa taught me that the paperwork matters as much as the bricks. Renovation budgets overrun, maintenance in tropical humidity never stops, occupancy moves with the seasons, and the relationship with the landowner carries on long after the contract is signed. None of that is a reason not to buy. It is a reason to buy with your eyes open and your exit plan written down.
Before paying any deposit, get independent legal and tax review of the specific property. If it would help to talk through a specific villa’s title, remaining term or permitted use before you instruct a lawyer, I am happy to point out what to ask and which documents to request.
Have a villa in mind and want a second pair of eyes on the tenure, title type and intended use before you commit? Send me the details for a practical first look.
I can explain the property-right information and walk you through a due-diligence checklist, but I am not a licensed Indonesian lawyer or tax adviser. Any final decision should rest on independent professional advice for your circumstances.
Frequently Asked Questions
Can foreigners own freehold property in Indonesia?
No. Under Indonesia’s Basic Agrarian Law No. 5/1960, Hak Milik freehold is reserved for Indonesian citizens and certain specially designated Indonesian legal entities. A foreign buyer cannot obtain personal freehold by using a local nominee or establishing a PT PMA. Lawful alternatives may include a lease, qualifying Hak Pakai or company-held HGB.
What is the difference between Hak Pakai and leasehold in Bali?
Hak Pakai is a registered right to use land, available to eligible foreign individuals holding the required immigration documents, provided the property meets the price, type and land conditions. Leasehold is based on a contract with the landowner and does not create a registered land title. The better option depends on immigration status, property eligibility, intended use, remaining term and contractual protections.
How long can a foreigner lease land in Indonesia?
A Bali land lease commonly starts with a negotiated term of around 25–30 years, but this is market practice rather than a universal statutory maximum. UUPA Article 45(b) refers to foreigners domiciled in Indonesia, so non-residents should have a lawyer confirm the lease’s legal basis for their specific transaction. Distinguish the original lease duration from the years remaining, and never assume a promised extension is automatic.
Can a foreigner buy a villa through a PT PMA?
A properly established PT PMA may hold qualifying property rights, including Hak Guna Bangunan, where the company and its activities meet Indonesian requirements. The foreign investor owns shares in the company, not personal Hak Milik freehold. Paid-up capital, investment-value tests, licensed business activities, taxation and ongoing reporting can make this structure unsuitable for a small personal holiday home.
What happens when a leasehold villa expires in Bali?
When a lease expires, the contractual right to use the property generally ends unless a valid extension or new lease has been agreed. The treatment of buildings, fixtures and improvements depends on applicable law and the contract. Buyers should obtain clear written provisions on renewal pricing, notice periods, assignment, compensation and surrender before paying.
Can I rent out a property held under Hak Pakai?
Hak Pakai does not automatically authorise a foreign individual to run a commercial holiday-rental business. Eligibility, the property title, contractual restrictions, zoning and accommodation licensing must be assessed separately. Before advertising short stays, obtain legal confirmation of the permitted use and check whether a licensed business structure and operator are required.
Fazit
Foreigners cannot hold Hak Milik freehold in Indonesia. The lawful routes are a lease with a confirmed legal basis, a registered Hak Pakai for eligible foreign individuals buying a qualifying home, or registered rights such as HGB held by a properly licensed Indonesian company. Each has a different holder, term and risk profile, as set out in the comparison table above.
The practical test I apply is simple: could you explain to a land office, a tax officer and a future buyer exactly who holds the right, for how long, and what the property is allowed to be used for? If the answer is yes and the documents back it up, you have a structure worth considering. If any part of that answer depends on a promise, a side agreement or an unlicensed rental history, walk away and keep looking.
For official information, start with ATR/BPN for land rights and the foreign home price decree, the Ministry of Investment/BKPM for PT PMA capital and investment rules, the Directorate General of Taxes for transaction tax guidance, and the Directorate General of Immigration for immigration documents. Your independent lawyer and PPAT should confirm everything for the specific property.
Disclaimer: This article provides general information about Indonesian property rights as at October 2026. It is not legal, tax, immigration or financial advice. Laws, regulations, thresholds and administrative practice can change and may be applied differently by region. The author is not a licensed Indonesian lawyer, notary, PPAT or tax adviser. All calculations are hypothetical and do not predict prices, rental income or returns. Obtain independent advice from qualified Indonesian professionals before signing any agreement or transferring funds.
