A leasehold counts down; freehold does not. Most foreign-held Bali villas sit on 25–30 year leases, so part of each year’s “return” is the holder’s own money coming back before the land reverts, and the same headline yield is worth much less on a lease than on freehold. Price the remaining term, the extension terms and the exit. Information only.
Why are most foreign-held villas leasehold?
Because foreigners cannot hold Hak Milik, Indonesia’s freehold title, which is reserved for Indonesian citizens. A lease of 25–30 years is a real, workable structure — but it is a countdown, not ownership for ever.
The long-term alternatives are HGB (Hak Guna Bangunan, a right to build and hold buildings on land) through a PT PMA, a foreign-owned Indonesian company, or Hak Pakai, a right of use. See how foreigners hold property and which structures foreigners can use. Not legal advice.
Why does a lease change the yield?
On a lease, part of each payment is your purchase price coming back to you, not income. A freehold owner keeps the land at the end, so would not count that part as yield.
On a 28-year lease, about one twenty-eighth of the price — roughly 3.6% a year — has to come back each year just to recover what you paid. So an 8% yield on a 28-year lease is worth far less than 8% on freehold. Illustrative — not financial advice.
What should you price in?
- The term left, and the cost and certainty of any extension.
- The resale value to a buyer as the term runs down — a villa with 10 years left sells for far less than one with 25.
- The exit — whether a sale or a refinance still works with fewer years left.
See planning an exit from Bali property.
Does that make leasehold a bad choice?
Not at all — it is a different product, and it should be priced as one. A lease with plenty of years left, clear extension terms and a sensible price can work well. The mistake is paying a freehold price, or trusting a freehold-style yield, for something that runs out. If the plan is to hold for decades, compare the lease with longer structures such as HGB through a PT PMA. See security over HGB and a PT PMA. Illustrative — not financial advice.
Sources: Ascendure commentary. Not legal advice. General information about the Indonesian market, not legal, tax or financial advice.
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