Leasehold in Indonesia: What Dutch Investors Need to Know

How does leasehold work in Indonesia? An explanation of Hak Sewa, Hak Pakai, PT PMA, and the differences compared to Dutch ground lease (erfpacht). Including common mistakes.

The concept of ‘leasehold’ is one of the biggest hurdles for many Dutch investors looking into real estate in Indonesia. You buy a villa, but you do not own the land. That can feel unusual. However, leasehold is the standard structure in Indonesia — even Marriott, Hilton and Novotel use it. In this article, we explain how it works.

What is leasehold?

Leasehold (Hak Sewa) means you have the right to use a piece of land for an agreed period of time. Everything built on it — the villa, swimming pool, garden — belongs to you. You can rent it out, live there yourself, and in many cases resell it together with the remaining lease term.

Compare it to ground lease (erfpacht) in Amsterdam. It has existed for more than a hundred years and nobody worries about it. The difference: in Indonesia, leasehold is often the only option for foreigners because full land ownership (Hak Milik) is reserved for Indonesian citizens.

The different ownership structures

Hak Milik (Freehold)

Full land ownership, forever. Only available to Indonesian citizens. As a foreigner, you cannot obtain this, not even through an Indonesian partner — unless specific legal arrangements such as a prenuptial agreement apply.

Hak Pakai (Right of Use)

Available to foreigners with a residence permit (KITAS/KITAP). Term: 30 years, extendable up to a total of 80 years. However, it is tied to personal use — commercial rental is not automatically permitted.

Hak Sewa (Leasehold)

The most flexible option for investors. You lease the land, own the building, and may rent it out commercially. Typical term: 25 to 30 years, with extension options included in the contract.

HGB through PT PMA

If you establish an Indonesian company (PT PMA), you may obtain an HGB right: the right to build on land for 30 years, extendable for a total of 50 years. This is how most serious developers and hotel groups structure their projects.

How long does a lease last?

The standard term is 25 to 30 years. It is also possible to agree extension options with the developer — often another 20 to 25 years. In practice, this can provide security for 50+ years.

What happens afterwards?

The honest answer: it depends on your contract. If the extension is included with clear terms, it is already arranged. If it is not included, the extension must be negotiated and formalised at the end of the lease. If it is not extended, the villa will generally revert to the landowner at the end of the lease.

Always check: is the extension explicitly included? Is the price fixed or indexed? Is it registered with the notary (PPAT)? And has it been reviewed by someone who does not work for the developer?

Mistakes you want to avoid

Only relying on the developer’s notary. They represent the interests of the developer, not yours. Always hire your own legal advisor. It costs €1,500–€2,500 and is some of the best money you can spend.

Focusing only on the view (and forgetting zoning rules). A beautiful piece of land does not automatically mean you can build on it. If you accidentally invest in protected agricultural land (‘Green Zone’), you will not receive a building permit. Always demand written proof that the land has a tourism or residential designation.

Not checking the land certificates. Before signing: verify that the landowner has the right to lease the land, that there are no claims on the property, and that everything is registered with the land office (BPN).

Is leasehold safe?

Yes, if it is structured properly. The risk is not in the model itself — it is in the execution. A bad contract with an unreliable developer is dangerous. A strong contract with a reputable party is solid.

Resale

Yes, you can resell a leasehold villa. You sell the right to the remaining lease term together with the building. Naturally, a villa with 28 years remaining on the lease is worth more than the same villa with only 8 years left. Keep this in mind when planning your investment horizon.

Tax in the Netherlands

For the Dutch Tax Authority, it does not matter whether your property is freehold or leasehold: the value is included in Box 3. The withholding tax paid in Indonesia (20%) can be offset through the tax treaty.

Read also: Paying tax on real estate in Indonesia as a Dutch investor

Summary

Leasehold is not something to fear. It is comparable to ground lease. It has worked for decades for thousands of foreign investors and the world’s largest hotel chains. The key: a strong contract, a reliable developer, and an independent legal review.

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