The leasehold maths nobody shows you
Someone shows you a Canggu villa. Rp 6 B, 25-year lease, netting Rp 500 M a year after costs. That is an 8.3% return and everyone nods.
It is not 8.3%.
The lease is being consumed
You did not buy an asset that holds its value. You bought 25 years of use, and every year you own it, one of those years is gone. At the end there is nothing to sell unless the landowner agrees to extend — and the price of that extension is his decision, not yours.
Spread the purchase price across the term and it costs you Rp 240 M a year in capital before you count a single expense. Take that off the Rp 500 M and the real return on capital is closer to 4.3%.
That is still respectable. It is roughly what an Indonesian time deposit pays, with considerably more work and considerably more risk. The point is not that leasehold is bad — most of the good stock in Bali is leasehold. The point is that you should know which number you are looking at.
Year twelve is not year one
The trap in the resale market is that a lease with 13 years left is often advertised at close to what it cost with 25. Sellers anchor on what they paid. A lease at the halfway point is worth materially less than half, because the last years are the hardest to sell — nobody wants to buy into a term that is about to run out.
As a rough guide, we treat anything under 15 years as a business purchase rather than a property purchase. You are buying cash flow you can extract before the clock stops, not an asset.
What to actually ask for
- The remaining term in writing, from the certificate, not the agent
- Whether extension is agreed, at what price, and whether that is in the deed or a side letter
- What happens if the landowner dies — does the lease bind his heirs
- Whether you can assign the lease to a buyer without his consent
The fourth one matters more than people expect. A lease you cannot sell without permission is a lease you may not be able to sell at all.
