Leasehold in Prime Resorts: Pricing a Term-Bound Right

A term is not a title#

The question a foreign buyer asks in a prime resort market is usually the wrong one. The question is "can I own it," and the honest answer in most of these markets is no, not the way the word is meant at home. What is on offer is a right to hold and use, granted for a fixed number of years, after which it reverts. The distance between that and freehold is the entire underwriting problem, and it is routinely collapsed into a single reassuring line in a brochure.

Zanzibar is explicit about this, and the statute leaves no room to soften it. Under the Land Tenure Act, all natural land in Zanzibar is vested in the President for the benefit of the people. An individual holds a Right of Occupancy over land, not the land itself, and that right is granted only to Zanzibaris above eighteen. Foreigners, including Tanzanians from the mainland, cannot be granted a Right of Occupancy by purchase. What a foreign buyer acquires instead is a long-term leasehold, and the leading route is the Condominium Act No. 10 of 2010, which permits foreign ownership of a unit on a 99-year lease, renewable in 33-year phases.

Indonesia arrives at the same place by a different statute and a shorter clock. The Basic Agrarian Law No. 5 of 1960 reserves Hak Milik, true freehold, for Indonesian citizens. A foreigner can never hold it. The resident foreign buyer holds Hak Pakai, a right of use, which under PP 18/2021 runs thirty years, extendable by twenty, renewable by thirty, and stops at eighty. The instrument differs, the substance does not: a term-bound right, priced against a calendar, sitting inside a freehold that belongs to someone else.

Tenure is an underwriting input, not a footnote#

The tenure structure is the first number the allocator prices, not the last. A resort asset generates a stream of use and income across a horizon. Freehold makes that horizon indefinite. A 99-year leasehold caps it at ninety-nine years minus whatever has already elapsed, and an 80-year right caps it at eighty. Every discounted cash flow, every terminal value, every assumption about what the asset is worth to the next buyer runs off that ceiling. Treat the ceiling as a footnote and the model is wrong before the first assumption is entered.

The reversion is the part the brochure never mentions. At the end of a leasehold term, absent renewal, the asset returns to the grantor, and in Zanzibar that grantor is the state. Renewal in 33-year phases is how the market is structured, but a renewal that depends on administrative grant is not the same as a right that never expires. The principal underwriting a ninety-nine-year term is underwriting the reversion and the renewal mechanism as much as the building, because those are what determine whether year ninety-eight looks like year two.

Zanzibar attaches a residence dimension to the same instrument, and it should not be confused with a tenure upgrade. A non-citizen can secure a residence permit by acquiring in a project approved by the Zanzibar Investment Promotion Authority, with a commonly cited threshold of at least US$100,000, extending to spouse and minor children. That is a migration benefit bolted onto a leasehold. It does not convert the leasehold into freehold, and it does not remove the countdown. Naming and pricing the two separately is the difference between an institutional read and a sales read.

What Zanzibar actually grants, and what it withholds#

The foreign route in Zanzibar is real, registrable, and bounded, and each of those three words carries weight. It is real because the Condominium Act No. 10 of 2010 gives foreigners a statutory basis to own a unit outright as leasehold, with the right to rent, resell, and bequeath. It is registrable because the interest is recorded, not merely contractual. It is bounded because the term is ninety-nine years, delivered in renewable 33-year phases, and because the underlying land never leaves the President's hands. The buyer who hears "almost all the rights of ownership" should attend to the word almost.

Direct leasing from a local right-holder is a weaker instrument than the condominium route, and the two are frequently blurred. A Zanzibari who holds a Right of Occupancy may lease to a foreigner, but those private leases are reported by practitioners as short, well below the 99-year condominium horizon. The 99-year figure that circulates belongs to the structured, ZIPA-channelled, condominium-titled route, not to every arrangement a seller may describe as a lease. The grade on the headline term matters: statute for the ninety-nine years, practitioner-reported for the phase cadence, and considerably softer for anything transacted outside the approved channel.

The institutional read is that Zanzibar offers a clean but finite title, and finiteness is not a defect to hide. A ninety-nine-year leasehold is a perfectly underwritable instrument. It is underwritable precisely because its limits are legible. The error is not buying leasehold; the error is paying a freehold price for it, modelling a freehold terminal value, and assuming a resale market that prices the term the way the purchase ignored it. Legibility is the asset. The countdown is the cost.

Indonesia: the same problem, a shorter clock#

Bali is the market where the tenure ceiling is most often mis-sold, and the mis-selling is structural rather than incidental. The recurring line is that a foreigner can "own" a villa in Bali. Under Indonesian law a foreigner cannot hold Hak Milik, the only true freehold, which the Basic Agrarian Law No. 5 of 1960 reserves for citizens. What the resident foreigner can hold is Hak Pakai, and what a foreign-owned company can hold is Hak Guna Bangunan, a right to build. Both are term-bound, and both top out, on the current framework, at eighty years.

The eighty-year ceiling is measured from the regulation, and the regulation itself has moved twice in a decade. PP 103/2015 opened Hak Pakai to foreigners holding a residence permit. PP 18/2021, issued under the Omnibus Law on Job Creation, confirmed the 30+20+30 structure and expanded strata provisions. PP 28/2025 then adjusted the application process while leaving the eighty-year entitlement intact. That sequence is the point: the ceiling is legible today, but the instrument sits on regulation that a legislature can amend, which is a different risk profile from a freehold enshrined in a constitution.

The nominee structure that promises freehold-in-substance is the single most dangerous shortcut in the market, and it should be named as such. Arrangements where an Indonesian citizen holds Hak Milik on paper for a foreign beneficial owner are void under Indonesian law; the foreign party's protection is a private contract that the courts will not enforce against the statute. The marketing line writes itself and should be resisted. A term-limited right that is real and registrable is worth more than a freehold-shaped promise that is neither.

How a term-bound right is priced#

A term-bound right is worth less than a freehold, and the size of that discount is the whole question. In principle the mechanics are familiar: the value of a leasehold is the present value of the right to use the asset for the remaining term, plus, where relevant, the value of any renewal, discounted for the reversion the holder will eventually surrender. Two forces move together as the clock runs. The remaining income horizon shortens. The buyer pool for a short remaining term thins. Both push the discount wider, and both accelerate as the term gets shorter.

The only market that has turned this intuition into a measured curve is UK statutory leasehold, and it is worth borrowing as a mechanism while refusing to borrow it as a price. In England and Wales, valuers use relativity — the value of a leasehold expressed as a percentage of the freehold — and the curve is not linear. One peer-reviewed study puts the discount for a 60-to-69-year lease at roughly 12.5%, against roughly 6.4% for an 81-to-89-year lease. The discount roughly doubles as the term falls from the high eighties into the sixties. That is the shape of the thing: convex, steepening, unforgiving as the term compresses.

The UK also marks a threshold where the discount changes character, and the threshold is instructive even where it does not apply. Below eighty years of unexpired term, English law makes marriage value payable on a lease extension, split evenly between leaseholder and freeholder — a structural cost that appears precisely as the term crosses that line. Zanzibar and Bali have no equivalent statutory enfranchisement, so the number does not transfer. What transfers is the lesson: the discount is not a straight line, it has cliffs, and a resort leasehold with decades already elapsed is a different asset from a freshly granted one, even at the same address.

The resale problem nobody underwrites at entry#

The buyer who pays a freehold price for a leasehold has already lost the resale, and the loss is deferred, not avoided. At entry the term is long and the discount is easy to ignore. The problem surfaces at exit. The next buyer is purchasing a shorter remaining term, and if they underwrite the countdown that the first buyer waved away, they will price it in. The exit price carries the discount the entry price refused. This is why tenure is an entry-underwriting question, not an exit surprise: the discount exists the whole time, whether or not the first buyer chooses to see it.

Resort leasehold has a thinner and more opaque secondary market than the UK statutory analog, which makes the discount harder to measure and easier to misprice in both directions. There is no published relativity graph for Zanzibar or Bali. There is no tribunal record generating a curve. What exists is broker commentary, transaction by transaction, in markets where comparable evidence is scarce and often self-reported by the party selling. The honest position is that the leasehold-to-freehold discount in these markets is real but not measured, and any single figure offered for it is broker-reported until triangulated against independent transactions.

Currency, registry, and enforcement sit underneath the tenure question and can dominate it. A term-bound right is only as good as the registry that records it and the courts that enforce it. Title registration quality, the reliability of renewal at phase boundaries, foreign-exchange access on exit, and the enforceability of the lease against the state or grantor are all inputs the allocator prices alongside the term itself. A ninety-nine-year leasehold in a jurisdiction with a clean registry and reliable renewal is a stronger asset than a longer nominal term in a jurisdiction where either is in doubt.

The end-of-leasehold risk, honestly disclosed#

The central weakness of every instrument discussed here is that it ends, and pretending otherwise is the one error the allocator cannot afford. A 99-year Zanzibar leasehold and an 80-year Bali Hak Pakai both terminate. Renewal is the mechanism that extends them, and renewal in both markets depends on administrative or regulatory continuity rather than an absolute statutory guarantee identical to freehold. The reversion is real. The question is not whether the term ends but whether renewal is dependable enough, and priced cheaply enough, that the reversion never bites in practice.

The Bali entitlement rests on regulation that has changed three times since 2015, and a framework that moves is a risk even when each move has been benign. PP 103/2015, PP 18/2021, and PP 28/2025 have so far preserved or clarified the foreign position. None guarantees the next revision will. The allocator underwrites not only the current eighty-year ceiling but the probability distribution of future regulatory change over a multi-decade hold. That is a genuine, unhedgeable exposure, and it is understated whenever the eighty-year figure is quoted as if it were permanent.

The measurement gap is itself a weakness, and it cuts against the seller as often as the buyer. Because no relativity curve exists for these markets, the discount cannot be precisely stated, which means a buyer can overpay and a seller can undersell with equal ease. Victaura does not publish a single leasehold-to-freehold discount for Zanzibar or Bali, because we cannot source one to the standard we would require. We would rather quote a range and grade it broker-reported than manufacture a false precision that a model would then treat as fact.

Finally, the nominee and "structured freehold" temptation remains the largest tail risk in both markets, and it is a legal risk, not a valuation one. Where a structure promises freehold economics to a foreigner the statute forbids from holding freehold, the structure is exposed to being unwound, and the foreign party's recovery may be a contract claim the courts decline to enforce. This risk does not appear in a discounted cash flow. It appears all at once, and it is the reason a modest, registrable, term-bound right is the conservative position and the freehold-shaped promise is not.

Where the marketing line fails#

The demand behind these markets is genuine and measured, which is exactly why the tenure question deserves discipline rather than dismissal. Zanzibar recorded 736,755 international arrivals in 2024, up 15.4% and a record, with 2025 press-reported above that. The visitor economy is not the speculative part of the thesis. The speculative part is the leap from strong demand to "therefore ownership is safe," a leap the tenure structure does not support. Strong demand raises the value of the use-right. It does not extend the term or remove the reversion.

The line that fails is the one that sells a countdown as a title. "Own a piece of paradise" describes a freehold and is being applied to a leasehold. The correction is not to walk away from the market; it is to price what is actually on offer. A ninety-nine-year right to a beachfront villa in a market growing at double digits is an attractive instrument when bought at a leasehold price, underwritten to a leasehold terminal value, and exited to a buyer who is told the truth about the remaining term. It is a poor instrument when bought at a freehold price on a freehold story.

The institutional read reconciles the two halves that the brochure keeps apart: real demand, finite tenure. Both are true at once. The allocator who holds them together — pricing the visitor economy into the income and the countdown into the terminal value — is underwriting the asset that exists. The buyer who holds only the first half is underwriting an asset that does not.

The operator advantage#

Term-bound tenure rewards the operator who treats the countdown as a variable to be managed, not a constant to be endured. Renewal is not automatic paperwork; it is a process with timing, cost, and counterparties. An operator embedded in the jurisdiction — one that manages the registry relationship, the phase-boundary renewals, the residence-permit compliance, and the exit mechanics — carries a different risk on the same instrument than a distant owner who bought a story. The tenure discount is partly a discount for management difficulty, and management difficulty is what an operator exists to remove.

The advantage is not a promise of return; it is a reduction of the specific frictions that make a leasehold trade below a freehold. Clean title work at entry, disciplined renewal at each phase, honest disclosure of the remaining term at exit, and structures that stay inside the statute rather than around it — these are the operator's contribution to value, and they are the reason a well-run leasehold can narrow, though never close, the gap to freehold. The friction is the cost. Removing friction is the work.

What this means for the allocator and their advisor#

The allocator's first task in any of these markets is to establish, in writing, what is being bought, and to refuse to proceed until that is unambiguous. Freehold or leasehold. If leasehold, how many years remain, on what statute, with what renewal mechanism, in what registry, enforceable against whom. In Zanzibar the answer is a 99-year leasehold under the Condominium Act No. 10 of 2010, renewable in 33-year phases, on land vested in the President. In Bali it is an 80-year Hak Pakai or Hak Guna Bangunan under PP 18/2021. Neither answer is disqualifying. Not having the answer is.

The second task is to price the countdown, not to wish it away. A leasehold is worth less than a freehold, the discount widens and steepens as the term shortens, and no published curve exists for these markets to tell the allocator by how much. The disciplined response is a range, graded broker-reported, tested against whatever independent transactions can be found, and applied to both the entry price and the terminal value. The advisor who lets a client pay a freehold price for a leasehold, on a demand story, has mispriced the one variable that the structure makes unavoidable.

The third task is to underwrite the tail: regulatory change, renewal failure, and the voidness of freehold-shaped shortcuts. These do not appear in the base-case model. They appear at the reversion, at the next regulation, or in the court that declines to enforce a nominee contract. Pricing them means holding a modest, registrable, term-bound right in preference to a freehold-shaped promise, and treating the eighty-year Bali ceiling as regulation-dependent rather than permanent.

Skin in the game disclosure. Victaura, through its parent Greystone B.V. (Netherlands), holds an active operating position in Zanzibar. Readers should assume that commentary on this market may be influenced by, or may benefit, Greystone's existing position. This document is classified as marketing material under MiFID II Article 24(3). It is not investment advice.