7 Things to Consider While Buying Land in Lombok as a Foreigner

Lombok, an emerging gem in Indonesia’s tourism and real estate landscape, is gaining traction among investors. With its serene beaches, breathtaking natural beauty, and strategic government initiatives like the Mandalika Project, Lombok offers a promising future for property investments.

In this article, we will explore the prospects of real estate development in Lombok, understand the legal landscape of foreign property ownership in Indonesia, and uncover why Lombok is a compelling alternative to Bali for foreign investors.

Understanding Lombok Property Market Prospect

Lombok’s property market is growing, driven by government investments and increasing demand from local and international buyers. With competitive land prices and untapped development opportunities, Lombok is a rising star in Indonesia’s real estate sector.

Why Foreign Investors Should Buying Land in Lombok

Lombok’s real estate market benefits from:

• Strategic Government Initiatives: Projects like the USD 3 billion Mandalika Project and the new international airport in Praya are driving infrastructure growth.
• Affordable Land Prices: Compared to Bali’s average of USD 1,000 per square meter, Lombok offers land for as low as USD 230 per square meter, making it highly attractive for investors.
• Tourism Growth: Lombok is part of Indonesia’s “10 New Balis” initiative, which aims to diversify tourism beyond Bali. Its natural beauty and tranquil beaches continue to attract international and local travelers.

Is It Worth Investing in Lombok?

Investing in Lombok offers a mix of affordability, growth potential, and lifestyle appeal. Its strategic location and government-backed infrastructure projects make it a standout destination for real estate investors.

Advantages of Investing in Lombok

• Untapped Potential: Much of Lombok needs to be developed, offering significant opportunities for growth and high returns on investment.
• Alternative to Bali: With Bali experiencing over-tourism, Lombok emerges as a quieter, more affordable option with similar appeal.
• Infrastructure Expansion: New roads, airports, and resorts are enhancing accessibility and boosting property values.

Potential Challenges

• Zoning Restrictions: Buyers must ensure the land is zoned for commercial or residential use.
• Legal Complexities: Foreign investors must comply with land ownership regulations in Indonesia to avoid disputes or invalid transactions.

Can Foreigners Buy Land in Indonesia?

Foreigners can buy land in Indonesia under specific conditions, though outright freehold ownership is restricted. Understanding the legal framework is essential for secure investment.

• Hak Pakai (Right to Use) is a renewable legal title for property use that is valid for up to 70 years.
• Hak Guna Bangunan (Right to Build): This ownership allows the holder to build on and use the land for up to 30 years, extendable for 20 years or more.

These options provide foreign investors with secure property access while adhering to Indonesia’s land ownership regulations.

How Much Does It Cost to Build in Lombok?

Building a property in Lombok is relatively affordable, especially compared to Bali or other major destinations. Costs depend on location, materials, and labor availability, so budget planning is crucial:

• Location: Coastal areas and proximity to Mandalika see higher prices.
• Materials: Locally sourced materials reduce costs, while imported materials increase them.
• Labor: Labor in Lombok is relatively affordable compared to Bali, averaging USD 5-10 per day for unskilled labor and higher for specialists.

Usually, building a standard villa in Lombok costs:

• Mid-Range: USD 500 to 800 per square meter.
• Luxury Villas: USD 1,000+ per square meter.

Requirements for Foreign Property Investment in Indonesia

Investing in property as a foreigner in Indonesia requires adherence to strict regulations and legal processes. Proper planning, documentation, and engaging the right professionals can ensure a smooth transaction.

• Obtain the Right Title: Foreigners must use titles like Hak Pakai (Right to Use) or Hak Guna Bangunan for legal compliance.
• Engage Professionals: Work with local notaries, legal advisors, and real estate agents to verify documents and ensure zoning compliance.
• Follow Zoning Laws: Confirm that the land is in an area designated for the intended purpose, such as residential or commercial use.

Restrictions for Foreign Property Investment

Foreign property ownership in Indonesia comes with limitations designed to protect local interests. These restrictions affect the type of ownership, minimum property prices, and the legal frameworks involved.

• Ownership Type: Foreigners cannot own freehold property (Hak Milik) directly.
• Price Thresholds: The government mandates minimum property prices for foreign buyers, e.g., IDR 10 billion in Jakarta for houses, and lower thresholds in other regions.
• Building Restrictions: Permits like IMB (Izin Mendirikan Bangunan/Building Permit) must be obtained before construction.

Things To Consider While Buying a Land in Lombok

Purchasing land in Lombok requires careful due diligence to ensure a secure and profitable transaction. Key considerations include verifying land ownership, zoning compliance, and obtaining the necessary permits.

Who is the Owner of The Land?

Ensure the rightful owner of the land by confirming their valid land certificates and inheritance documents.

Tax Payment

Duly confirm if the previous owner has paid all the taxes, as unpaid taxes could prevent them from obtaining a building permit (Izin Mendirikan Bangunan).

Land Zoning

Ensure the purchased land lies in a commercial zone, as some zones prohibit commercial activities.

Building Permit

Acquire a building permit IMB (Izin Mendirikan Bangunan) and ensure compliance with the zoning law before building on the purchased land. Otherwise, the building will be prone to demolition by law.

Land Infrastructure and Border

To avoid future disputes with neighbors, double-check the actual size of the bought land, confirm the legal accessibility of the linking road, and eradicate the possibility of any boundary overlapping.

Limited Property Access

When buying, foreigners must ensure they possess the right to use the road linked to the property and are not subjected to future disputes or charges.

Sales and Purchase Agreement

Conduct the transaction as a Sales and Purchase Agreement (SPA) signed by both parties. The SPA requires a valid document, such as a Marriage Agreement, Prenup, or Postnuptial document, which must be lodged at the land registry office for further proceedings.

Types of Property Foreigners Can Own in Lombok

Foreigners have several options for acquiring property in Lombok, depending on their goals and legal status. These range from leasehold arrangements to properties under specific titles:

1. Leasehold Land: Long-term leases with usage rights.
2. Condominiums: Purchased under the Hak Pakai title.
3. Investment Land: Acquired through a locally registered entity (PT PMA).

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Buying Land in Lombok Securely with InCorp

It is essential to have a clear understanding of land acquisitions and investing in Lombok. InCorp offers quality due diligence that will help you gain insights into the land values and potential issues, giving you confidence in making a final decision for closing the deal.

Furthermore, InCorp provides the necessary information and guides you through all the steps of the Business Investment Process, such as preparing a list of potential investments and analyzing the shortlisted investments. InCorp will assist you in setting up your land and property investment plan in the most secure way.