Investing in Lombok’s Booming Market

Invest in visionary opportunities

Lombok, the ‘new Bali,’ has been attracting private and large-scale investors. South Lombok region presents promising, secure opportunities for those looking to invest ahead of the curve.

Belong among Indonesia’s expat community

Lombok’s natural beauty has attracted a welcoming and culturally diverse expat community that enjoys gathering around the many white sand beaches, hidden bays and world-class surf.

Thrive in Lombok’s growing market

With strong infrastructure, increasing airline routes, high-profile events like Moto GP, and new international schools, South Lombok promises significant growth to potential investors

Investing

Lombok has become the go-to island for those looking to invest in Indonesia but seeking the authentic charm of a tropical paradise. With a thriving tourism industry and robust infrastructure attracting expats from around the globe, investment opportunities in South Lombok are endless.

Purchasing real estate in Indonesia and more specifically in Lombok can have its challenges. Before considering investing here, it is important to understand the different legal structures and potential obstacles that may come your way.

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HAK MILIK

Reserved to Indonesian nationals, these freehold titles have the strongest form of ownership in Indonesia. The title is registered with the National Land Agency and extends to all fixtures on the land.

HGB (PMA)

HGB certificates can be owned by foreigners for up to 80 years through a PMA company. This right entitles its owner to build and possess buildings on the land. The title is registered with the National Land Agency and is freely transferable.

HGB ownership through a PMA company is the safest title foreigners can have in Indonesia.

Hak Pakai

This right grants the permission to use the land for a specific purpose that is negotiated in advance. The title is registered with the National Land Agency. However, it can only be transferred to a third party upon permission of the landowner.

Hak Sewa

This right is substantially similar to the right of tenancy. It derives from a primary land title and is hence not registered with the National Land Agency. It is neither transferable nor can it be encumbered. It is valid for the time negotiated in the lease or rental contract. There are no other time limits fixed by law.

Establishing a PMA in Indonesia isn’t difficult with the help of a lawyer or notary. Although, it is important to understand the rules and regulations that should be followed:

Classification of the Business Activity

The first important aspect of establishing a PT PMA is to determine which Indonesian Standard Classification of Business Fields ("KBLI") your business falls under. The KBLI is used as a reference for business scope, business risk classifications, required business licenses, and other important matters, such as the eligibility basis for fiscal incentives for the business activity.

Foreign Share Ownership of the Business Sector

In general, based on the Positive Investment List introduced by the government, a business sector is open to 100% foreign investment unless it is subjected to a specify type of limitation, such as closed business sectors or open business sectors with specific requirements. The company should check whether its business activity falls under the exception classifications as stipulated under its KBLI.

Investment Plan and Capital Requirements

The Head of the National Investment Coordination Board ("BKPM") regulates that a PT PMA shall have investment value of more than IDR 10 billion. The relatively high threshold is set to protect local small businesses from foreign competitors and to encourage foreign investment in large-scale business. However, it should be noted that this minimum capital requirement is not meant to be a frozen asset and may be used for the company's investment plans.

Shareholder Structure

At least two shareholders are required for the establishment of a PT PMA. These shareholders can be individuals, legal entities, or a combination of both. Some business sectors specifically require legal entities to be shareholders.

PT Management

In general, the stipulations regarding company management for PT PMA are the same with PT PMDN. A PT shall have a minimum of one director and one commissioner. However, the Indonesian Manpower Law prohibits foreigner director to do tasks related to Human Resources. Certain business activities also requires an Indonesian citizen to hold director and commissioner positions.

While the Nominee Structure is commonly used to acquire properties, it's important to understand they represent a gray area in Indonesian law. While not strictly illegal, it's not explicitly recognized or protected by Indonesian property law.

The primary risk is that the nominee is the legal owner of the property. If a dispute arises between you and the nominee, you might find that your legal standing is weaker than you expected. Moreover, changes in the nominee's personal circumstances, such as death, bankruptcy, or legal issues, can significantly affect your property rights.

For that reason, PMAs offer greater protection to investors. Although the land is owned for 80 years, the shareholders of the PMA have the right to buy, build operate and sell properties. It is also freely transferable and can be used as a security.

With a PMA, shareholders can also apply for an Investor Visa which grant them the right to stay in the country.

Like for any investments, in Indonesia or abroad, it is essential to conduct a proper due-diligence before signing a Sales and Purchase agreement. These are the most common due diligence items

Scrutinizing agreements and property documents

Cross-verify land certificates and ownership documents with the National Land Agency (BPN) to ensure their authenticity.
Checking the actual size of the land compared to the certificate.
Conducting background checks on sellers.
Verifying pre-existing agreements that may grant certain rights to your land (access roads, irrigation, or other utilities).
Making sure the land is accessible, with access to electricity and water.

Our agents will be there to help you during that process

Disclaimer

As we are not qualified legal advisers, we can only provide a general information. For those wanting full legal advice, one needs to get qualified legal advice.

If you wish further information, we recommend that you contact a Lawyer/legal adviser or speak with a notary, who can help to answer any legal questions which you may have.