The Ultimate Guide to Buying Property in Lombok: Can Foreigners Own Land in Indonesia?
Lombok, the "unspoiled Bali," has recently emerged as a popular destination for tourists and property buyers seeking a more relaxed and laid-back atmosphere than Bali's overcrowded beaches and bustling towns. But can foreigners actually buy land or property in Lombok? And if so, how does the process work? This article aims to answer these and other questions related to owning land, buying real estate, and living in Lombok as a foreigner. Whether you're a retiree looking for a peaceful retreat, an investor seeking to capitalize on Lombok's growth potential, or simply a curious traveler, this guide will provide you with valuable insights and practical tips to navigate Lombok's property market and legal framework. So, let's get started!
First things first, let's address the elephant in the room: can foreigners own land in Indonesia? The answer is yes, but not directly. To simplify the structure, a foreigner can establish a company, and your company can own the land or property. Let’s dive in...
The safest way for foreigners to acquire property in Indonesia is to register a PT PMA, which enables you to acquire freehold land and properties in the name of your company with the Hak Guna Bangunan (HGB) title. PT PMAs are eligible to hold this title for a maximum of 80 years, and it is the closest a foreigner can get to a lifetime Hak Milik title reserved for Indonesian nationals. Through the PT PMA, you reserve a greater degree of control over the land and property than a regular leasehold, and especially over using a nominee.
What is the difference between HGB and Hak Milik?
To explain, the highest land title in Indonesia is called Hak Milik (Right of Ownership), more commonly known as “Freehold Title”, and this right is only given to a citizen of Indonesia. This basically means that a foreigner can never own a property indefinitely in Indonesia; however, if you have a PT PMA company, you can buy a property in Indonesia and acquire a Hak Guna Bangunan, or HGB (Right to Build) title, which is the highest title a foreigner can obtain.
In an HGB title, the PT PMA is registered as the owner and has full rights to transfer, sell, or split the property, whereas Hak Pakai and Hak Sewa (used for leasing land) only grant an individual the right to use the land/property, thus he/she cannot transfer the title without the landlord’s consent. Another advantage is that HGB can be converted back to Hak Milik if the land is sold to an Indonesian national, granting better flexibility when it comes to selling the property.
It's possible to purchase any land or property with the PT PMA regardless of the zoning, but nevertheless, you should consider the land zoning so you can obtain the permits and business licenses for your property that meet the needs of your development. For example, forest zoning limits construction to 10% of the total plot.
With HGB, your PT PMA company’s name will be on the land certificate registered in the Indonesian Land Office. It is initially valid for 30 years extendable to 50 years right away, and renewable for another 30 years – in total 80 years. After that, you can establish a new company and sell the assets to yourself. I hope we all can enjoy such an exceptional lifespan! But it’s worth noting for the purposes of inheritance. One other benefit of buying a property through PT PMA is that you and your purchase are protected by the law in cases of any dispute.
How do I acquire a property using a PT PMA?
First, you’ll have to register a new PT PMA or acquire an existing one, you can set up a 100% foreign-owned PT PMA in the Hospitality Management category for a short-term villa rental or the Real Estate category for a long-term villa rental. Your business can only have three areas of operation so make sure to chose areas in which you plan to operate.
You can acquire property in the name of your PT PMA immediately after the company’s Articles of Association have been approved and the company’s tax card has been issued which usually takes around 2-3 weeks.
After striking a deal for a property, the next step is agreement signing and title transfer. A Binding Sale & Purchase Agreement (PPJB) will be drafted with the name of your PT PMA. Once both parties have signed the agreement, the Land Office will convert the land certificate from Hak Milik to HGB, and the deal is finalized by signing the Sale and Purchase Agreement (AJB) and paying the tax for the transaction; 5% for the buyer and 2.5% for the seller.
How do I establish a PT PMA?
Shareholders/Commissioners and directors of the PT PMA
At least two shareholders are required (President Director and President Commissioner) for the establishment of a PT PMA. At least one of the shareholders needs to be a foreign individual. The Director needs to reside in Indonesia to take care of all daily activities. The foreigner who works and resides in Indonesia is required to obtain a tax number (NPWP).
If you are husband and wife wanting to be assigned President Director and President Commissioner you will need a prenuptial agreement.
Minimum (Paid Up) Capital Requirements for the PT PMA
For the establishment of a PT PMA, the foreign investor needs to comply with minimum capital requirements for foreign investment. Currently the minimum requirement stands at IDR 10 billion. The Indonesian government set a high requirement in order to attract large scale companies and investors, while protecting smaller sized local businesses.
Paid up capital is generally set at 25% of the minimum capital requirement (IDR 2.5 billion). In practice, however, it frequently occurs that a PT PMA is established without the foreign investor needing to transfer the paid up capital to an Indonesian bank account. The shareholders of the PT PMA can sign a Capital Statement Letter pledging that the paid up capital can be transferred (without ever transferring it).
Ready to establish your PT PMA?
If you would like to begin the process of establishing your PT PMA, we highly recommend contacting Ibu Oni Monica Lawyer who can begin the process for you.*
She can also assist with due diligence on any plots you're interested in, as well as handle contracts, land certificates, registration of ownership changes and visas.
Her contact details are:
Ibu Oni Monica Lawyer
Now you have a good foundation of knowledge on the PT PMA process, it's probably time to start searching for the perfect plot. Start your search here!
*While we work closely with Ibu Oni, it's important to note that she operates independently from PT South Lombok and her services will be charged separately.
Although we do our best to keep up with the legal landscape in Indonesia, we cannot guarantee the accuracy of this information and it is not legal advice.