What Foreign Companies Must Know Before Entering Lombok
Lombok is fast emerging as one of Indonesia’s most promising investment frontiers, especially in tourism, hospitality, and real estate. For foreign investors (especially from Europe) eyeing Lombok’s natural beauty, lower land prices versus Bali, and growing infrastructure development, the opportunity is real. However, Indonesia’s property and land laws remain complex, especially for non-Indonesians. To successfully invest in Lombok as foreigner, foreign companies must carefully navigate regulatory, structural, and strategic dimensions.
Key Legal & Ownership Frameworks: What Every Foreign Company Should Understand
- Indonesia’s Agrarian and Land Law Foundation
- The foundation for land and property is Undang-Undang Pokok Agraria (UUPA) No. 5 of 1960 (Basic Agrarian Law). This law reserves freehold ownership (Hak Milik) exclusively for Indonesian citizens and stipulates alternative property rights for others.
- Because of this, foreign entities cannot simply buy land outright (in their own name) with permanent ownership. They must rely on other legal structures and lease or usage rights.
- More recent regulations especially Government Regulation No. 103 of 2015 and Permen ATR 29/2016 clarify how foreigners may obtain certain land use rights like Hak Pakai (Right to Use) for residential or noncommercial purposes.
- Ownership or Right Titles That Foreigners Can Use
Foreign companies (or foreign nationals) typically use one or more of the following legal instruments to hold property in Lombok:
| Right / Instrument | What It Means | Typical Term / Extension | Who Can Hold It | Key Constraints / Notes |
| Hak Pakai (Right to Use) | A right to use and benefit from land | Often up to 80 years (initial + renewal) in practice | Foreigners or foreign-owned companies | Especially for residences; must respect the designated use; renewal clauses must be drafted carefully.
Important note: foreigners cannot directly hold Hak Milik (freehold title) under Indonesian law. Thus, for a foreign company entering Lombok, structuring through a PT PMA is often the most practical approach (especially for commercial real estate or tourism ventures). |
| Hak Guna Bangunan (HGB, Right to Build) | Right to build on land you don’t own | Often 30 years, renewable (can extend up to total 80 years in certain cases) | Indonesian legal entities, including PT PMA (foreign investment companies) | Most commercial developments use HGB; the certificate is held in the name of the entity. |
| Leasehold (Hak Sewa / lease agreement) | Contractual lease (land or property) for a limited period | Common 25–30 years or more (negotiable) | Foreigners or companies | Often simpler for residential or small projects; must register with land office. |
| PT PMA (Foreign Investment Company) holding land rights | A fully foreign-owned Indonesian company that acquires HGB or Hak Pakai | As per the underlying right (HGB or Pakai) | Foreign investors through PT PMA | Gives more control over property, facilitates commercial operations (e.g. villas, hotels). |
Why Lombok? Investment Prospects & Strategic Advantage
Before diving into regulations, let’s understand why Lombok is attractive to a foreign company:
- Lower land and property costs compared to Bali
Many investors today see Lombok as “the next Bali” — prices are lower, and there is more room for growth. - Increasing infrastructure development & connectivity
New roads, airports (Lombok International Airport), ferry links, and government focus on tourism support make Lombok more accessible. - Tourism growth & niche segmentation
Lombok attracts surfers, nature lovers, wellness retreats, and future eco-tourism projects. It presents opportunities in boutique hospitality, resort villas, wellness centers, and event venues. - Regulatory support for foreign investment
Indonesia’s broader investment climate is gradually opening (e.g. via omnibus laws and revised regulations) to attract foreign capital.
Concluding Thoughts
Lombok offers compelling upside for foreign investors, lower entry cost, growth potential, and natural appeal. But the road is not simple: Indonesian land law, bureaucracy, regional variation, and regulatory risk demand a careful, well-structured approach.
For foreign companies aiming to invest in Lombok:
- Use a PT PMA to hold property under HGB or Hak Pakai
- Always conduct full due diligence
- Negotiate strong, enforceable contracts
- Secure all permits before major spending
- Optimize tax, repatriation, and compliance from the start
If you’re serious about property and development investment in Lombok as a foreigner, establishing a PT PMA is almost always the more robust choice compared to depending on a local entity or nominee scheme. A PT PMA gives clearer legal standing, more control, and the ability to own land via HGB. But it also demands higher capital, greater compliance, and more upfront work.
Get free professional consultation with IndoNed Consultancy, your trusted partner for foreign investment and company setup in Lombok.
Disclaimer
The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.
