Southeast Indonesia: A guide for investors and developers in Lombok, Sumbawa, and Flores
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The document is a guide for investors and developers focusing on the growing tourism and property market in Lombok, Indonesia. It outlines various tourist hotspots, infrastructure developments, and the increasing demand for villa plots, indicating that Lombok is becoming a more attractive destination compared to Bali. The report highlights the rise in visitor numbers, real estate investment opportunities, and significant potential for future growth in the region over the next few years.
Southeast Indonesia: A guide for investors and developers in Lombok, Sumbawa, and Flores
- 1. A Guide for Investors and Developers 2014 | Issue 1 S o u t h e a s t I n d o n e s i a • Lomboks Tourist Hot Spots • The Gilis • Kuta and Southern Lombok • Senggigi • Lombok Tourism Growth • Villas and Villa Plots • Bonus: Foreign Buyers Guide to Indonesian Property Law
- 2. Welcome to Southeast Indonesia 01 Focus On Lombok 02 Lombok Tourist Development 03 News Bites: New projects, Rumors and Hot Areas 04 Lombok’s Growing Tourist Market 06 Villa Plots Take Off 09 Villa Plot Market in Lombok 09 Senggigi Area 10 Gilis 14 Kuta Area 18 Bonus: Foreign Buyers Guide to Indonesian Property Law 22 CONTENT
- 3. Welcome to Southeast Indonesia. We represent an international team, based in Lombok and Singapore. In addition to property brokerage, our projects in Southeast Indonesia include innovative hospitality solutions, high end hotels, villas and villa plots, with more to come. From the Gilis to Lombok, Sumbawa to Flores, Southeast Indonesia has come into its as a destination for both visitors and investors. And with land prices still significantly lower than Bali, potential returns remain high. We created Southeast Indonesia Property to help other investors navigate through this exciting emerging market, by providing safe guidelines and transparent processes. It is our hope that you find the information in this magazine informative and helpful as you learn about this exciting, growing area. www.southeastindonesiaproperty.com 01
- 4. Focuson Lombok Bali’s sister island has come alive this year with new projects, increases in tourism arrivals, infrastructure improvements and steadily rising property values. Outside factors have also helped to raise interest in Lombok. Much of Bali’s prime land is only available for lease; this fact, when coupled with prevailing high prices, has shrunken the profit margin significantly in Bali. With opportunity cost relatively lower and hotel occupancies often higher than those in Bali, Lombok has become a more attractive location. Nationally, Indonesia’s middle class of over 100 million people continues to become more affluent, pumping more and more discretionary spending into the national economy. All of these factors combine to make Lombok’s ascendance as a new prime tourist destination no longer a dream but a reality. bet on Lombok over the last 20 years for a number of reasons. The physical and cultural proximity to Bali being a major one. The west of the island, for instance, supports a large Balinese population, who have brought many of their traditions and culture to Lombok. Physically, Lombok contains hundreds of small white sandy bays backed by rugged mountains, creating virtually unlimited picture perfect beachfront areas. This island also sports Mt. Rinjani, one of the tallest peaks in Indonesia, visited by thousands of trekking enthusiasts each year. Rinjani as well as the well established tourist areas of Senggigi and the Three Gilis also give Lombok an existing tourism infrastructure which will enhance and support the future growth of the island. For years, Lombok has been hailed by visitors and investors as “The Next Bali”. While tourist growth and property values have consistently risen, the island has yet to see explosive growth of the sort experienced by Bali over the last six years. In 2013-14, however, we have witnessed a new wave of property investment, many completed projects, skyrocketing visitor numbers and hotel occupancy rates, as well as greatly improved access to the island and regions within the island. All of these indicators suggest that real change is converging on Lombok, likely leading to a tipping point within the next 3 – 5 years. While Indonesia possesses thousands of beautiful islands, many locals and foreigners have 02
- 5. 03 Lombok’s Tourist Development The Three Gilis and Mt. Rinjani of North Lombok, and Senggigi of West Lombok have hosted visitors for many years, providing the foundation for Lomboks tourist industry. The Kuta area in the south is now growing fast, while Sekotong, Tanjung Ringgit and the small giilis surrounding Lombok are attracting interest as future destinations. Well Established Tourist Areas Rapidly Growing Tourist Areas Future Tourist Areas
- 6. 04 Aston Branded Luxury Villa Project Attracts Attention to West Lombok Royal Kamuela Villas, a 50 unit residential villa complex located in Meninting, Lombok, between Senggigi and Mataram, is reporting over 70% of units sold in the projects starting phase of development. The project is being managed by Archipelago International, formerly the Aston Group. The success of the project, with units reportedly priced between US$400,000-800,000, signals Lomboks coming of age as a destination, as it begins to attract high profile projects which formerly were only seen in Southern Bali. The location suggests that suburban Meninting may be moving towards becoming a higher end villa and residential area, and that other properties on the less expensive outskirts of the tourist epicenters of Senggigi, Kuta and the Gilis may hold strong potential as well. Private Island Development in East Lombok Slated for 2014 Ocean Blue Resort on Gili Sanut, East Lombok, will complete sometime in 2014, according to Ocean Blue Group. The resort will be a unique development in the area, as it is formed by a working partnership between the groups Singapore based investors and the local government. Ocean Blue will develop and manage an entire 7.5 hectare island for their high end private resort. In order to fulfill their obligations, the developers were required to meet certain environmental qualifications, as well as build new residences and infrastructure on the mainland for the islands former residents. The project will undoubtedly not only open up East Lomboks secluded beaches and islands to more high end development, but pave the way for similar projects on government owned land in the future. NewsBitesNewprojects,rumorsandhotareas
- 7. 05 New Projects Open Up the Northwest Lombok Coastline Lomboks northwestern coastline provides spectacular ocean cliffs, white sand beaches fringed by coconut palms, and tall mountains covered in tropical foliage. Colorful sunsets over the ocean and Bali’s Mt. Agung are a popular draw for both locals and tourists, who are served by the hundreds of small food stalls offering fried corn, fish and other local flavors along this popular route between the Three Gilis and Senggigi. Until recently, the area sported only a few hotels and villas among the fishing villages; new developments, however, suggest that this area will soon become a new tourist hub for West Lombok. KERANDANGAN Up until the 1990s, the bay and small village of Kerandangan marked the end of the paved road in the north; its small valley was and still is known as a haven for expats in search of privacy. 2013 saw both the soft opening of Svarga resort, a high end bungalow and hotel complex, as well as the construction of a new large seaview villa plot development. A seperate large hillside development was started in Q2 2014. TELUK NARE AND BANGSAL These bays are known primarily as the jumping off point for private and public boats heading between Lombok and the Three Gilis. In the future, however, they may become known as destinations themselves. While the Gilis abound in restaurants, bars and guesthouses, the infrastructure on the islands is still limited, as is the amount of small plots available for private villas. With their lower prices, fantastic views and proximity to not only the Gilis but the towns of Tanjung, Senggigi and Mataram, the hills around Teluk Nare and Bangsal have begun to be noticed by investors. Several new villa projects are currently under construction in the area, from private units to larger complexes. NIPAH Situated almost perfectly halfway between the Gilis and Senggigi, Nipah bay may be the area to watch over the next several years. The areas brilliant white sand beach, turquoise waters, sunset views of Mt. Agung and rugged mountainous backdrop add even more to its attraction. 2012-13 has seen a flurry of activity and improvements on the beachfront and nearby hillsides, suggesting this area may become a crucial link between the already developed areas of Senggigi and the Three Gilis. Half of the beachfront has already been broken into small plots for boutique hotel developments, with one already in progress. Villa plots are currently being sold on one of the nearby hillsides, with many more planned in the future.
- 8. 06 Lombok’s Growing Tourist MarketNew direct flights and greater awareness fuels a sharp rise in visitor numbers and hotel occupancy The hotel sector in Lombok has experienced strong positive growth over the last few years, which can easily be seen in rising occupancy rates, construction of new city and beach hotels, as well as growing tourist arrivals. These strong fundamentals, as well as new infrastructure development, government promotion of local tourism and the development of new regions for tourist expansion all contribute to the areas strong outlook. Lombok lies directly to the east of Bali and has many cultural similarities to its famous neighbor. In fact, Lombok’s diverse blend of Balinese Hindu, Sasak, Arab, Javanese and Chinese cultures makes it unique in the area; simultaneously familiar to visitors who have already experienced Bali, as well as a new experience in and of itself. As Bali experiences more overcrowding and infrastructure problems, many visitors are being drawn to the more pristine island of Lombok as an alternative. Lombok features well established destinations such as Senggigi, the Three Gilis (Gili Trawangan, Gili Air, and Gili Meno), Mt. Rinjani, and Kuta. Sekotong and East Lombok also feature many as yet untapped potential resources for diving, trekking and surfing, while the city of Mataram attracts local business travelers and students from throughout Eastern Indonesia. In addition to these advantages, Lombok serves as a hub and gateway to other growing destinations in Southeast Indonesia, such as Sumbawa and Flores. VISITOR ARRIVALS Between 2001 and 2012, total arrivals to Lombok by plane grew at a compound annual growth rate of 15.2%, according to data released by Badan Pusat Statistik Indonesia (BPSI). 208%Increase in visitor arrivals, November 2013 over November 2012 In 2001, air arrivals totaled 181,429 passengers. By 2012, arrivals by plane had grown to 858,710. By the end of 2013 the early effects of the new airport and increased direct flights was even more evident; Lombok International received 5,386 new visitor arrivals in November alone, a 208% increase over the previous year. These numbers are expected to increase significantly by 2015, with
- 9. HOTEL VISITORS AND OCCUPANCY The most dramatic growth seen in recent years was the 61.8% jump in international guests to star rated hotels from 2011 to 2012. This increase could continue over the next several years, as more direct flights make the island accessible to growing numbers of international visitors. In 2012, the most popular country of origin for international visitors was Singapore, followed by the UK, Malaysia, Germany and France. These numbers reflect the fact that prior to the addition of direct flights from Australia in late 2013, the potentially lucrative Aussie market was largely untapped. 61.8%Growth of international visitors to star rated hotels, 2011-2012 While international arrivals, particularly Australian, may provide the strongest growth over the next several years, Indonesia’s robust and increasingly well-heeled domestic travelers still form the bulk of hotel arrivals. With domestic guests now outnumbering Australians and Japanese in Bali, we could expect to see this trend continue in Lombok as well. According to BPSI, total arrivals to star rated hotels grew from 165,953 to 369,855 between 2007 and 2012, a compound growth rate of 17.4%. Of the 369,855 arrivals in 2012, 253,642 were domestic visitors, with the remaining 116,213 from abroad. 2010 to 2012 saw a 20% increase in 1-5 star hotel rooms, from 1,931 rooms in 2010 to 2,794 in 2012. Three and four star hotels constitute the bulk of these rooms, with 35% and 40%, respectively. the anticipated additions of more direct flights from Australia, Malaysia, Hong Kong and Singapore, as well as increased domestic flights. Currently the newly completed Lombok International Airport sees 8 direct flights per week from Singapore, 7 per week from Kuala Lumpur and 4 per week from Perth, Australia. Domestic destinations such as Jakarta Bali, Surabaya, Sumbawa, Jogjakarta and Makassar are served by over 220 direct flights per week. Additionally, many visitors from Bali opt for a direct speed boat either to the Three Gilis or to Senggigi. There are currently dozens of operators ferrying passengers every day of the week, with rates and travel times competitive with local flights. 07 The new Lombok International Airport currently hosts 239 regular scheduled domestic and international filghts per week.
- 10. According to data published by HVS research, hotel occupancy in Lombok grew from 56.4% in 2010 to a healthy 70.2% in 2012. 70.2%Avg. occupancy 2012 Due to a number of factors such as increasingly better access, overcrowding in Bali, a growing domestic market, well established tourism areas and increased international exposure, the future of the hotel business in Lombok looks very positive both in the short and long term. Silent watcher over Mataram’s Mayura Hindu temple Far Left : Total arrivals to star rated hotels, 2007 and 2012 Left : Star hotel guests point of origin, 2012 08
- 11. 09 Villa Plots Take Off The supply of build-ready villa plots in West Lombok is still very limited despite rising customer demand. This, coupled with views that are simply unavailable in much of Bali, as well as prices that are far lower than Bali, will continue to contribute to rising values and buyer interest in Lombok villa plots. The upper right graph compares the rising value of undeveloped plots (average size 5000 M2 ) in Seminyak, Jimbaran, and Canggu with the price of undeveloped seaview hillside plots in West Lombok (avg. size 1 Hectare +) and developed villa plots in West Lombok, from year-end 2007 to year-end 2013. Bali data is based on surveys published by Knight Frank, Lombok data is based on original market research. The discrepancy between the relative value rise of developed villa plots with undeveloped hillsides in West Lombok likely reflects the current limited supply of developed plots, which can be expected to continue for the next several years. As the upper left graph shows, while the necessary initial investment is higher than 2007, the relative profit potential from the development and sale of hillside villa plots in West Lombok is currently much greater than ever before. VILLA PLOT MARKET IN LOMBOK Purchase of unimproved land in emerging areas for the purpose of creating and reselling villa plots has been an investor favorite in Bali and Lombok for years. Significant returns can be achieved with, depending on the plot, a small amount of infrastructure work. Where to purchase, expected returns and turnaround time largely depends on the area chosen. MATURE MARKETS Senggigi, Montong, Meninting, Batu Layar, Kerandangan. Multiple completed, sold, and ongoing projects. Most unimproved land has been purchased by investors. EMERGING MARKETS Mangsit, Malimbu, Kuta, Selong Belanak, Torok, Gerupuk, Nipah, Bangsal. Multiple projects in planning, already begun, and for sale. Some locally owned land remaining, strong investor interest, expect to become mature market in 2-5 years. MatureMarkets EmergingMarkets % Gross Profit West Lombok Villa Plot Development Rise in Value 2007 - 2013
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- 13. Senggigi Area
- 14. 012 Senggigi is the most well established tourist hub on the island of Lombok, with growth picking up significantly over the last several years. The town itself is a small, densely developed enclave situated around several crescent shaped bays, providing plenty of locations for sunset drinks, meals, walks and swimming. There are several popular higher end restaurants, A. Gili Trawangan, Air, Meno Dense low to high end hotels B. Sire Golf course, low density Five Star hotels. C. Bangsal, Teluk Nare Private boats to Gilis, new villa projects D. Malimbu, Nipah, Pandangan Planned boutique hotels and villas E. Mangsit High end hotels and villas, planned high end hillside villas F. Central Senggigi Dense low to mid range hotels, restaurants G. Montong Local entertainment, low to mid range hotels, high end hillside villas H. Meninting Mid range local housing, high end villa projects, commercial I. Mataram Mixed local housing, low to mid range city hotels, dense commercial although prices are still quite low compared to Bali or Jakarta. These are supplemented by a variety of international bakeries, hotel restaurants, seafood grills and more. The road from Mataram and the new airport leads through the quickly developing areas of Meninting and Montong. Among the hills and valleys of these areas can be found some of Lomboks oldest expat neighborhoods, while along the main road new clubs catering to tourists and local students pop up continually. Empty land directly off the main road as well as towards the beach is quickly being converted to suburbs for the local housing market. North of the town, towards the Three Gilis and North Lombok, the highway runs through a series of breathtaking bays and hillsides loved by visitors and locals for their breathtaking views. Watch these areas around Nipah, Malimbu, Kerandangan and Pandangan to quickly fill up with hotels and villas over the next several years.
- 15. 013 Successful projects and private villas in Meninting, Kerandangan, Mangsit and around the northwest coastline have prompted a flurry of new building and roadworks for future projects. Before 2015, new projects are expected to open up in Montong, Mangsit, Batu Layer, and Nipah. A limited number of small plots available, rising demand and high occupancies should keep the finished villa and villa plot market going strong for the next several years. North of Senggigi features many half moon bays such as Malimbu, Nipah and Pandangan. These areas are already famous for their panoramic sunsets and street vendors of fried fish and corn, however developments have so far been limited to small private villas. The first larger projects to open up the area have begun in Nipah, with more undoubtedly on the way over the coming years. Due to its well established status, growing villa and hotel market, and strategic location between Mataram and the Gilis, we can expect the Senggigi area to remain as a premium and safe investment for some years to come. Pictures (counter-clock wise) : 1. Beachfront private villa in Kerandangan 2. Antique wooden furniture graces a hillside villa 3. Beachfront villa plot in Teluk Bora, north of Senggigi 4. View from Malimbu Point
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- 17. Gilis
- 18. 016 Pictures (from top to bottom) : 1. The small islands of East Lombok, near Tanjung Ringgit 2. The “Southern Gilis” near Sekotong 3. Government owned islands in East Lombok and Sumbawa 4. The famous “Three Gilis” or Air, Meno and Trawangan in North Lombok Thirty years ago, Lombok’s Gili Trawangan was a forgotten island, occupied only by itinerant fisherman. Today the small island is alive 24 hours per day with nightlife, diving schools, backpacker guesthouses and luxury accommodation. This car and motorbike free island has always held a special draw with visitors, whether they be divers or simply backpackers wishing to relax with a beer on its white sand beaches. Trawangan’s neighbors, Gili Air and Gili Meno have also taken off in recent years. Both support the same car free getaway island culture, but with less of Trawangans famous party-all-night hedonism. Gili Meno is known as the quietest, popular with honeymooners and snorkelers who wish to explore the reefs directly in front of their guest house door. Gili Air, the smallest of the three, offers a combination; while most of the perimeter is covered in small wooden guesthouses and bars, the island still sports a quiet, low key and exclusive vibe. While the three Gilis of North Lombok are the regions most famous, there are also many other small Gilis in the Sekotong area, just a 30 minute speedboat trip south of Senggigi. With a new harbor in Sekotong, and the growing amount of speedboats serving Senggigi and the northern Three Gilis, the beautiful Southern Gilis may not stay hidden for long either. Eastern Lombok, Northern Sumbawa and Flores all contain many small, almost deserted islands similar to the famous Gilis as well. Sunset over Bali from Gili Trawangan
- 19. 017 The Three Gilis are famous for their coral reefs and native turtle habitats. Visitors can view the underwater flora and fauna through snorkels or by taking a dive course at one of the many schools on the islands. Over the last several years, all three islands have sprouted a number of high quality restaurants, villas and hotels as well. While there are still plenty of the backpacker bungalows that the islands are famous for, quickly rising land values and limited area should drive the opening of more high end facilities in the future. Gili Trawangans sunset side has remained relatively quite until recently. Today there are several new hotels and villa projects, with plans for more over the next several years. With stunning sunsets over Balis Mt. Agung nightly, it’s easy to see why. The land on Gili Trawangan, Meno and Air is all privately owned by individuals or PT companies. The other small islands around Lombok, Sumbawa and Flores offer a mixture of privately owned and government owned land. Several projects are currently in the works around the area to create government-private partnerships for the management of state owned islands, with the aim of increasing tourism while conserving the areas unique natural ecosystems. Small Gili near Tanjung Ringgit Gili Meno and Trawangan seen from Gili Air
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- 21. Kuta Area
- 22. 020 The Kuta area comprises a series of large white sand bays stretching from East Lombok to Sekotong in the west, all within around 45 minutes of the new airport. Add to this dozens of famous surf breaks, hillsides with ocean views from nearly every angle, and a planned 300 hectare resort development to support the whole area, and it’s easy to see why many investors have their eyes on Kuta. The 300+ hectare Mandalika resort area at the center of Kuta has seen many starts and stops over the years, mostly due to fallout from the Bali bombings and the 2008 global financial crisis. As of 2013, however, French hotelier Club Med had officially announced a partnership with Indonesian developer MNC group to manage the first stage of the resort complex, which would be built by MNC under the authority of the Bali Tourism Development Corporation (BTDC), the state owned company in charge of developing the site. Promoting even more speculation of big things to come, the entire Tanjung Aan beach was cleared of temporary restaurants and kiosks in late 2013, creating a wide clear beach for large developers. While the BTDC project has locked down most of the beachfront in the central Kuta area, there remain many beaches both to the west and to the east with plots still available. East of Kuta, Tampa, Mawun, Selong Belanak, Serangan and Torok Aik Belik abound in hillsides and beachfronts still available at low prices. With new paved roads putting these eastern bays as well as the western bays of Bumbang and Awang all under an hour from the new airport, the entire south is now open and simple to access. Kuta Area on Map
- 23. 021 Selong Belanak features nearly year-round greenery, a classic white sand beach, with jagged rock islands and hillsides peering out over the ocean. With these natural features it is easy to see why this bay west of Kuta has attracted attention over the years. New tarmac roads link the area directly to Kuta, the airport and later, Sekotong, making access better than ever. Prices have risen dramatically on the beachfront and flat land behind the beach, however there are several pristine hillsides with views of the bay and surrounding area still available from local owners, at relatively low prices. Although less famous than nearby Selong Belanak, Torok Aik Belik may contain some of the southern areas best “virgin territory”. Until recently the area was largely inaccessible, which may explain the pristine look of Torok’s cascading rice fields and long wide beachfront. Fortunately for potential buyers, land prices at Torok are still quite low compared to other bays in the south. A tarmac road linking Torok to Kuta and Selong Belanak is set to complete this year, while another link road connecting the bay to Sekotong and Mataram-Senggigi is also in progress. Tanjung Aan Beach of Central Kuta View of Selong Belanak from nearby Hillside Torok Aik Belik
- 24. 022 Bonus: Foreign Buyers Guide to Indonesian Property Law 1. Indonesian Land Titles The three most common land titles used when investing in Indonesian Property are Hak Milik, Hak Guna Bangunan and Hak Pakai. Hak Milik (Right to Own) This is what is commonly referred to as a “freehold” title. Hak Milik titles may be held by Indonesian individuals, state banks, agricultural cooperatives and specific social or religious groups. In order for a foreigner to have legal control over a property titled Hak Milik, they must have signed a set of legally binding documents with the Indonesian owner. Thee documents are commonly reffered to as a “Nominee Agreement”. Hak Pakai (Right to Use) A Hak Pakai titled property may be held by foreign individuals, Indonesian citizens, as well as foreign embassies, international organizations and social or religious organiza-tions. A Hak Pakai title may be placed over either state owned land or Hak Milik land. In the case of state owned land, the initial rights of use are valid for 25 years and may be extended for an additional 20. In the case of Hak Milik land, the rights to use will be valid for 20 years, but may be renewed pending the consent of the underlying owner. A Hak Pakai title can be considered a primary land title and is registered with the federal land bureau. Hak Guna Bangunan (Right to Build) A Hak Guna Bangunan (HGB) title may be held by Indonesian or foreign owned companies. These rights are given for an initial period of 30 years, may be extended for another 20, and may be renewed. All of the above titles may be sold, bequeathed or transferred. In most cases a property may be converted from one type of title to another. For example, if a foreigner wishes to purchase a Hak Milik property, they may apply to have the title converted to a Hak Pakai. Later if the foreigner wishes to sell the Hak Pakai titled property to an Indonesian citizen, the title may be converted back to a Hak Milik.
- 25. Other types of land titles in Indonesia include; Hak Guna Usaha Cultivation rights over state owned land. May be held by Indonesian inviduals, corporations, and foreign joint venture corporations. Hak Pengelolaan Rights to manage state owned land, given only to state owned companies and government institutions. It is possible for a HGB to be placed over a Hak Pengelolaan. Hak Memungut Hasil Hutan Right to crop forest products. Hak Membuka Tanah Right to clear land. Some properties have no title registered with the land office, but nonetheless are subject to a traditional claim within the village government. Properties have been claimed by a community or individual as their traditional or ancestral lands are referred to as customary lands. A common form of customary land is designated as “Sporadik”. These properties have been registered with the village head but not yet with the land bureau. Titles may be applied for and given over these properties following due process and payment of the applicable fees.
- 26. 2. Foreign Property Ownership in Indonesia Foreign Individuals Foreign individuals are legally allowed to possess a Hak Pakai registered land title. Hak Pakai titles are utilized by foreign individuals in order to possess a house or villa in Indonesia. A Hak Pakai may be held as the primary land title over a property, in this case the land is technically owned by the state, with the rights to its use granted to the foreign individual. For instance, a Hak Milik property that was sold to a foreigner could be converted to a Hak Pakai title. In this case the foreign individual’s title would be valid for an initial 25 year period with the possibility for another 20 year extension. According to Government Regulation Number 40 of 1996, the initial period, an extension as well as a renewal period may be guaranteed all at once following the payment of the Uang Pemasukan, or up-front official costs. A Hak Pakai may also be placed over a Hak Milik title, in this case it is the Indonesian holder of the Hak Milik who technically owns the land, while the foreigner maintains the rights to its use. This is known as a Hak Pakai Atas Hak Milik. The owner of this type of title may wish to sign additional legal agreements with the owner of the underlying Hak Milik title, granting the foreign owner sole rights to sell or transfer the Hak Milik title as well as the Hak Pakai. One advantage to retaining the original Hak Milik title instead of transferring ownership to the state would be that the property could be resold to an Indonesian buyer without the need to create a new title. It is technically possible for a Hak Pakai to be mortgaged, however it should be noted that at the time of writing, Indonesian banks were not typically lending money against Hak Pakai titles. A foreign individual may only own one Hak Pakai title at a time, and the size limit for a Hak Pakai is 5000 square meters. Foreign purchasers often leave their land with a Hak Milik designation, and sign a series of papers granting sole rights to sell, lease or otherwise alter the land exclusively to the foreign partner. The Indonesian partner, whose name is on the original title, is generally paid a flat fee, a percent from future sale, or a combination of both. The Indonesian partner is referred to as the “nominee”. Transactions of this type are generally less costly than the creation of a new Hak Pakai title, but it should be noted that the supporting documentation is not registered with the land bureau. To ensure the rights of all partners, a nominee agreement should be drawn up and reviewed by reputable legal counsel.
- 27. We believe in enabling emerging market property investments that are safe, transparent and accessible. We extensively research the investment prospects, local infrastructure, tourism potential and other relevant information for every region that we work in. We also aim to objectively assess the status, merits and drawbacks of ever property that we list. To ensure transparency, we always recommend a qualified third-party firm for due diligence and legal assistance. To learn more about property investment opportunities in Lombok, Sumbawa and Flores, feel free to contact us via email: info@southeastindonesiaproperty.com Foreign Corporate Ownership Partial or fully foreign owned companies registered in Indonesia are given many of the same rights as wholly Indonesian owned companies. Neither Indonesian nor foreign companies are allowed to own Hak Milik land titles, they are however allowed to possess Hak Guna Bangunan (HGB) and Hak Guna Usaha (HGU) land titles. HGB titles allow a company to build on a property. The use of the building must match the stated purpose of the company. I.e., in order to build a hotel, the possessing company would need to be a hospitality provider. A HGB is granted for an initial period of 30 years, with a 20 year extension. According to Government Regulation Number 40 of 1996, the initial period, an extension as well as a renewal period may be guaranteed all at once, following the payment of the Uang Pemasukan, or up-front official costs. The total period in this case would be 80 years. If a foreign owned company wishes to purchase land that is registered as Hak Milik, the original Hak Milik title must be cancelled and a HGB title must be created.