Land Ownership in Bali, Lombok and Sumbawa: 7 Legal Truths Every Foreign Buyer Must Know

Introduction: Why Foreigners Need to Understand Land Laws in Indonesia

For many foreigners, the dream of owning a slice of paradise in Indonesia—especially in places like Bali, Lombok, and Sumbawa—is incredibly appealing. Stunning beaches, vibrant culture, and a lower cost of living make these islands top choices for lifestyle investors, retirees, and digital nomads alike. But before signing any contracts or transferring funds, it’s essential to understand the legal reality behind land ownership in Bali, Lombok and Sumbawa.

Unlike many Western countries where foreign individuals can directly hold freehold property, Indonesia’s land laws are far more restrictive. These laws are designed to protect national sovereignty and prevent foreign control over Indonesian territory. Unfortunately, too many foreigners fall into legal traps simply because they assume the process is similar to what they know back home.

This article serves to demystify the rules around land ownership in Bali, Lombok and Sumbawa—what’s legal, what’s risky, and what’s completely off-limits. By the end, you’ll have a clear understanding of your options and the safest legal structures to invest in Indonesian property without putting your money—or your future—at risk.

What the Law Says: Foreign Ownership Is Not Permitted—But There Are Alternatives

Under Indonesia’s Basic Agrarian Law (Law No. 5 of 1960), foreign individuals are not permitted to own freehold land (Sertifikat Hak Milik or SHM). This law reflects the government’s longstanding stance on land sovereignty, ensuring that land remains under the control of Indonesian citizens. This restriction applies across the country and includes popular investment hotspots like Bali, Lombok, and Sumbawa.

However, not all doors are closed. Foreigners still have legal and secure alternatives to access and control property—if done correctly.

One of the most common methods is Hak Pakai (Right to Use). This land title allows foreign individuals to use land or property for residential purposes, typically valid for 30 years, and extendable up to 80 years. Hak Pakai is one of the few land rights that can be issued directly to a foreigner under their own name, but only for certified land in tourist zones or urban areas.

For commercial use, setting up a PT PMA (foreign-owned limited liability company) is often the most viable option. A PT PMA can hold Hak Guna Bangunan (Right to Build or HGB), enabling long-term use of land for business development. This structure is especially attractive for those planning villas, resorts, or hospitality ventures.

Another route is entering a leasehold agreement, which grants long-term access (commonly 25–30 years, with renewal options). While legal, this structure requires careful contract drafting and due diligence to avoid disputes.

Understanding the intricacies of land ownership in Bali, Lombok and Sumbawa is essential. Many foreign buyers have faced legal complications by relying on outdated advice or nominee schemes—which are not only risky but illegal. To protect your investment and stay compliant, it's vital to consult professionals and only use structures recognized by Indonesian law.

Option 1: Hak Pakai (Right to Use) for Foreign Residents

Hak Pakai, or Right to Use, is one of the few legal land titles in Indonesia that foreigners can hold under their own name—making it a popular route for those seeking secure and compliant property access. Unlike Hak Milik (freehold), which is reserved for Indonesian citizens, Hak Pakai is designed for foreign individuals who are legally residing in Indonesia.

To qualify for Hak Pakai, a foreigner must hold a valid KITAS (limited stay permit) or KITAP (permanent stay permit). This title allows the right to use a certified piece of land or a property—typically for residential purposes.

The initial validity of Hak Pakai is 30 years, with an option to extend for another 20 years, and a possible renewal of 30 more years, bringing the total duration to up to 80 years. However, extensions must be processed correctly with the land office and cannot be taken for granted.

Foreigners can own buildings on Hak Pakai land, reside in the property, or even rent it out under specific conditions. However, the land itself cannot be sold as freehold and cannot be used for commercial purposes unless additional licenses are obtained.

Understanding how Hak Pakai fits into land ownership in Bali, Lombok and Sumbawa is crucial. It offers legal clarity and peace of mind—but only when properly structured. It’s always wise to consult a qualified legal professional to ensure your investment aligns with current regulations surrounding land ownership in Bali, Lombok and Sumbawa.

Option 2: PT PMA Route – Corporate Ownership Using HGB Titles

For foreigners looking to legally invest in property or operate a business in Indonesia, the PT PMA (Penanaman Modal Asing) route is a widely used and government-recognized solution. This structure allows foreign nationals to establish a foreign-owned company that can legally control land through a title called Hak Guna Bangunan (HGB)—or the Right to Build.

HGB is one of the key instruments available for land ownership in Bali, Lombok and Sumbawa for business purposes. It allows a PT PMA to build and operate commercial establishments such as hotels, villa rentals, restaurants, shops, coworking spaces, and resorts. The title is issued for an initial period of 30 years, with the possibility to extend for 20 and then 30 more years, totaling up to 80 years—similar to Hak Pakai in terms of duration.

It’s important to understand that PT PMA ownership does not mean full private or individual ownership of the land. The land is held by the company—not the individual—so this structure is best suited for those looking to generate income or invest commercially.

The process of establishing a PT PMA involves obtaining business licenses, registering with the Indonesian Investment Coordinating Board (BKPM), and fulfilling minimum capital requirements—currently IDR 10 billion, which includes both paid-up and planned investment.

While this method is legal and offers a degree of land control for foreigners, it comes with corporate responsibilities such as tax filing, annual reports, employment compliance, and periodic audits. Therefore, working with a reputable consultant or legal team is critical to ensure all requirements are met.

When discussing land ownership in Bali, Lombok and Sumbawa, the PT PMA + HGB combination is a strong option for long-term investors. It provides operational flexibility and legal security—if executed properly and transparently.

For anyone considering land ownership in Bali, Lombok and Sumbawa, this route offers a clear legal pathway while staying compliant with national land and foreign investment laws.

Option 3: Long-Term Lease Agreements (Hak Sewa)

For many foreigners exploring land ownership in Bali, Lombok and Sumbawa, long-term lease agreements—commonly known as Hak Sewa—offer a simpler and more affordable path compared to corporate or title-based options. While this method does not involve actual land ownership, it does grant legal usage rights for a set period of time.

Under Indonesian law, Hak Sewa allows a foreigner to lease land from an Indonesian individual or legal entity. Lease durations typically range from 25 to 30 years, and can be renewed or extended through new agreements. Some contracts are even structured with initial lease plus optional extension clauses, allowing for continuous occupancy for up to 50 years or more.

This method is popular among foreigners who wish to build a villa, run a guesthouse, or reside in Indonesia long-term without setting up a PT PMA. However, it’s crucial to note that Hak Sewa does not grant any ownership title—the land always remains legally in the hands of the Indonesian owner.

The legal framework permits foreigners to lease land as individuals, without needing a KITAS or business entity. However, the risks are often underestimated. Contracts that are poorly drafted may:

• Lack clarity on renewal rights,
• Allow the landowner to reclaim the property prematurely,
• Be unenforceable if not properly notarized or registered.

To reduce these risks, it's essential that all agreements are reviewed by a lawyer familiar with land ownership in Bali, Lombok and Sumbawa. This ensures the contract includes protective clauses, payment schedules, dispute resolution terms, and a clear exit strategy.

Many foreign buyers also fall into illegal “nominee” arrangements—where land is purchased in someone else's name but leased to the foreigner. These are highly risky and not legally recognized.

In short, while Hak Sewa can offer flexible, lower-risk access to land for foreigners, it must be handled with care. For safe and legal engagement in land ownership in Bali, Lombok and Sumbawa, long-term leases should always be backed by formal legal advice and registered documentation.

Beware: Why Nominee Structures Are Legally Risky

When exploring land ownership in Bali, Lombok and Sumbawa, some foreigners are tempted to bypass legal restrictions by using a nominee structure—registering land in the name of an Indonesian citizen while making a private agreement that the land is "really" theirs.

This arrangement may seem like a shortcut, but it’s illegal and extremely risky. The Indonesian government has explicitly discouraged nominee agreements, and Indonesian courts do not recognize such contracts if disputes arise. Since the land title is legally under the nominee’s name, the foreigner has no enforceable ownership rights.

There have been real-life cases where foreigners lost land worth millions due to nominee disputes. Whether the nominee passed away, decided to sell the land, or simply broke the agreement, the foreigner had no legal ground to reclaim their investment.

In the context of land ownership in Bali, Lombok and Sumbawa, relying on nominee structures puts your money, time, and peace of mind at risk. Instead of taking shortcuts, foreigners should pursue legal pathways—such as Hak Pakai, long-term leases, or forming a PT PMA—to ensure compliance and protect their property interests.

Remember: if it’s not recognized by law, it’s not truly yours.

Title Types Explained: SHM, HGB, Hak Pakai, and SHGU

To navigate land ownership in Bali, Lombok and Sumbawa, foreigners must understand the key types of land titles under Indonesian law. Each title defines who can use or own the land, for how long, and under what conditions.

🔹 SHM (Sertifikat Hak Milik / Freehold Title)
This is the strongest form of land ownership in Indonesia, granting full ownership rights without time limits. However, SHM is reserved strictly for Indonesian citizens (WNI). Foreigners cannot legally hold land under SHM, making it off-limits unless part of a risky nominee setup—which should be avoided.

🔹 HGB (Sertifikat Hak Guna Bangunan / Right to Build)
This title allows the holder to build on and use land for business purposes. It is valid for 30 years, extendable to 80 years. PT PMAs—foreign-owned companies—can legally hold HGB titles, making this ideal for foreign investors in real estate, hospitality, or commercial development.

🔹 Hak Pakai (Right to Use)
This title is the safest route for individual foreigners with a KITAS or KITAP. It allows them to legally use land for residential purposes for up to 80 years (30+20+30), depending on extensions.

🔹 SHGU (Sertifikat Hak Guna Usaha / Right to Cultivate)
Mostly used for agriculture and plantations, SHGU is typically held by companies or Indonesian nationals. While rare for expats, it’s occasionally seen in Lombok and Sumbawa, where land is used for farming or sustainable development.

Understanding these titles is critical for compliant land ownership in Bali, Lombok and Sumbawa. Always match the correct title to your visa type, business goals, and location.

​​Final Checklist: What Every Foreigner Must Verify Before Buying or Leasing Land

Before you finalize any transaction related to land ownership in Bali, Lombok and Sumbawa, make sure you complete this essential checklist to avoid costly legal issues down the road:

✅ Check Zoning Regulations (ITR, RDTR)
Ensure the land is zoned for your intended use—whether residential, commercial, or tourism. Each region has its own spatial plans, and violating them can lead to permit rejections or forced demolition.

✅ Verify Certificate Authenticity at BPN (Badan Pertanahan Nasional)
Cross-check the land certificate with Indonesia’s official land registry. This ensures the certificate is valid, current, and matches the property location and size.

✅ Confirm Seller's Ownership and Encumbrances
Request proof that the seller has the legal right to sell or lease the land. Check for existing liens, mortgages, or disputes that could affect the transaction.

✅ Inspect IMB/PBG or SLF (Feasibility Certificate)
For built properties, ensure the structure has the proper permits—either the older IMB or the newer PBG—and that the SLF has been issued post-construction.

Doing proper due diligence is the smartest move in protecting your investment. Whether you're buying, leasing, or investing, always consult a trusted legal expert before proceeding with any form of land ownership in Bali, Lombok and Sumbawa.

Conclusion: How to Secure Legal Land Access Without Breaking the Rules

When it comes to land ownership in Bali, Lombok and Sumbawa, the rules are clear: foreigners cannot directly own land under freehold titles. However, this doesn’t mean your dream of living or investing in Indonesia is out of reach.

Through legitimate channels like Hak Pakai, PT PMA using HGB titles, or long-term lease agreements, foreigners can legally and safely control land for residential or business use. Each option comes with its own benefits and responsibilities, and the best path depends on your goals, visa status, and intended land use.

The most important step? Don’t go it alone. Always work with licensed legal advisors and notaries who understand the complexities of land ownership in Bali, Lombok and Sumbawa. Doing so will protect your investment, prevent legal headaches, and give you peace of mind.