A Comprehensive Guide to Building a Villa in Lombok

Are you thinking of building a villa in one of Indonesia’s popular island destinations? Compared to the bustling areas of Bali, Lombok stands out for its unique scenery surrounded by lush green hills, vast farmlands, and access to famous island hopping destinations like the Gili Islands. 

In this guide, we’ll provide you with key insights for building a villa in Lombok, as well as provide an overview of the most popular locations, and construction factors to consider in your project.

Overview of the property market in Lombok

Choosing the Right Location to Build a Villa in Lombok

Choosing the right location in which to build your villa in Lombok is critical. Whether you want to rent out your property or build it for personal use, below you’ll find the most popular locations for building a villa in Lombok: 

• Kuta Lombok – Kuta is a popular tourist hub in Lombok, famous for its beautiful beaches and surfing. The locale has a lively atmosphere with access to activities and social scenes. With ongoing infrastructure improvements, Kuta is a common destination for investors looking to set up short-term villa rentals, especially near Tanjung Aan Beach. 
• Selong Belanak – Known for its pristine beaches and tranquil atmosphere, Selong Belanak is a desirable location for luxury villas and eco-friendly developments. This area is also becoming popular among expats and retirees looking for longer-term villa rentals.
• Tampah – This location is currently seeing rapid expansion through the Tampah Hills development project which aims to build luxury communities and villas. Currently, daily rates in the region already start at USD 1500.

To learn more about the region’s most popular locations and development opportunities, be sure to take a look at our related guide for foreign buyers on purchasing property in Lombok.

Key Considerations Before Building a Villa in Lombok

With a vast amount of land remaining underdeveloped in Lombok, it is a region in which there is a lot of available land that can be purchased quite inexpensively. However, before planning to acquire land and build a villa, the price should not be the deciding factor. Below you’ll find the most important things you need to consider before planning your investment:

• Road access: Public road access is not widely available and in the majority of cases,  access to your land might overlap with the neighboring land. This is something that you will need to factor into your planning, as you may need to pave your own roads and negotiate access with neighboring owners.
• Electricity: Currently, most unoccupied lands are not connected to the electricity grid. While the cost of installing electricity is not expensive, you will need to bear the costs of the materials such as cables which cost approximately USD 180 – USD 250 per square meter. To determine the total costs, you’ll need to calculate the distance between your land and the nearest PLN box.
• Cost of construction: Construction costs can vary significantly, with more remote locations generally seeing higher quotes. A typical luxury standard of building is anywhere between IDR 12,000,000 – IDR 15,000,000 per square meter, however, your contractor will likely quote you 30% higher due to unofficial “charges” referred to locally as a Pungli. It is also best practice to allocate a portion of your budget to the common occurrence that certain construction items may disappear during the process.
• Sourcing construction materials: Local materials are very high quality and widely available. Stones often come with your land, due to the topography, while wood and other natural materials can generally be locally sourced directly from Lombok
• Local customs: In Lombok, you need approval from the Melokaq (regional head) before starting construction or business operations. It is also important to respect local customs by asking for a blessing from the Local Mosque’s Kyai.

How to Build a Villa in Lombok

Establish a PT PMA

The most efficient way to lease a property in Lombok is by establishing a PT PMA. Company setup requires the following:

1. You will need at least two shareholders, with one being a foreign individual or entity
2. You must appoint a director who can be either local or foreign but must reside in Indonesia. 
3. The minimum capital requirement is IDR 10 billion (approximately USD 700,000), with at least 25% required to be paid up initially. 

While Indonesia restricts land ownership for foreigners, there are several methods to secure land in Lombok through your PT PMA such as:

• Leasehold (Hak Sewa): allows foreigners to lease land or property for a set period, often up to 25 years, with options for renewal. Does not give you the Rights of Ownership, you can only transfer the remaining lease period to the new leaseholder.
• Right to Build (Hak Guna Bangunan): grants the same rights of ownership for a specific period, starts from 30 years, and can be extended. Right to Build can be transferred to a new owner. Foreign companies commonly prefer this option for ownership guarantee and flexibility.

Conduct Due Diligence on the Property

Conducting due diligence on a property is a critical process that helps ensure that your property investment is sound and legally compliant. Here are a couple of things to consider: 

• Certificate Verification – to confirm the legitimacy of the land title you plan to lease. The certificate is issued by the National Land Agency (BPN) or relevant land authority. 

• Ownership Verification – to ensure that the landlord is the rightful owner of the property. Check for spousal consent if the owner is married to prevent potential legal disputes after signing the lease. 
• Site Inspection – to assess physical conditions and access to essential services such as access to roads, electricity, water supply, and land conditions. 

Acquire the Property in Lombok

Once you have set up your legal entity, conducted due diligence, and verified property and ownership, you will need to follow through several steps to legally secure the property before you can build a villa in Lombok:

1. Enter into a Sales and Purchase Binding Agreement (PPJB)
2. Signing the Sales and Purchase Deed
3. Certificate Change and Final Ownership Transfer

Building and Construction 

To start construction, you need to do the groundwork including a Sondir test to assess the soil’s load-bearing capacity, stability, and topography, as most of the land is located on hills or slopes. 

This directly influences your villa’s design and the foundation of the building. It is also recommended to verify whether your intended operations require specific permits or licenses which should be applied for prior to construction.

Once a design is finalized, construction can take anywhere from 12 to 21 months depending on available cash flow for the contractor. Throughout this period, overseeing construction quality is imperative; this includes regular site visits to monitor progress and ensure that materials and workmanship meet the established standards. 

Emerhub can help you navigate all the key steps for building your villa in Lombok, ensuring that timelines are adhered to and construction quality meets established standards. Our local experts can also provide local insights on how best to set up your company and which locations are best suited for your intended business investment.

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