This chapter summarizes the process steps involved in buying property on Lombok. Let us focus on the “Nominee Method”, which is the most popular method of investing in land on Lombok as a foreigner. The foreign investor provides the money to buy the land. The nominee delivers the service to legally hold ownership of the property. The nominee is compensated with a one time fee or percentage when the land changes ownership. The rights and responsibilities of the investor and nominee are detailed in a Partnership Agreement.
There are also lease methods that can be used to realize your dream in your slice of paradise. Lease methods do not produce financial benefit when land value increases, but that is not always the most important thing. Advantages and disadvantages of each method are discussed further in chapter “Legal”.
2.1 Get familiar with Lombok
Lombok offers many different areas with varying climate, terrain, vegetation and degree of development. Some very nice locations are off the beaten trail and completely overlooked by most investors. It is possible that the perfect property for you can go unnoticed. Exploring the Island a few weeks and get familiar with all of Lombok can be very rewarding.
2.2 Choosing a Partner(“Nominee”)
Finding a competent, independent and honest partner is the most important, but also the most difficult step. After doing business together for many years, your partner will probably become a close friend. Your may also need trusted local residents in your team. They can give you advice and help you to avoid mistakes and scams that are common in the real estate purchasing process.
If you are thinking of marrying an Indonesian citizen that currently is your nominee or could become your nominee. It is very important to enter into a pre-nuptial agreement before the marriage; otherwise your spouse may no longer hold Hak Milik land title (legal trap). Mixed-couples that did not register a pre-nuptial agreement are risking loosing their properties in Indonesia. This information cannot be overstated since it is very common that the nominee is also your wife or husband.
2.3 Find a parcel of Land
There are many ways of finding land for sale on Lombok. What channel is best depend on what criterion is most important to you: low price, variety, smooth process or short time.
2.3.1 Real Estate Offices
You can easily find Real Estate Offices around Kuta Lombok and in other developed areas on Lombok. You will be offered a range of services needed (or not needed) during the property purchase process. As a consequence of the large overhead these companies have, the total price is always much higher. Agents working in Real Estate Offices are overrepresented in scams and dishonesty in general. Be extra careful here!
2.3.2 Real Estate Web Sites
All Real Estate Offices have their own web site, which is a way of finding new customers. There is also property web sites not affiliated with an office. This web site is such a web site. This web site has a very low overhead on the sales price since the actual property owner is doing the property listing work and no other middlemen are involved.
2.3.3 Local Guides
Tour and surf guides who frequently hang out around restaurants and hotels are usually familiar with local property for sale.
When you let other people know that you are looking to buy land, the gossip will attract local residents who wish to sell their land.
Expats who live in the area and have gone through the property purchase process often know about land for sale.
2.3.6 Road Signs
You will see hundreds of “For Sale” signs while driving around in Lombok, but some signs may be quite old and out of date.
Advertising in local newspapers and Lombok guides is common for Real Estate companies and for development projects such as for example Kuta Heights, Tanjung Ocean View and Lobster Bay.
2.4 When You Find a Parcel
It is easy to get carried away when you lay eyes on a piece of land for the first time. Getting too attached before clearing up infrastructure questions and viewing the property through the eyes of an engineer is never good. You should always make sure that the property does not have any obvious problems. The most important items are: be certain the land has clear title, availability of water, electricity, access road and that the land is suitable for building at a reasonable cost.
2.5 Negotiate the Price
The process of negotiating and agreeing on a price can become quite drawn out. It is common that family, friends and neighbors are involved, which can be both unfamiliar and uncomfortable. It is most beneficial for you if someone you trust can take control over the conversation. You still keep the power to reject the price and make changes to the deal.
2.6 Comprehensive Due Diligence
Performing Due Diligence is doing research to make sure the property does not have any hidden ownership problems. You do not want to find out about ownership issues when the local land office (BPN) tells you that it is impossible to process the land certificate. The first step is to review public records for problems and conducting a land survey to verify boundaries. The second step is to talk with neighbors, family and anybody that may have knowledge about the property history. Due Diligence is not for a foreigner as you might already have guessed. Due Diligence can only be handled by someone who is familiar with both the purchasing process and knows the people and customs of the area.
2.7 Initiate Title Transfer
All documents to be signed by the landowner and your nominee needs to be prepared and signed. The Notaris is legally not obliged to prepare the documents in case the land is raw land, but it is common that he or she does. If you have someone with extensive experience of buying raw land on your team, he or she can prepare all the documents you need and then you can keep the Notaris fee in your pocket or give to your partner.
In case a certificate exists, the Notaris must be involved in preparing the documents to make the title transfer legal. The Notaris can also help with the Partnership Agreement and make sure it is signed, witnessed and recorded.
2.8 Issuance Land Certificate
Finally, the land must be recorded (or updated) at the local land office (BPN). The process is faster for non-raw land since a certificate exists. The process can take between 4 and 8 months for raw land. “Donations” to BPN employees influence how long you need to wait for the certificate. The certificate makes the sales final.
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