If you’re looking at property in Lombok, you’ll quickly run into three terms that seem to decide everything: SHM, Leasehold, and HGB. They’re often used interchangeably in casual conversations, but legally they are not even in the same category. Getting this wrong is one of the fastest ways for a foreign investor to step into unnecessary risk.
This guide explains SHM vs leasehold vs HGB in plain English, with the legal reality behind each option, and a practical way to choose the right structure depending on what you actually want to do with the property in 2026
The simplest truth: foreigners can’t “buy SHM” in Lombok
In Indonesia, SHM (Sertifikat Hak Milik) is the strongest form of land ownership, commonly described as “freehold.” It is closely tied to Indonesian nationality principles, meaning foreign nationals do not hold SHM in their own name. That’s why most foreign investment structures in Lombok revolve around either leasehold (contractual rights) or HGB (title rights held by an eligible legal entity).
This is also why Lombok’s best deals can be misunderstood by outsiders: many premium plots are SHM, but that doesn’t mean they’re inaccessible—it means the structure must be correct.
What SHM actually means (and why it’s attractive)
SHM (Hak Milik) is the closest thing Indonesia has to permanent ownership. It typically offers the strongest long-term security and the broadest control for Indonesian citizens.
In Lombok, SHM matters because it’s common for prime land (especially in desirable lifestyle corridors) to be SHM, and you’ll often see sellers advertising “SHM land” as a quality marker.
For foreign investors, the practical point is this: SHM is a land status, not an ownership pathway for foreigners. If the land is SHM, foreigners usually access it through leasehold, or through an appropriate legal structure if development and commercial operation are intended.
Leasehold in Lombok: simple, common, but only as strong as the contract
When people say “leasehold” in Lombok, they’re usually referring to Hak Sewa (lease rights) a long-term lease agreement where you pay for the right to use land for a set period. Leasehold is popular because it’s practical, fast, and doesn’t require setting up a company.
But leasehold strength comes from documentation quality, not marketing language. The protection comes from the contract: clarity of term, payment, extension rights, dispute resolution, and what happens if the land is sold or inherited.
Leasehold is often a great fit for foreigners who want a holiday home, a long-stay base, or a straightforward asset with known time horizons. It can also work for rentals, but the more “business-like” the project becomes, the more investors start to prefer title-based structures like HGB held by a company.
HGB explained: the “developer title” foreigners actually use
HGB (Hak Guna Bangunan) translates roughly as Right to Build. It’s one of Indonesia’s most important land titles for development and commercial property activity.
The key point for 2026: HGB can be held by Indonesian legal entities, including a PT PMA (foreign investment company), which is why it’s widely used for villas, boutique hospitality projects, and long-term build-and-operate strategies.
Under the Omnibus Law framework and implementing regulations, the commonly cited lifecycle for HGB is:
- Initial grant up to 30 years
- Extension up to 20 years
- Renewal up to 30 years
This is often summarised as 30 + 20 + 30 = 80 years total, depending on the land base and compliance requirements.
If you’re building, selling, refinancing, or scaling an investment portfolio, HGB via PT PMA is often considered the most “investor-grade” structure because it aligns the asset with a recognized legal title system rather than purely contractual rights.
A simple decision framework: choose based on what you want to do
Instead of asking “Which is best?”, the smarter investor question is: What’s my intended use?
In practice, these are the cleanest matches:
If you want long-term personal use (holiday home, lifestyle base): leasehold or Hak Pakai is often the starting point, depending on eligibility and property type.
If you want to develop and operate commercially (villas, hospitality, rentals with scale): HGB via PT PMA is commonly the stronger fit.
If the land is SHM (very common in Lombok): foreigners typically interact through leasehold or a legally compliant structure—never by pretending to “own the SHM.”
At Mandala Terra Capital, this “intent-first” structuring is where most value is created. In Lombok, choosing the right structure early can determine everything downstream: bankability, resale options, dispute exposure, and long-term operational control.
What about Hak Pakai?
Even though your headline focuses on SHM, leasehold, and HGB, one more term frequently appears in foreign buyer research: Hak Pakai (Right to Use).
Indonesia has specific regulations allowing foreigners who are lawfully resident in Indonesia to own certain residential property under Hak Pakai conditions. The government has published and reiterated these rules under PP No. 103/2015, which is widely cited in foreign ownership discussions. Peraturan BPK+2Setkab+2
You don’t need to go deep in this article, but acknowledging it improves SEO coverage and builds trust because serious readers will be searching for it.
The “nominee” question: the risk you should address plainly
Many foreign buyers eventually hear about a “nominee” structure (using an Indonesian person’s name to hold SHM while the foreigner funds it). It’s often marketed casually, but it creates obvious legal and enforceability risks, especially if the relationship changes, the nominee passes away, or a dispute arises.
Editorially, the safest stance is simple: if you want long-term protection, choose a structure the law clearly recognizes for your intended use, and don’t build your investment thesis on informal workarounds.
What most investors in Lombok get wrong
The biggest mistake isn’t picking “the wrong title.” It’s thinking the title is the whole story.
In Lombok, outcomes often depend on whether investors do proper verification and documentation around:
- land certificate checks and registration status
- zoning and intended land use
- access rights and boundaries
- notarial agreements and dispute clauses
- extension and renewal mechanics (for leases and titles)
These steps matter more than confident sales language—and they’re precisely where experienced local operators add real value.
Final takeaway: Lombok is investable—if the structure matches the strategy
Lombok is increasingly attractive to foreign investors because it’s still early relative to Bali in many areas, and the upside remains meaningful. But the market rewards investors who treat ownership structure as part of the investment strategy, not an afterthought.
If you remember one line, make it this: SHM is the strongest land status, leasehold is contract-based, and HGB is title-based—and foreigners succeed in Lombok by choosing the right path for the right purpose.
FAQs
Can foreigners own SHM (freehold) in Lombok?
Foreigners cannot legally hold SHM (Sertifikat Hak Milik) in their own name under Indonesian land law. SHM is the highest form of land ownership in Indonesia and is reserved for Indonesian citizens only, as it is directly tied to nationality principles embedded in the Agrarian Law framework.
That said, SHM land is still highly relevant to foreign investors in Lombok. Many prime plots are held under SHM by local owners, and foreigners commonly gain access to these assets through long-term leasehold agreements or by developing projects via legally recognised company structures. The key distinction is that foreigners interact with SHM land through use or development rights, not by transferring the SHM title itself.
In practice, the safety of a foreign investment on SHM land depends less on the title and more on how the relationship is structured, documented, and enforced. Properly drafted lease agreements, notarisation, and clear extension clauses are critical to long-term security.
What’s the difference between HGB and leasehold in Lombok?
The difference between HGB (Hak Guna Bangunan) and leasehold (Hak Sewa) comes down to the nature of the right itself: title-based versus contract-based.
Leasehold is a contractual arrangement. It grants the right to use land for a fixed period, as agreed between the landowner and the lessee. The strength of a leasehold lies entirely in the quality of the contract — including term length, extension rights, transferability, and dispute resolution clauses. Leasehold is often favoured by foreigners seeking simplicity or personal use without forming a company.
HGB, on the other hand, is a registered land title issued by the Indonesian state. It grants the right to build, use, and commercially exploit land for a defined period. Crucially for foreign investors, HGB can be held by an Indonesian legal entity, including a PT PMA (foreign investment company). This makes HGB the preferred structure for villa developments, hospitality projects, and scalable rental operations.
In short, leasehold offers simplicity and speed, while HGB offers stronger legal standing, clearer transferability, and greater long-term commercial flexibility.
How long does HGB last in Indonesia?
HGB is granted for a defined but extendable period, rather than permanently. Under current regulations and common practice, an HGB title is typically issued for an initial period of up to 30 years.
Once this initial term expires, the holder may apply for an extension of up to 20 years, provided the land is being used in accordance with its approved purpose and remains compliant with zoning and regulatory requirements. After the extension period, the HGB may be renewed for a further period of up to 30 years.
This structure is often summarised as 30 + 20 + 30 years, allowing for a potential total control period of up to 80 years, subject to compliance and approval. While renewals are not automatic, properly managed projects with clear land use and regulatory compliance generally face minimal barriers to extension.
For long-term investors, this timeframe is often considered sufficient to support multi-generation development, refinancing, and exit strategies, especially when compared to shorter leasehold terms.
