Lombok is promoted as the new place to invest in property since Bali has been overdeveloped in the last few years. However, finding the right property in Lombok is not as easy as it could be in Bali. Although it could appear at first sight, Lombok is complex to access. Actors are less welcoming than Bali when it comes to closing a deal, and getting the right information can be confusing for a buyer as sellers are more than Bali tell you everything is possible. Is Lombok a new Eldorado or a market pushed by developers? How to find a good property in Lombok.
Return on Investment on Lombok Property
Lombok is a booming market currently pushed by developers who are promoting several beautiful projects. In comparison, in Bali, the projects were pushed just after COVID-19 by the demand for accommodation due to a lack of supply, as a lot of people were moving to Bali to visit the Island of Gods.
Projects in Lombok are certainly profitable in the long term. However, investors have to be cautious about where and how to select their investment or where to develop their project. The breakeven point can vary depending on how the market is going to grow in Lombok. Indeed, if the number of projects grows faster than the demand for holiday homes, with Lombok being more seasonal, the Return On Investment for buyers can take time.
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The best strategy to invest in Lombok
There are several ways to approach a property market with high potential. Below, we describe the different strategies currently applied by actors in Lombok in the real estate market.
Acting as a developer in Lombok
Often, developers are the ones getting the highest margin in real estate but also assuming the biggest risk. This strategy is to buy land, build a house and resell the house. In his strategy, the investor has to manage the construction by hiring contractors. This strategy has a high return as the developer takes margin on several aspects, from the land value appraisal increasing to the property value.
Developing a project in Lombok can take 1 to 2 years, depending on the size of the project.
Land Banking in Lombok
Buying land at the right time and not developing it can be a good bet in a growing property market. As the demand for land increases, several investors will need land to develop hotels, villas, restaurants, and commercial buildings. This strategy is beneficial for people not looking for immediate cash flow. Land value in some circumstances can be expected to double or triple depending on the location.
Renting out a villa or hotel in Lombok
This strategy is the easiest way to apply. The investor buys a villa already developed or off-plan (in construction) and rents out the villa on Airbnb, booking.com, Agoda, etc. This strategy brings a good ROI in a market pushed by demand and when other projects are not yet finalised before the competition arrives. However, this strategy involves some structure to ensure some legalities, as renting out as an individual is illegal. Investors need to go through different structures and ensure to optimise it for better taxation.
Also read: 7 Real Estate Investment Mistakes to Avoid in Bali & Lombok
Where to find a property in Lombok
Finding a property in Lombok is not as easy as in Bali. There are different actors promoting lands, and Lombok is sometimes confusing to buyers. Unfortunately, a few brokers are not yet professionalised, and it is not rare to see several brokers overlapping each other and not having the land in their listing but getting it from another person.
We recommend ensuring the broker is in direct contact with the landowner and ensuring this person has all the papers and certificates regarding the land before entering into any deal.
Another suggestion is to work with professional sellers or brokers who follow proper rules. One of the red flags is usually to hear that Lombok is different. Lombok real estate and property development has the same rules as the rest of Indonesia. It is usually a sign of forced sales leading to later complications.
- Work with a proper and licence agent
- Work with somebody having all the documentation regarding the property
- Do not pay any fee before any agreement or contract and having seeing the paper of the property
- Work with somebody in Lombok who do not push the investment with the timing and say there is a lot of buyers (we all know this technique)
Some professional agencies are located in Lombok and have a great understanding of the place. Despite receiving commission from the sales, they follow correct procedures and normally do proper due diligence on the product.
Location to invest in Lombok
As in every country or property market, the investment has to be at the right place at the right time. While the Mandalika area is a great place to invest with Kuta Lombok, Sekotong, and Selong Balanak, each piece of land in each area doesn’t have the same value. All those locations are close to the beach, but the infrastructure with access to facilities and utilities can vary from one land to another. Obviously, land close to the beach, beachfront, or on the hill is a good location.
However, it is important to check a few things. While a top hill provides a great sea view, road access management and utilities can lead to several issues in getting the water and all the supplies.
Conduct a proper due diligence and inspection
In order to confirm the location, there are several factors to consider, and we recommend proper due diligence before signing any documents before investing in property in Lombok.
- Check all utilities such as water, electricity
- Access road and management
- Zoning and permit to build and rent out the property
- Remeasurement of the land as price is related to the size
- Tax payment and land value
- Ownership and ownership surrounding
Lombok, with its beautiful landscape, gorgeous beach, and fantastic surf spot, is certainly one of the places to invest, and we are happy to support investors in this journey to make a successful investment.
Also read: How to Rent Out A Property in Bali and Lombok as Foreigner
