Jason, originally from Melbourne, who paid $130,000 for prime beachfront land on Lombok, only to find out the vendor was not the owner. Source: The Australian
VISITORS to Indonesia marvel at the stunning natural beauty of Lombok, Bali's island neighbour. Many are so smitten by the lush southern landscape around Kuta that they invest on the spot.
Lombok’s Kuta shares a name with Bali’s tourist drawcard and supposedly resembles the Bali of about 20 years ago. Trading on its good looks, the area has been courting investors for the past several years. But after a five-year buying spree, many foreigners, including Australians, are sitting on their empty blocks of Lombok heaven, contending with a lack of promised infrastructure and battling bureaucratic incompetence and, sometimes, downright dishonesty.
Queenslanders Jason and his wife (they decline to provide additional details for safety reasons – “It can get me killed, that’s my biggest fear,” Jason says) have called these pristine beaches and aqua waters home since 2009. “It was a lifestyle change. We’d had enough of the grind, paying the mortgage. We came here with two suitcases.”
They bought 22 are (2200sq m; one are equals 100 square metres) of prime beachfront land through a local nominee last February and built a small business in April. But there was a slight hitch: “The guy we bought the land off didn’t actually own it,” says Jason.
He paid 60 million rupiah (about $6600) per are, about $2000 per are above the average price. The difference, Jason believes, went in commission to the vendor, who works in cahoots with the legitimate owner. They paid a total of about $130,000 in instalments, which included the cost of a land certificate, to be converted by Jason into a business title. On checking, the certificate application had not been submitted. The vendor, in a bid to extract an additional $2000 for the certificate, backed off when the couple employed a lawyer. “He’s got one month to hand it over, then he’ll go to jail,” says Jason.
The scam appears to be widespread. Jason knows of two brothers buying from the same vendor. Though he’s concerned for them, he’s worried that to warn them might mobilise the local mafia, “so I just keep my mouth shut’’. A Perth friend, he says, is also battling a land certificate hoax in the area.
“It’s dangerous living here; there’s no law and order,” says 44-year-old Jason. “It’s not like Senggigi [in the island’s north], where tourism is established and there are systems in place.” Yet, determined to persevere, he says: “We’ll never walk away. We sold our house on the Sunshine Coast and it’s too much to walk away. Lombok is getting a new international airport so investors have got to look to the future and read the property market.
“A lot of people get ripped off,” he warns. “If you’re a bule [foreigner] in Indonesia, you pay more for everything. If you don’t keep documents and receipts, then you’re really vulnerable. I don’t think people know how corrupt it is here.”
Though the Indonesian Government has pledged to improve the investment climate, more roads, power, drinking water and telecommunications are badly needed if Governor Zainul Majdi’s tourist target for West Nusa Tenggara (comprising the main islands of Lombok and Sumbawa) is to grow from 600,000 to one million by next year.
The background to this instability centres on 1200ha of state-owned land, slated since 2007 for a multimillion-dollar mega-resort, which so far hasn’t seen so much as a trowel. In addition, the opening of the region’s new international airport has been repeatedly delayed. The tourism boom expected to flow from the development stopped dead after Dubai-based Emaar Projects pulled out at the beginning of last year. The project was to trigger crucial infrastructure, attractive to foreign investors. Now, many who saw the potential returns are sitting tight – if they can afford to. Others, tired of waiting, are bailing out.
The Lombok land rush started going off the boil several months ago, says Michael Gunawan, manager of Ray White real estate in Kuta, Bali. The response to his agency’s listing of eight foreign-owned Lombok properties in the past seven months has been lacklustre, with just one tentative inquiry, he says. “It is easy to buy, difficult to exit,” says Gunawan.
In an attempt to kick-start the resort project (now renamed Mandalika), the state-owned Bali Tourism Development Corporation recently signed a memorandum of understanding with a strategic investor, a Jakarta company backed by several Asian countries. The final agreement is due to be signed this month, but foreign observers’ excitement will be tempered with a degree of scepticism.
“We are very close to announcing one strategic investor,” says an adviser to the BTDC, New Zealander Christopher Mason. “We don’t want to release the name until it is finalised, but they have acquired the right to develop all of the land.’’ Ever conscious of the blank canvas that is Lombok’s good fortune, authorities invite comparisons with Bali in its early prime, while promising to avoid Bali’s path to overdevelopment and overcommercialisation. And Bali’s tourism experience, 40 years ahead of Lombok’s, is something to be mined. “It is a step back in time to a younger, fresher Bali,’’ says Mason.
Investors should also be mindful of the cultural differences between the two islands. While Bali has a majority Hindu population, the people of Lombok – “land of a thousand mosques’’ – are 85 per cent Sasak and predominately Muslim, a factor rumoured to have influenced the selection process for investors in Mandalika. “Mosques will be built, but the development will accommodate people of every faith,” says Mason.
Accommodating the local population around Kuta, most of whom rely on subsistence farming and fishing, and only speak a Sasak dialect, is another thing. West Nusa Tenggara investment board chief Yaqoub Abidin loosely refers to a mix of social programs, adjustment plans and street and beach vendor jobs. “They must be appreciated,” he says of the locals. “They cannot be kicked out.’’
In a plan modelled on Nusa Dua’s world-class set-up in Bali’s south, Abidin says 7.5km of beaches will be developed over 12 years, creating five-star resorts, a residential community, golf courses, marinas, a safari park and retail outlets. Asked why investors wanted out, Gunawan cites the lack of tourists, lengthy processing of land titles and building licences, and a deluge of locals demanding obscure fees. Compounding this, property bought directly from local landowners (in the belief prices will be cheaper) is often not legally transferred, or is sold twice.
It’s a familiar story: foreign buyers getting burnt after unwittingly becoming immersed in ownership conflicts. Queenslander Steven, 60, and his Indonesian wife bought 1.8ha freehold in 2007 for a shipyard and engineering workshop in Lembar harbour on Lombok’s west coast. Fearing for their safety, he doesn’t want to disclose their full identities. They paid $150,000, increasing to $210,000 to include a road, to a local landowner. The purchasing process was smooth, done through Steven’s wife and therefore not requiring a local nominee. “It was double the price of the land around us, but we didn’t know that,’’ says Steven. “With this property, we are in dispute over about 300 sq m which is on our land certificate, but the local people say it belongs to someone else. We have not fenced this land as the locals say they will burn down our buildings, even though the land does legally belong to us.’’
Another vendor has come forward seeking $80,000 for the 300 sq m in question, a strategic section that leads to a river. The problem is that the locals band together to receive a cut, Steven says. He is a large man, unlikely to be easily ruffled or intimidated, but he explains: “There is no law here. A group of villagers stand over you. They threaten to burn your house down.’’ Asked what the property means to their livelihood, the mechanical engineer says “it’s our total life, so we cannot walk away as many others have done’’.
Yet small investors in it for the long haul, without time constraints, such as Melburnians David Bruce and wife Anne-Marie, are happy to take their retirement dollars outside Australia. They are enjoying the remote, untamed spot before the bulldozers move in: “Development is a double-edged sword,’’ says David. “At the moment, Lombok is very unspoilt from a western point of view.’’
Yet the promised bounty of the Emaar project was the catalyst for the couple’s decision to buy here in 2009. They used their self-managed super fund for the purchase, waiting more than a year for a land title certificate to be issued, and plan to develop between four and six villas on the property. But shortly after they bought land, Emaar withdrew. “When the project fell through, there was a bit of nervousness and ‘What have we done?’ But there are no regrets. We see this as a long-term investment,” David says, chuffed the $100,000 for their 1ha of beachfront land did not break the bank.
They will welcome amenities down the track when they decide to develop and sell, but for now, the lack of development seems more of an asset. “The property does not have a single western building anywhere in sight, and has unobstructed ocean views,” says David. “With the international airport opening, it will bring many changes. We hope Lombok won’t be turned into another Bali with traffic jams and over-population of tourists.”
Brad and Kim Fitzpatrick, from the Central Coast of NSW, paid $42,000 for 5000sqm, also in 2009, with Emaar a contributing factor in their purchase. Though they are still waiting for their land title certificate, they are unperturbed. The self-employed couple plan to build a small hotel and a private villa for themselves. “We are keen to retire to this part of the world, become involved in the local community and provide employment and opportunity for the locals,” Brad says. They say the drawn-out development processes have not been a problem, as they don’t intend to build for five years. “We are now feeling fairly confident that the greater part of the infrastructure will be in place and operable by the time we commence.” Both the Bruces and the Fitzpatricks believe the value of their investments has doubled.
Indonesia seems to be trying to get it right. An Australian company recently reported by the Indonesian government news agency to be building 50 villas in south Lombok will receive help obtaining building permits. In a further bid to calm the investment waters, local authorities will also mobilise a team to address any other problems that arise. The FICB’s Abidin says 44 Australians make up the majority of the island’s property investors. Last year, Australians poured some $200 million into 83 projects in Indonesia, of which almost $3 million flowed into seven projects in Lombok and Sumbawa.
Going nowhere The outlook should be rosy, but there remains a giant thorn in the side of authorities and investors alike: the ongoing debacle of the new international airport, where construction work has stopped since funding from the state airport management company, Angkasa Pura, dried up. Just 20 minutes north of Kuta, the airport is touted as a major incentive by real estate agents and by authorities promoting the island. But a series of completion dates over the past two years have not been met, and continue to be pushed back. Estimates of funding shortfalls range from $12 million to $30 million, and the airport has been beset by protests over land acquisition claims, unpaid wages, theft of construction materials, and labour and workmanship problems.
When The Weekend Australian Magazine visited the site at the beginning of March, it was in a woeful state. An eerie, derelict shell, the conditions were testament to millions of wasted dollars and the millions more necessary to get it off the ground: pools of putrid water, loose electricity cables from open roofing, equipment already rusty, concrete steps leading nowhere, while baggage conveyor belts still wrapped in plastic sit alongside shiny arrival and departure gate signs.
Erdi Nuka, general manager of the current airport in Lombok’s capital, Mataram, had predicted construction would be completed by July, but officials have now revised that to October; but if the airport opens in a year everyone will be delighted, not least because it will take that long to build small-scale accommodation.
Meanwhile, hopeful – or unwary – investors continue to arrive. Ni Luh Suarni is director of the Lombok International Law Office in Mataram, the island’s major legal firm assisting the 70 per cent of foreign investors ensnared by problematic property transactions. “Many foreign investors buy land without doing due diligence,” she says. “They just meet direct with the local owner of the land and don’t check the legal status or the location. Sometimes the information is different from what is in the document. A lot of land already has certificates, but the village ‘owner’ sells it twice.’’
Under an immensely complex land registration system, further complicated by decentralisation from Jakarta to autonomous regional governments in 2001, foreigners can be duped or forgotten amid a sea of red tape and lack of training. “Bureaucracy in Indonesia is too complicated,” says Ni Luh of the myriad complaints she handles concerning delays for land title certificates. “Many people come to me about long waits for certificates – up to four years. I think there are more than 500 applications sitting in the department since five years ago.”
The problems stem from the Suharto era in the ’90s, when the now defunct Lombok Tourism Development Corporation bought large tracts of land. The land titling system often meant local farmers and fishermen had no legal ownership. Rather, they had a Right of Use title. Villagers were frequently unaware “their” land was owned by the state government or by large Jakarta companies, Ni Luh says, or that it was necessary to apply for a certificate from the Land Office for a title change. “But,” she adds, “there are also many villagers who are not honest.”
But despite the risks, there are still plenty of people who fall for Lombok’s charms. Australian expat Paul Lupton, director of several Lombok and Jakarta-based companies and former owner of a real estate franchise in the island’s tourist heart of Senggigi, admits he has seen investment prospects oscillate, but insists land in the south is still cheap and plentiful, with the opportunity to make significant profits. “From what I understand, the number of new investors in 2010 is slightly less than previous years, but there is still a lot of buying going on,” Lupton says.
And though he’s no longer an estate agent, he can still rattle off the region’s attractions: “Beautiful beaches and scenery, 20 minutes from a new international airport, 10 times cheaper than Bali, low-density living, low pollution and fantastic capital gains, are more than enough to sell Kuta.’’ Just be careful who you’re buying it from.
Find Article by Date