Foreigners buying property in Labuan Bajo face a hard legal ceiling: Hak Milik (freehold) is closed to non-Indonesian citizens under the Basic Agrarian Law, UU 5/1960 (UUPA) Article 21. Full stop. The routes that do work — PT PMA with HGB, Hak Pakai for resident individuals, and registered leasehold — each carry specific conditions, and there is a fourth model unique to Labuan Bajo’s investment zone above town where nobody buys land at all. This guide names those paths clearly. It also names the trap that catches too many buyers before they reach a lawyer.
The Freehold Prohibition and Why Nominees Are a Trap, Not a Workaround
Indonesian law does not merely discourage foreign freehold ownership — it voids it. UUPA Article 26(2) states that any transfer of Hak Milik (SHM) that is intended to circumvent the prohibition on foreign ownership is null and void by operation of law. The land does not revert to the seller. It falls to the state. The money paid is not recoverable through a civil claim because the contract itself is unlawful.
The mechanism buyers are sometimes offered is a nominee arrangement: an Indonesian citizen holds title on paper while a foreign buyer retains beneficial control through a side agreement — a power of attorney, a loan agreement, a shareholder deed, or some combination. Indonesian courts have repeatedly refused to enforce these side agreements. The nominee structure does not protect the foreign party’s investment; it exposes both parties to a transaction the law treats as if it never happened.
This is not a technicality that clever drafting can fix. The problem is at the level of the statute itself. Anyone who tells you a well-drafted nominee agreement is safe in Indonesian courts is describing wishful thinking, not settled law.
Beyond the legal exposure, the practical risk in Labuan Bajo is acute. Land prices in the area around town — prime sea-view lots closer to the waterfront — have reportedly appreciated sharply since the government’s 2019 designation of Labuan Bajo as one of five national Super Priority Destinations (DPSP). Asking prices on broker listings (unverified, not transaction data) range from around IDR 2 million to IDR 15 million per square metre for sea-view land near town. At those prices, a nominee arrangement failing late in the project does not leave room for error.
Legal Paths That Actually Work
There are three established routes, plus the Parapuar cooperation model which sits apart from all of them. None of these substitutes for individual legal counsel — this page explains the framework, not the specifics of your deal.
Route 1: PT PMA with Hak Guna Bangunan (HGB)
A foreign-owned Indonesian company (PT PMA, established under Undang-Undang Penanaman Modal UU 25/2007 and regulated by BKPM/Kementerian Investasi) can hold Hak Guna Bangunan — a right to build and use land. This is the standard vehicle for hotel, resort, and commercial development in Indonesia.
Under PP 18/2021 (the Government Regulation on Land Rights, replacing the earlier PP 40/1996), HGB can be granted for:
- Initial term
- Up to 30 years
- Extension
- Up to 20 years
- Renewal
- Up to 30 years
- Maximum cumulative tenure
- 80 years (initial + extension + renewal)
HGB can be held over private SHM land (via agreement with the landowner), over state land (granted by ATR/BPN), or — critically for Parapuar — over HPL (Hak Pengelolaan) land held by a government authority body like BPOLBF. The specific terms depend on the underlying arrangement.
For a PT PMA to operate in the tourism sector in Labuan Bajo, the minimum investment threshold under Peraturan BKPM No. 4/2021 is more than IDR 10 billion per 5-digit KBLI code per project location, excluding land and buildings. The minimum issued and paid-up capital is also IDR 10 billion. Relevant KBLI codes include 55110 (star hotel accommodation) and others depending on the business concept. Licensing runs through the OSS-RBA (Online Single Submission, Risk-Based Approach) system established under UU 11/2020 (Cipta Kerja) and PP 5/2021.
PT PMA is the right vehicle for commercial-scale development. It is not suitable for a foreign individual buying a single villa for personal use — the minimum capital and compliance burden make that economically irrational.
Route 2: Hak Pakai for Foreign Individuals
PP 18/2021, supplemented by Permen ATR/BPN 18/2021, gives foreign individuals who hold a valid stay permit (at minimum a temporary residence permit, KITAS, or equivalent) the right to hold Hak Pakai — a right of use — over residential property in Indonesia.
The key conditions:
- The property must be used as a dwelling (not for resale or commercial rental).
- The property must meet a minimum price threshold set by Kepmen ATR/BPN by province. The current threshold for NTT (East Nusa Tenggara) is unverified in publicly available sources — check the current Kepmen ATR/BPN before proceeding. National minimums in the 2021 regulation run from IDR 800 million (for designated areas) upward, but provincial variations apply.
- The residence permit must remain valid; the Hak Pakai lapses if the holder leaves Indonesia permanently.
- Term under PP 18/2021: up to 30 years, extendable 20 years, renewable 30 years.
Hak Pakai for individuals is legitimate, but it is narrower than many buyers expect. It covers a residence, not a commercial investment. It requires active Indonesian residency status. And the NTT-specific minimum price means that certain properties in Labuan Bajo may or may not qualify — a figure that must be confirmed with ATR/BPN or a licensed property lawyer before any transaction.
Route 3: Registered Leasehold
A foreign party can contract directly with an Indonesian landowner for a long-term lease. Properly structured, a registered leasehold is a contractual right enforceable in Indonesian courts — it does not require a PT PMA and does not require the buyer to hold any land title.
The durability of a leasehold depends entirely on how it is drafted. A 25- or 30-year lease with an option to renew, registered at ATR/BPN, and covering specific land with clear title, is a different instrument from an informal agreement written between friends. Unregistered leaseholds are harder to enforce if the landowner sells, dies, or contests the agreement. In Labuan Bajo — where land records can be incomplete and the title history of some plots is disputed — the verification work before signing matters as much as the contract itself.
Leasehold is the path most commonly used by foreign individuals who want long-term use of a villa or small commercial space without establishing a company. It is not freehold. The buyer does not own the land, cannot mortgage it, and has no equity in the underlying asset if the lease ends. Those are real constraints, not hypothetical ones.
If you want to discuss whether leasehold or another structure makes sense for your specific situation in Labuan Bajo, our enquiry form connects you to vetted independent legal specialists. We do not provide legal advice; they do.
The Parapuar Model: A Third Kind of Access
Parapuar is a roughly 400-hectare integrated tourism development zone on the forested hills directly above Labuan Bajo town, managed by BPOLBF (Badan Pelaksana Otorita Labuan Bajo Flores) under the Ministry of Tourism. BPOLBF holds a Hak Pengelolaan (HPL — State Land Management Right) over approximately 129.6 hectares of Zone 1, certified 12 September 2023 and formally handed over 15 September 2023. The zone is divided into 19 investment lots across four zones: Cultural, Leisure, Wildlife, and Adventure.
In Parapuar, no investor buys land. The freehold/Hak Milik question is irrelevant because BPOLBF, as HPL holder, retains the land. Investors — foreign or domestic — enter through cooperation agreements with BPOLBF, which typically take the form of HGB-on-HPL or a cooperation/utilization scheme. The specific instrument and tenure term are not published in any publicly accessible BPOLBF document as of mid-2026; interested investors must negotiate directly with BPOLBF’s investment and cooperation division.
A foreign-invested PT PMA is the normal vehicle for accessing Parapuar. The PT PMA holds HGB derived from BPOLBF’s HPL, rather than HGB over privately owned land. The legal chain is longer — authority body, not a private seller — but it is a documented Indonesian mechanism under PP 18/2021.
What is confirmed as of mid-2026: Dusit International has committed approximately US$15 million for a hotel on Lot 1.6 (reported April 2025, single-source — unverified at contract level); PT Eigerindo (Eiger) committed approximately US$1.2 million for a store and coffee shop with construction slated to begin around October 2025 (same single source). Frans Teguh, then-acting BPOLBF director, cited five to six committed investors total in April 2025. Only two are publicly named. BPOLBF has not published lot tariffs.
Parapuar is not a KEK (Kawasan Ekonomi Khusus). The fiscal incentives that apply in KEK zones — income-tax reductions under PP 40/2021, PPN facilities, customs exemptions — do not apply here. What BPOLBF offers is facilitation, land with HPL certification (described as clean and clear in their promotional materials), and coordination with government ministries. No Parapuar-specific fiscal incentive has been formally committed in public documents.
Comparing the Options
| Structure | Who can use it | Max tenure (PP 18/2021) | Suitable for | Key condition |
|---|---|---|---|---|
| Hak Milik (freehold / SHM) | Indonesian citizens only | Perpetual | N/A for foreigners | Closed to non-citizens; nominees void under Art. 26(2) UUPA |
| PT PMA + HGB | Foreign-invested Indonesian company | 80 years (30+20+30) | Hotel, resort, commercial development | Min. IDR 10B investment + paid-up capital; OSS-RBA KBLI licensing |
| Hak Pakai (individual) | Foreign individual with valid stay permit | 80 years (30+20+30) | Personal dwelling only | Minimum property price per province (NTT threshold: check current Kepmen ATR/BPN) |
| Registered leasehold | Any foreign party | Negotiated; typically 25-30 years + option | Villa, small commercial use | Contract quality and ATR/BPN registration are determinative |
| Parapuar HPL cooperation (PT PMA) | PT PMA (foreign or domestic) | Not publicly disclosed; HGB-on-HPL mechanism | Commercial tourism development in Parapuar zone | 19 lots; direct negotiation with BPOLBF; no published tariff or term |
Due Diligence on Labuan Bajo Land — What the Market Does Not Tell You
The Labuan Bajo property market is illiquid and thinly documented. Broker asking prices — the IDR 2-15 million per square metre figures you see on listing sites — are not transaction prices. There is no public price index, no transparent registry of completed sales at specific addresses, and no reliable occupancy data for the villa market. Claims about multi-fold appreciation since DPSP designation in 2019 are anecdotal and come from parties with an interest in selling.
Title due diligence in the area requires more than checking a certificate number. Some land around Labuan Bajo sits within or adjacent to the Nggorang Bowosie forest, which carries its own contested history. Four kampung — Racang Buka, Kaper, Lancang, and Nggorang — have claimed customary rights over parts of Bowosie forest land, including areas now within BPOLBF’s HPL. Residents from these communities physically blocked land clearing in 2022, and demonstrations continued into 2023. As of mid-2026, no comprehensive public settlement, compensation scheme, or formal recognition of adat claims has been documented. Sunspirit for Justice and Peace, WALHI NTT, AMAN Nusa Bunga, and Floresa.co have covered these claims in detail.
This does not mean Parapuar or town-adjacent land is unbuyable. It means the due diligence scope must include social-license and land-history checks that standard title verification does not cover. An investor who discovers a contested community claim after construction has begun is in a different position from one who mapped the risk beforehand.
Separately: Labuan Bajo’s water system runs on the Wae Mese spring, already under pressure from the town’s growth. Clearing in the Bowosie catchment area is a documented concern raised by NGOs and local residents. For a hospitality project at Parapuar, water availability per lot is a question that must go directly to BPOLBF — there is no public project-level utility plan for the zone.
What to Ask Before You Sign Anything
Regardless of which route you are considering, there are questions every foreign buyer or developer should have answered in writing before committing capital:
- What is the current title status of this specific land? (SHM, HGB, HGB-on-HPL, state land, or disputed?) Request the certificate, not a photocopy.
- Has the land ever been subject to a community or adat claim? Is it adjacent to the Bowosie forest boundary?
- What is the water source for this lot, and what is the confirmed daily supply capacity from PDAM or well?
- If the structure is a PT PMA with HGB: what are the KBLI codes, the project location used in OSS, and the renewal process when the initial 30-year HGB term expires?
- If the structure is a Parapuar cooperation agreement: what is the exact legal instrument BPOLBF will sign, what is the agreed term, what happens at renewal, and what approvals does BPOLBF still need from ATR/BPN, KLHK, or the Ministry of Tourism?
- If the structure is leasehold: is the lease registered at ATR/BPN? What are the conditions for early termination by either party?
None of these questions have standard answers that apply to every plot in Labuan Bajo. That is the point. The person answering them needs to be an Indonesian lawyer with a current practising certificate, not a property agent or a developer’s sales team.
We maintain a list of vetted independent specialists — market-entry consultants and legal advisers who work with foreign investors in NTT. There is no guarantee of outcomes, approvals, or returns. If you engage a specialist through us and proceed to retain them, they may pay us a referral fee at no extra cost to you. Use our enquiry form or WhatsApp to request an introduction — tell us what structure you are considering and at what scale, and we will point you to the right person.
Frequently Asked Questions
Can a foreigner hold a villa in Labuan Bajo in their own name?
Not through Hak Milik (freehold). A foreign individual with a valid Indonesian stay permit (KITAS or equivalent) can hold Hak Pakai over a residential property that meets the minimum price threshold set by Kepmen ATR/BPN for NTT province — that exact figure is unverified in public sources, so it must be confirmed directly with ATR/BPN or a licensed adviser before any transaction. A registered leasehold is the alternative that does not require a stay permit, but it is a contractual right, not a property right.
Is a nominee arrangement safe if my Indonesian lawyer drafts it carefully?
No. UUPA Article 26(2) voids the transfer itself, not just the side agreement. Even a well-drafted nominee arrangement cannot fix the underlying illegality: the land title held by the nominee has no legal standing as a vehicle for foreign beneficial ownership, and Indonesian courts have consistently refused to enforce the foreign party’s beneficial claim. The risk is not just losing the case — it is losing the land and the money paid for it.
What is the minimum investment to set up a PT PMA for a hotel in Labuan Bajo?
Under Peraturan BKPM No. 4/2021, the minimum investment in a single project location (per 5-digit KBLI) is more than IDR 10 billion, excluding land and buildings, plus a minimum issued and paid-up capital of IDR 10 billion. For a hotel (KBLI 55110), this applies per project location. The OSS-RBA system handles licensing; the process involves NPWP registration, NIB issuance, and sector-specific permits. Parapuar lots require direct negotiation with BPOLBF on top of standard PT PMA formation.
Does Parapuar offer any tax incentives for foreign investors?
Parapuar is not a Kawasan Ekonomi Khusus (KEK). The income-tax reductions, PPN facilities, and customs exemptions available inside KEK zones under PP 40/2021 do not apply at Parapuar. General investment incentives — such as the tax allowance under PP 78/2019 — may or may not apply depending on the KBLI code and NTT’s inclusion in the relevant annex; this requires a case-by-case check. No Parapuar-specific fiscal incentive has been formally committed in any public BPOLBF or government document as of mid-2026.
How does buying land near Labuan Bajo town compare to investing in Parapuar?
They are structurally different transactions. In town and surrounds, a PT PMA acquires HGB over privately owned SHM land — the investor has a documented right tied to a specific cadastral parcel, and the counterparty is a private landowner. In Parapuar, the PT PMA enters a cooperation agreement with BPOLBF, which holds the HPL; the tenure term is not publicly disclosed, and lot tariffs are not published. Town land comes with its own risks — contested titles near the Bowosie boundary, incomplete PDAM coverage, and an illiquid market with no verified price index. Parapuar’s risks include infrastructure that is largely staged rather than built, an adat and forest controversy that remains structurally unresolved, and cooperation terms that are negotiated behind closed doors. Neither option is risk-free; the right question is which risk profile matches the investor’s project type and legal structure.