Real Estate Surges in Indonesia: What It Means for Customary Landholders

Jakarta, Indonesia — Indonesia’s booming property sector is turning heads in regional investment circles. Fuelled by a post-pandemic economic rebound, expanding urban populations, and government-backed infrastructure projects, the real estate market is experiencing one of its strongest growth phases in over a decade.

As Indonesia’s real estate boom accelerates, customary landholders face rising pressure — and a growing fight for recognition and inclusion. (Photo: Tom Fisk)

According to Indonesia’s Ministry of Public Works and Housing, property development approvals rose by 24% in 2024, with new investment projects stretching from Sumatra to Papua. Yet behind the cranes and construction lies a less visible story: that of Indonesia’s customary landholders.

As demand for urban and peri-urban land increases, Indigenous and local communities who have long stewarded the land without formal titles are increasingly vulnerable to displacement, dispossession, and legal marginalisation.

Growth Meets Governance

Indonesia recognizes the existence of customary land (tanah adat) under its Basic Agrarian Law, but the process of formal recognition remains complicated and slow. While over 18 million hectares of land are estimated to be under customary tenure, fewer than 20% have been officially mapped or recognized by the state.

In cities like Makassar, Bandung, and Medan, rapid urban expansion has pushed property developers toward the urban fringe — often into territories informally occupied or managed by Indigenous communities or transmigrants with unclear tenure. This legal ambiguity, combined with strong market incentives and weak safeguards, creates a high-risk environment for customary landholders.

“Developers are moving fast, but policy is lagging behind,” says Rachmat Adiwijaya, an urban planner and land policy researcher at Universitas Gadjah Mada. “Without legal clarity or meaningful consultation, local communities are often the last to know and the first to lose.”

The Case of West Java

In West Java, a new industrial zone near Karawang has generated significant investment interest — but also triggered tensions with Sundanese adat communities living on ancestral land. Affected families report that they were neither consulted nor compensated adequately, sparking protests and appeals to local government officials.

Civil society organisations, including the Indonesian Forum for the Environment (WALHI) and the Indigenous Peoples Alliance of the Archipelago (AMAN), have stepped in to provide legal assistance and facilitate community mapping efforts.

“Recognition begins with visibility,” says Dewi Kartika, Executive Secretary of Konsorsium Pembaruan Agraria (KPA). “If communities can map and document their land claims, they stand a better chance of defending them against speculative development.”

Private Sector at a Crossroads

Real estate investors — both domestic and international — are increasingly under pressure to align with Environmental, Social, and Governance (ESG) standards. Some are beginning to screen projects for land tenure risk and are exploring ways to engage more responsibly with communities.

Notably, a consortium of developers in Bali has piloted a community engagement framework based on FPIC (Free, Prior and Informed Consent), in partnership with local land councils. While still in early stages, it points to a growing recognition that sustainable investment requires not just green buildings, but fair land practices.

“You can’t claim sustainability if the land you build on was taken unjustly,” says Rizky Santosa, Director of ESG Compliance at Nusantara Holdings.

Bridging the Gap

The Indonesian Government has acknowledged the need to reform land governance systems to keep pace with urban growth. The One Map Policy, launched in 2016, aims to create a single, integrated geospatial platform for land-use planning. However, integration of customary land data into national systems remains uneven.

Advocates argue that inclusive land reform must be at the heart of equitable development. This includes streamlining recognition of adat land, supporting participatory mapping, and requiring impact assessments that include customary tenure as a risk factor.

For now, customary landholders in Indonesia find themselves navigating a development landscape where progress and precarity often go hand in hand. Whether the country’s real estate boom can be steered toward justice — and not just profit — will depend on the strength of its land governance and the voices of its communities.