Land & Property Ownership

Indonesia is one of the most promising markets in developing countries in Asia. In this era of globalization, as a result, foreigners inevitably want to come to this country. Whether it is for investment or tourism purposes. Nowadays, foreigners can choose to invest in various types of sectors in Indonesia such as tourism, property, technology, and others.

The land and property in Indonesia are one of the largest sectors for investment opportunities in the first place. Important to realize that the basic regulation regarding land ownership is regulated in Act Number 5 the Year 1960 About Basic Regulation of Agrarian Principles (UUPA).

To assist businessman in understanding the land and property ownership, Indoned Consultancy provides a service in regard to Land and Property Ownership in Indonesia.

Land and Property Rights in Indonesia

1. Hak Milik or The Freehold

Hak Milik or in other words Freehold title can only be held by an Indonesian citizen or by Indonesian legal entities under certain circumstances. Important to realize that the freehold title gives you the rights to use your land in any way. However, it does not mean they can capitalize on natural resources under the land. Also, the Freehold title gives you the rights to sell, exchange, or use it as a mortgage.

Therefore, this title is the strongest and fullest title that can be obtained. Indonesian companies (Indonesian Legal Entities), no matter if they are PMA (foreign investment companies) or not, cannot possess freehold title over the land, in other words, currently, foreigners are not able to own freehold title under their name, state in Article 21 UUPA.

2. Hak Guna Usaha or The Right of Exploitation

Hak Guna Usaha or in other words The Right of Exploitation is the right to cultivate land that is directly controlled by the State. The another way, Hak Guna Usaha granted you for a maximum period of 25 or
35 years and can be extended for a maximum of another 25 years. In addition, the least land area is 5 hectares. Another key point that Hak Guna Usaha is given for business in agriculture, fisheries, and livestock.

3. Hak Guna Bangunan or The Right of Building

Property owned by a foreigner may not be Hak Milik, but the Right of Building title is completely firm. Therefore, the safest way for a foreign national to invest in property is to do it through a foreign-owned limited liability company registered in Indonesia (PT PMA). PT PMA is enabling the foreigner to acquire the Rights of Building (Hak Guna Bangunan), Right of Exploitation (Hak Guna Usaha), Right of Use (Hak Pakai) as well as Leasehold (Hak Sewa). The duration of the Rights of Building is a maximum of 50 years, with an initial duration of 30 years that can be renewed for a further 20 years. The Rights of Building title has effectively the same strength as a freehold title as long as the company continues to exist.

4. Hak Pakai or The Right of Use

As long as the property is not part of government-subsidized housing, foreigners are allowed to invest in commercial, residential real estate or property. However, because foreigners cannot actually own property as freehold title, a less risky and increasingly popular solution to the prohibition on foreign land ownership is a long-term leasehold agreement under the title of Hak Pakai (Right of Use).In addition, for state land the right of use is granted for a maximum period of 25 (twenty five) years and can be extended for a maximum period of 20 (twenty) years or granted for an unspecified period as long as the land is used for certain purposes.  After the granted period of the Right of use or its extension as previously mentioned has expired, the right holder can be given renewal of the Right to Use over the same land.  As for the right of use land with freehold title, it is granted for a maximum period of 25 (twenty five) years and cannot be extended. Based on the agreement between the holder of the Right of Use and the holder of the Freehold title, the Right of Use over Freehold land title can be renewed by granting new Right of Use with Deeds made by the and these rights must be registered. By having a Rights of use, you can construct a residential property on the land that is owned by the person having a freehold title or land directly controlled by the state.

5. Hak Sewa or Leasehold

Hak Sewa or in other words Leasehold is a person or a legal entity who has the right to lease land, if he has the right to use the land owned by someone else for building purposes, by paying the owner an amount of money as rent. Lease periods are not always the same but it referring to the time of Hak Guna Bangunan which is 30 years. The state can’t lease the land, because the state isn’t a landlord.

Land and Property Ownership in Indonesia

To support Indonesia’s domestic economic growth and attract private foreign investors within the land and property sector, so the governments set new requirements and procedures to allow the foreigner to own land and property. In addition, foreigner or legal entity cannot freely obtain land or property rights in Indonesia, the right to land or property for the foreigner or legal entity is limited by the Indonesian government.

1. Foreigner (Naturlijk Persoon)

Must be remembered that Article 42 UUPA that foreigner who domiciles in Indonesia is one of the subject who can have the Rights of Use. Therefore, the foreigner can build buildings to live or run his or her business on land with the status of the right to use. In addition, other than the right to use foreigners can also have the right to lease as stated in Article 45 UUPA.

In Agrarian and Spatial or Head of the National Land Agency of the Republic of Indonesia Ministerial Regulation Number 29 Years 2016 state, one of the requirements for a foreigner to get the Right of Use is must have Residence Permit in Indonesia, in other words, it’s KITAS or KITAP. The government also limits land ownership, where one plot of land is only for one person or a family with a maximum land area of ​​
two thousand (2.000) m2. In addition regarding the minimum price of residence that can be owned by foreigners is:

2. Legal Entity (Recht Persoon)

In UUPA Legal entity can own land with status Hak Guna Usaha or in other words The Right of Exploitation (Article 30 paragraph 1). Not to mention that Hak Guna Bangunan or in other words The Right of Building (Article 36 paragraph 1) can too, as well as Hak Pakai or in other words The Right of Use (Article 42) and Hak Sewa or Leasehold (Article 45).

Disclaimer:

The information provided here is based on our long experience. In addition, the process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. In either case please contact us  as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.