7 Property Rights in Indonesia You Must Know!
Buying a property in Indonesia, especially Bali, is really promising because of its potential to yield a high ROI. However, it’s crucial to understand land or property rights in Indonesia that are applied and the property buying process. You need to pay attention to these aspects if you’re considering property investment in Bali.
In this article, we’ll dive into property rights in Indonesia – covering its definition, the acquisition process, and the advantages you’ll have if you have the title.
An Insight: Property Rights in Indonesia
Let’s get “brief” insights about property rights in Indonesia before we deep dive and learn each type of them.
So, what is the definition of property rights?
Property rights, or property ownerships, refer to the legal ownership and control over the property. The owners of the property can be individuals, governments, and corporations.
There are so many kinds of property and it has a broad scope concept. As a result, legal protection for every property can be significantly different between jurisdictions.
But, in this article, we’ll discuss real estate objects' perspective – villas, hotels, lands, houses, and apartments.
Property ownership lets the owners have privileges on their properties – selling, renting, leasing, or generating profits.
Property rights in Indonesia are regulated by the Agrarian Law (Hukum Agraria). This law came from customary laws (Hukum Adat) that had been applied at the rural level for hundreds of years and then modified by Dutch colonial.
The Agrarian Law that applies in Indonesia is still considering concepts under customary laws (Hukum Adat).
In addition to this law, Chair of the National Land Agency (Badan Pertahanan Nasional) or the State Ministry of Agrarian (Kementerian Agraria dan Tata Ruang) also issues other property ownership regulations in this country.
These rules govern the property buying process in Indonesia. Whether you’re local or foreigner, you must know and stick to these rules in order to ensure a smooth property buying process experience.
7 Property Rights in Indonesia
There are seven property rights in Indonesia, each accompanied by a specific purpose.
If you’re a non-Indonesian who wants to have a property in Indonesia, please be aware of the restrictions that apply to the property ownership eligibility.
Let’s familiarize yourself with them!
1. Hak Milik (HM)
Hak Milik in Indonesia lets you have full ownership of land. As of today, only Indonesian citizens can acquire the rights – either buying from individual ownership, company ownership, or state-owned land. This title is one of the rights included in the freehold rights category.
Individually-owned land can vary from certified to even uncertified lands such as Girik, Letter C, or Eigendom Verponding which are usually owned in rural villages.
Furthermore, the property and land rights can be different – in this scenario, they might have different owners.
Lastly, if you are an Indonesian citizen, you can upgrade any land rights, both certified or uncertified, into freehold rights by registering with the Badan Pertanahan Nasional (BPN).
Hak Milik is the only rights that don’t have time restrictions regarding their ownership.
2. Hak Sewa Bangunan (HSB) – Leasehold rights
If you’ve got a leasehold title on your property as an individual, you’re able to rent your property to generate income.
The requirement is really simple. You only need your passport to obtain the leasehold title if you’re a foreigner and an ID card (KTP) if you’re an Indonesian.
You’re allowed to have leasehold rights for 30 to 80 years with an option to extend.
Want to know more about leasehold title and start generating income? Learn about leasehold title here!
3. Hak Pakai (HP) – Right to use title
In addition to leasehold title, as a foreign citizen, you also have a right to own Hak Pakai in Indonesia. However, this type of property only allows you to use the property for residential purposes, not for generating income (rent to someone else). Hak Pakai is included in the freehold rights category.
If you decide to have a holiday home, retirement plan, or planning to move to Indonesia, this land rights is fitting for you.
The duration of Hak Pakai ownership over land with Hak Milik is 25 years and can’t be extended. However, if the Hak Pakai and Hak Milik holders agree to have an extension option, it’s possible to extend Hak Pakai ownership.
The maximum validity period of Hak Pakai is 70 years – 45 years duration agreement up with 25 years of extension. The new Hak Pakai certificate is released by Pejabat Pembuat Akta Tanah.
4. Hak Guna Bangunan (HGB) – Right to build title
Hak Guna Bangunan permits the title owner to possess a building on land that is owned by another individual. Only Indonesian citizens and legal entities (PT. PMA) can have this property right. Hak Guna Bangunan is included in the freehold rights category.
The owner of Hak Guna Bangunan can use the building for commercial or residential purposes. However, additional requirements are needed when the title holders want to use the building for commercial purposes.
As we discussed earlier, Indonesian owners can upgrade their Hak Guna Bangunan ownership to freehold title by acquiring both the land and property above it and registering to BPN. Furthermore, when the freehold rights are acquired, the owner is entitled to inherit, sell, and lease the land and property.
Similar to freehold title, Hak Guna Bangunan title owners are also able to inherit or sell their HGB title and buy HGB title from someone else.
You can have Hak Guna Bangunan for 80 years – 30 years for the first contract, then you can extend the duration for 20 years for the first extension and 30 years for the next extension.
5. Hak Guna Usaha (HGU) – Right to cultivate title
Hak Guna Usaha only allows the utilization of land for agricultural, fisheries, or livestock purposes and the minimum land area is 5 hectares.
However, capital investment with a good company setting is needed if the land area is more than 25 hectares.
There’s a restriction for non-Indonesian individuals to obtain this property title. This property right is exclusively for Indonesian citizens and PT. PMA.
The contract duration for Hak Guna Usaha is 25 years – for companies that need a longer time, the duration is 35 years. If the contract expires, the extension is available for the next 25 years.
6. Hak Pengelolaan (SHPL) – Right to manage
Hak Pengelolaan is the most restrictive property right in Indonesia. This title is specifically designated for government agencies, state-owned enterprises (BUMN), regional-owned enterprises (BUMD), and government legal entities to manage the land.
The duration of Hak Pengelolaan can vary depending on the written agreement in the contract.
What are the authorities of Hak Pengelolaan holders?
• Planning the use of the land.
• Utilizing the land in order to carry the holder’s responsibilities.
• Transferring parts of the land to the third party as per the requirements of Hak Pengelolaan holder – conditions related to the land designation, utilization, duration, and compensation with the allocation of the land rights to the third party by government legal entities based on the regulations.
7. Hak Milik atas Satuan Rumah Susun (HMSRS) – Strata title
HMSRS or Strata title allows the owner to own a unit in multi-story building.
HMSRS provides you an ownership only over the unit, not the land as well. The land ownership is under Hak Pakai title or Hak Guna Bangunan title.
Please note that not all residential buildings in Indonesia have ‘strata title’ classification. You must ensure the building is eligible for you.
Also, there are limitations for foreigners who want to have HMSRS, including minimum unit price, land area, number of units, and unit utilization (for residential purposes only).
What about HMSRS duration? The contract duration depends on the land title where the units are built.
If the land title is HGB, the HMSRS duration will follow the HGB duration. For instance, if the HGB duration is 20 years, the HMSRS duration will be 20 years as well.
However, the HMSRS duration on land with Hak Pakai title is different. The maximum duration is 25 years with an extension option for another 25 years.
Additional information, the maximum area that foreigners can own within a multi-story building is 49% and the remaining units must be owned by Indonesian citizens.
If you’re interested in living in Indonesia, this title is good for you.
Property Rights in Indonesia You Can Have as a Foreigner
Here’s a quick recap of property rights you can have in Indonesia as a non-Indonesia individual, legal entity (PT. PMA), and Indonesian citizen.
Are You Ready to Own Property Rights in Indonesia?
The Indonesian government allows foreigners to access property rights in Indonesia in several ways. Typically, foreigners buy accessible rights through PT. PMA, as this way offers more property rights ownership compared to non-Indonesia individuals.
However, non-Indonesian individuals can still generate income in Indonesia through a property right like leasehold title. Regardless of your way to start acquiring property in Indonesia, collaborating with a trustworthy property agency is recommended to ensure a smooth property buying process.