Property Legislation
Indonesian land rights and legislation
All real estate matters, except those relating to the mining and forestry sectors, fall under the jurisdiction of the national land agency (Badan Pertanahan Nasional, or BPN), which was formed to manage all matters relating to the basic ""Agrarian Law of 1960"", such as the registration of the use of land and the granting of rights and permits to use the land.
The five main rights:
- Right of Ownership (Hak Milik)
- Right of Building (Hak Guna Bangunan HGB)
- Right to Rent (Hak Sewa)
- Right of Use (Hak Pakai)
- Right of Exploitation (Hak Guna Usaha)
Detailed Explanation of the Rights
A complete description of each property right
Right of Ownership (Hak Milik)
This refers to absolute ownership of land and corresponds to freehold in common law terms. This right can only be held by an Indonesian citizen, not a legal entity, local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural cooperatives, religious bodies, and social organizations can hold this right in perpetuity. It can be sold, transferred, inherited and mortgaged.
Right to Build (Hak Guna Bangunan)
Better known under the abbreviation "H.G.B.", this is the right to construct building(s) on a piece of land for a period of 20 or 30 years, and which can be extended based on the policy of the regional government. This right can be sold, exchanged, transferred and mortgaged, and can be held directly by any legal entity, local company or a government-approved PMA (joint venture) company.
Right to Rent (Hak Sewa)
This is the right to use land owned by another private party for building purposes. This right cannot be registered with the National Land Agency (BPN) and therefore does not exist in certificate form. Land lease agreements are not public documents. The law does not prescribe a period for such leases and whether it can be transferred depends on the original agreement between the parties. This right can be held by a foreigner permanently residing in Indonesia or a foreign legal entity with a representative office in Indonesia, and may not be mortgaged.
Right of Use (Hak Pakai)
This is the right of use of land owned by the state or public or private persons/entities for a specific purpose for (generally) a single period and or for an indefinite period. This land right may not be sold, exchanged or transferred unless explicitly stated in an agreement. Hak Pakai can be held by an Indonesian individual or entity or a foreigner permanently residing in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign banks, embassies, etc.
Right of Exploitation (Hak Guna Usaha)
This is the right to exploit state land for agricultural, fishery or livestock purposes. The title is normally granted for a period of 35 years, which can be extended for up to 25 years, provided the company is still operational and healthy. This right can be held by Indonesian individuals/entities and government-approved PMA (foreign joint venture) companies, and may be mortgaged.