posted by REB Team on March 26, 2016

The Indonesian government issued "UU 5/1960" (Law number 5 Year 1960) on the "Basic Regulation of Land in Indonesia" , which came into force on 24 September 1960 that is still valid till today.

UU 5/1960 recognized and regulated several rights over land and building including the most common title as outlined below:

 

 

​1. Hak Milik (Freehold Title) 

The most most absolute of individual rights over the land. There is no time limit, and the holder has the right to use the land. Right of Ownership may be held only by Indonesian citizens.

 

2. Hak Pakai (HP/Right of use) 

This is the right of use over state-owned (crown land) or property owned by public or private persons/entities for a specific purpose for (generally) a finite period and occasionally for an indefinite period. The document is legally registered in the Badan Pertanahan Nasional Office. For the durance of the period, the Right of Ownership of the Land is temporarily transferred to the Government. PP 40/1997 states that the initial period for Right of Use is not to exceed 25 years but can be extended for another twenty years or even indefinitely if the land is still in use for a certain reason. Right of Use may be owned by Indonesian citizens or foreigners.  For this option foreigner will require to have KITAS/KITAP (Kartu Izin Tinggal Sementara/Tetap – Temporary/Permanent stay permit), and the property documents will be under individual’s name

Hak Pakai title is granted for an initial term of 25 years, which can then be extended up to a further three times giving a total tenure of 80 years.  Hak Pakai is transferable if sold to another purchaser. The property under this title can be used for private residence only.

 

3. Hak Guna Bangunan (HGB/Right of Building) 

This title is granted for an initial period of 30 years, and can be renewed for several times.  HGB title is granted to local company (PT) or foreign entities (PT PMA), and can also be used as collateral or transferred to a third party. This type of property can be utilized for commercial purpose. For this option you will need to form a foreign investment company, and the property will be under company’s name. For more info how to form foreign investment company please click here. => link to other article on our web.

The property under this title can be used for private residence or commercial purpose.

The advantage of Hak Pakai (HP) and Hak Guna Bangunan (HGB) is that the document can be used for bank (credit or guarantee) purposes and it’s more save than Hak Sewa (Leasehold) because you actually lease the property from the State 

 

4. Hak Sewa (Right of lease/Leasehold)

Hak Sewa (Right of Lease) is similar to Leasehold. Leasehold rights are normally granted to tenants of both residential and commercial premises. Acquiring the leasehold of property is straightforward with the lease being in the name of the foreigner or Lessee. Lease period is vary, between 30 to 50 years is common in Indonesia. Mostly the terms and conditions of the extensions are agreed in advance and stated in the agreement

 

So which title is the most suitable for foreigner to obtain Property in Indonesia legally?

Please be advised that Indonesian Government is very open to foreigner who wants to invest in Bali and foreigners are able to legally obtained a property in Indonesia with the option number 2 , 3 and 4.

Unlike leasehold/Hak Sewa, for option number  1 and number 2, the value of the property does not depreciate as time goes by and the period of tenure matures. A property held using HP/HGB can be transferred to Foreigner or Indonesian and if sold to an Indonesian citizen it and can be upgraded to freehold title (Hak Milik).

 

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