Types of property titles in Indonesia
Indonesian Land Titles
Forms of legal land title regulated by the Indonesian government:
Hak Milik — equivalent to Freehold title
Hak Guna Usaha — Cultivation Rights Title
Hak Guna Bangunan — Building Rights Title
Hak Pakai — Right to Use Title
Hak Sewa untuk Bangunan — Right to Rent for Buildings
Hak Membuka Tanah — Land Clearing Rights
Memungut Hasil Hutan — Forestry Rights
Hak Guna-air, Pemeliharaan & Penangkapan Ikan — Water Use and Fisheries Rights
Hak Guna Ruang Angkasa — Airspace Use Rights
Hak-hak Tanah untuk Keperluan Suci & Sosial — Land Title for Social & Religious Purposes
For foreign investors, the most common titles are the following ones:
Freehold Title (SHM or Sertifikat Hak Milik)
This title grants absolute ownership of a land plot and represent the freehold title in Indonesia. This title is hereditary and can be held only by individuals Indonesian citizens. Foreigners are not allowed to access to this title (“SHM”) under their own name.
Rights to Build Title (SHGB or Sertifikat Hak Guna Bangunan)
HGB title gives the right to build and own buildings on a plot of land. This right is transferable.
HGB is the form of freehold title that can be owned by Indonesian citizens and also legal company established under the Indonesian Law and in the Indonesian territory (including foreign owned companies PT PMA). Foreign companies are commonly using the HGB title to own real estate in Indonesia.
The right to Build title is granted by the National Land Agency for an initial period of 30 years and it is extendable for a first period of 20 years and again extendable for a period of 30 years. At the end of the 80 years a new HGB title may be granted with the same terms and on the same plot of land.
This land title is almost a leasehold title as it is can be renewed for infinity after it is expired.
The important point of this title is the capacity to sell the land as a freehold to Indonesian citizen and the possibility to use this title to obtain a loan collateral as well as freehold. For a foreigner who is looking to own a property in Indonesia, we highly recommend this land title. The only obligation is to create a company PT PMA in Indonesia, but it is better solution than obtaining only the SHP (Serfikat Hak Pakai or Right of Use) title.
Right to Use Title (HP or Sertifikat Hak Pakai).
This title gives you the right to use a state owned land or land owned by others Indonesian citizen for a specific purpose as agreed by both parties. This title can be held by Indonesian citizens, individual foreigners residing in Indonesia, representative offices of foreign institutions or foreign embassies.
The title can be granted for a maximum validity period of 30 years and is extendable for another 20 years and again and is extendable for another 30 years.
Generally, foreign individuals that are not registered under current Indonesian laws enjoy only the Right of Use (HP or Hak Pakai).
Dictionary of property language abbreviations:
HM : Hak Milik or Freehold Title
HGB : Hak Guna Bangunan or Right to Build
IMB : Ijin Mendirikan Bangunan or Building Construction Permit
BPN : Badan Pertanahan Negara or National Land Office
BKPM : Badan Koordinasi Penanaman Modal or Capital Investment Coordinating Board
PPN : Pajak Pertambahan Nilai or Value Added Tax (VAT)
PMA : Penanaman Modal Asing or Foreign Investment Company also called PT PMA
AJB : Akta Jual Beli or Sale and Purchase Deed
PPAT : Pejabat Pembuat Akta Tanah or Land Deed Official