Land & Real Estate in Indonesia

The system of land registration in Indonesia includes measuring, mapping and recording the land dimensions, registering the land title (which includes a public announcement) and, finally, the issuance of the land certificate under the applicant’s name.

Land & Real Estate in Indonesia

The existing Agrarian Law provides for two categories of land title comprising a total of nine rights.
The first broad category of land title is comprised of five primary titles derived directly from the state :

1. Right of Ownership (“Hak Milik”);
2. Right to Cultivate (Hak Guna Usaha or “HGU”);
3. Right to Build (Hak Guna Bangunan or ”HGB”);
4. Right to Use (“Hak Pakai”); and
5. Right to Manage (“Hak Pengelolaan”).

The primary title is registered in the Land Office’s records and is recorded on the land title certificate. Every region has its own land office, each of which is a subordinate of the National Land Office.

The second broad category of land titles is comprised of secondary titles, which are titles granted by holders of the above-described primary titles on the basis of private agreements, which consist of :

1. the right to lease;
2. the right of share cropping;
3. the right of land pledge; and
4. the right of lodging.

A secondary title is obtained by an investor based on an agreement whereby a primary title holder grants a legal interest, or secondary title, to another party.  The secondary title is not registered in the land office’s records and is not recorded on the land title certificate.

What titles are an Indonesian entitled to?
An Indonesian individual is entitled to all primary titles as mentioned above; however, in order to conduct business in Indonesia, investors (local or foreign) need to establish a limited liability company.  Such company in Indonesia (whether a locally owned company or a Foreign Joint Venture Capital Investment (“PMA”) Company is entitled to an HGB or Hak Pakai title. Hak Milik is also relevant to a PMA Company since when purchasing land, the PMA Company, with assistance from the seller, can relinquish and convert such Hak Milik title into an HGB so that the PMA Company can own such land.

What titles are a foreigner entitled to?
An individual foreigner is entitled to a Hak Pakai title as long as he/she is a resident of Indonesia.  Some investors will also agree to allow the seller to keep his underlying Hak Milik or Hak Pengelolaan title. In this case, the buyer only obtains a HGB title (if the buyer is a company, which includes the PMA Company) or a Hak Pakai title (for an individual foreigner) “over” the seller’s pre-existing Hak Milik or Hak Pengelolaan title.  The seller remains the owner of the Hak Milik or Hak Pengelolaan and the investor would need to pay the seller another “purchase price” in order to renew the HGB title in 30 years time. Alternatively, such renewal can be agreed and prepaid in advance.