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PURCHASING LAND IN INDONESIA

In recent decades Indonesia, and in particular Bali has attracted an increase in foreign investment in land deals.  However land acquisition in Indonesia is not without its risks. Contrary, to misguided theories and in some instances contracts being put in place that may circumvent Indonesian law - foreign nationals are not permitted to freehold land title in Indonesia.

 

Prior to investing in property in Indonesia we recommend an extensive due diligence is conducted. Checks to verify the correct zoning principles of the land, build status, authenticate ownership and boundaries, title checks, tax implications and confirm there are no financial liens on the title.

 

We have outlined herein the regulations pursuant to land attainment for your perusal. 

 

Hak Milik (Right of Ownership) – refer to Regulation No. 5 year 1960 concerning PERATURAN DASAR POKOK-POKOK AGRARIA dated 24 September 1960. (Article 20-27)

A Hak milik (right of ownership) is exclusive to Indonesian citizens. This type of title can change hands and be transferred to other parties.

As long as one with Indonesian citizenship concurrently holds foreign citizenship, he/she cannot have land with the status of a hak milik.

A hak milik can be used as debt collateral by encumbering it with a hak tanggungan (security title).

The sale/purchase, exchange, gifting, bequest by a will, grant under adat and other acts which are intended to transfer a hak milik and the control of such acts are to be regulated by the Indonesian Government Regulations.

 

Hak Guna-Bangunan (Right of Use of Structures/Buildings) – refer to Regulation No. 5 year 1960 concerning PERATURAN DASAR POKOK-POKOK AGRARIA dated 24 September 1960.
(Article 35-40)

A hak guna-bangunan is a right to construct and possess buildings on land which is not one’s own for a period of 30 years.

Upon request of the right holder and in view of the needs and of the condition of the buildings, the term referred to can be extended for at most 20 years.

A hak guna-bangunan can change hands and be transferred to another party. 

Those eligible for a hak guna-bangunan are as follows:

a. Indonesian citizens, and

b. bodies corporate incorporated under Indonesian law and domiciled in Indonesia.

A person or body corporate which holds a hak guna-bangunan but no longer fulfills the conditions which are referred to in paragraph (1) of this article is obliged to relinquish the hak guna-bangunan in question or to transfer it to another party which is eligible for such a right within one year. This provision applies also to parties who obtain a hak guna bangunan if he does not fulfill the said conditions. If the hak guna-bangunan in question is not relinquished or transferred within the said period of time, it is nullified for the sake of Indonesian law.

A hak guna-bangunan comes into existence:

a. in the case of land directly controlled by the State, a determination by the Government;

b. in the case of land having the status of a hak milik, by  an authentic agreement has been made by the relevant land owner with the party who will acquire the hak guna-bangunan with the purpose of giving rise to the intended right

A hak guna-bangunan can become debt collateral by encumbering it with a hak tanggungan (security title).

 A hak guna bangunan is nullified because:

a. its term has expired;

b.              it is terminated before the expiry of its term on the ground that a condition has not been fulfilled;

c.              it is relinquished by the right holder before the expiry of its term;

d.              it is revoked in the interest of the public;

e.              it has been abandoned;

f.               the land has vanished / erosion / re-claimed by the Government.       

 

Hak Pakai - Right of Use refer to Regulation No. Regulation No. 5 year 1960 concerning PERATURAN DASAR POKOK-POKOK AGRARIA dated 24 September 1960. (Article 41-43)

A hak pakai is a right to use, and/or to collect produce from, land directly controlled by the State or land owned by another individual (tanah milik).  The grantee of authority and obligations is determined in a right-granting decree by the official who is authorized to assign an agreement with the owner of the land, where the agreement is not a land-lease agreement (perjanjian sewa-menyewa) or land-exploitation agreement, given that everything is possible as long as it does not contradict the essence and provisions of this regulation.

A hak pakai can be granted:

for a definite term or for as long as the land is used for a specific purpose; and

for a certain payment, or for any kind of service.

the granting of a hak pakai can not be entailed with conditions which contain elements of exploitation.

Those eligible for a hak pakai are:

a. Indonesian citizens,

b. foreign citizens domiciled in Indonesia;

c. corporate bodies incorporated under Indonesian law and domiciled in Indonesia, and

d. foreign corporate bodies having representation in Indonesia.

In the case the land is directly controlled by the State, a hak pakai can be transferred to another party only with the approval of the authorized official.

 

Hak Guna-Usaha (Right to Cultivate) – refer to Regulation No. Regulation No. 5 year 1960 concerning PERATURAN DASAR POKOK-POKOK AGRARIA dated 24 September 1960. 

(Article 28-34)

A hak guna-usaha is a right to work on land directly controlled by the State for a period of time for use by an agricultural, fisheries or animal husbandry company.

A hak guna-usaha is to be granted on land whose area is at least five (5) hectares, with the proviso that, in the case where the area of the land is 25 hectares or more, adequate investment shall be made and good corporate management techniques shall be adopted as appropriate, in accordance with the developments of the times.

A hak guna-usaha can change hands and be transferred to another party.

A hak guna-usaha can be granted for a term of at most 25 years.

In the case of a company which requires more time, it can be granted a hak guna-usaha with a term of at most 35 years.

Upon request of the right holder and in regard to the circumstances of the company, the terms of a hak guna-usaha as referred to can be extended for at most 25 years.

Those who may obtain a hak guna-usaha are:

a. Indonesian citizens, and

b. bodies corporate incorporated under Indonesian law and domiciled in Indonesia.

A person or corporate body which holds a hak guna-usaha and no longer fulfills the regulated conditions is obliged to relinquish the hak guna-usaha in question or to transfer it to another party which is in a position to fulfill the conditions. This provision also applies to a party who acquires a hak guna-usaha if he does not the fulfill the regulated conditions. If the said hak guna usaha is not relinquished or transferred within the said period of time, it is nullified for the sake of law. A hak guna-usaha is created by the authority granted  by the Indonesian Government.

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