Land and Property Ownership in Indonesia

Land and Property Ownership (i.e. Building) in Indonesia is primary regulated by Law 5 of 1960 (Undang Undang Pokok Agraria/ “UUPA”). The law became a modern unifying law that regulates land and property ownership in Indonesia. During the pre-independence era,land and property ownership were regulated by Colonial Law, Native Custom Law, and some Islamic Laws.

The Native Custom Law contributed a horizontal separation principle to the Land Law which makes the ownership of Land and Building separate. Having said that, a land with property on it may be owned fully or partially.

Even though the separation of ownership is regulated by law, however, this subject is not commonly known even by the Indonesians. The lack of implementation of the regulation for the ownership of buildings may be the cause of this.

In this article, we will discuss types of ownership for land and property in Indonesia based on the UUPA.

Land Ownership​

UUPA regulates that land ownership is classified into 5 primary types as follows.

1. Freehold Title (Hak Milik/”HM”)

  • Time Period: No limit
  • Designation: Free as long as it does not conflict with urban planning
  • Holder: Only Indonesian Citizens (and some religious foundation)
  • Used as an Inheritance: Applicable
  • Used as a Collateral: Applicable.

2. Rights to Build (Hak Guna Bangunan/ “HGB”):

  • Time Period: Maximum 30 years and can be extended for maximum 20 years
  • Designation: For building;
  • Holder: Indonesian Citizens and Indonesian Legal Entities
  • Used as an Inheritance: Applicable (Indonesian Citizens)
  • Used as a Collateral: Applicable.

3. Right to Exploit (Hak Guna Usaha/ “HGU”):

  • Time Period: Maximum 35 years and can be extended for maximum 25 years
  • Designation: Agriculture, fisheries, and plantations
  • Holder: Indonesian Legal Entity
  • Used as a Collateral: Applicable.

4. Right to Use (Hak Pakai/ “HP”)

  • Time Period: Maximum 25 years and can be extended for maximum 20 years
  • Designation: Free as long as it does not conflict with urban planning
  • Holder: Indonesian Citizens, Indonesian Legal Entity; Foreign Representatives Foreign Citizens.
  • Used as an Inheritance: applicable (for private persons)
  • Used as a Collateral: Applicable for some type.

5. Lease (Hak Sewa) 

  • Time Period: Subject to the lease agreement
  • Designation: Subject to the lease agreement
  • Holder: Indonesian Citizens, Indonesian Legal Entity; Foreign Representatives, Foreign Citizens, Foreign Entities
  • Used as an Inheritance: Not applicable
  • Used as a Collateral: Not applicable, unless otherwise specified in the lease agreement (using Fidusia security instrument).

Property Ownership

Property Ownership

As mentioned above, property or building ownership is less regulated. This has led to (i) no exact name given to the legal title as the proof of ownership for a property; or (ii) there is a specific property that has a legal title but not classified as a Property Ownership, but Land Ownership (e.g. Strata Title/ Sertifikat Hak Milik Atas Satuan Rumah Susun/ “SHMSRS”).

In practice, a person (private or legal entity) may be acknowledged as the owner of a property if they have an Building License Permit (Izin Mendirikan Bangunan/ “IMB”). Theoretically, a permit is different from a title of ownership, however, an IMB which was originally intended to be a building construction permit is used also as a document to prove the ownership of a property. This does not apply to a property that has legal title of Strata Title/ SHMSRS.

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Reference (downloadable via Google Drive)