In the past, there has been a large reliance upon nominee arrangements and a tendency to choose the property before conducting due diligence. There were conflicting interpretations of the regulations, low levels of enforcement and a culture of do now, structure later.
The current land ownership climate in Indonesia is rapidly changing. It is no longer viable to acquire property without proper due diligence around the existing title and zoning regulations. Some zoning areas to consider: tourism, commercial, residential, industry, farming, greenbelt, fishery or protected area. Your personal, business or investment land decision will need to be in the correct zone.
The first step is ensuring you have the correct land title. Options in Indonesia Include:
Hak Milik (Freehold)
Duration: Ongoing
Appropriate for: Residential and Commercial projects
Eligible to: Indonesian citizens only
Legislation: The Law of the Republic of Indonesia, Act No. 5 of 1960 Concerning Basic Regulations on Agrarian Principles Part 3 – Articles 20 and 21
Hak Guna Bangunan (HGB)(Right to Construct and Own Buildings On Land)
Duration: 30 + 20 + 30 years (up to 80 years)
Appropriate for: Commercial projects
Eligible to: Indonesian citizens and legal entities established in Indonesia
Legislation: The Law of the Republic of Indonesia, Act No. 5 of 1960 Concerning Basic Regulations on Agrarian Principles Article 36; The Law of the Republic of Indonesia, No. 40 of 1996 Concerning Representatives, Building Rights and Rights to Land Part 4 – Article 25
Hak Pakai (Right to Use)
Duration: 25 + 20 + 25 years (up to 70 years)
Appropriate for: Residential projects
Eligible to: Residents of Indonesia seeking residential property
Legislation: Minister of Agrarian and Spatial Regulation / Head of the National Land Agency (BPN) of the Republic of Indonesia, No. 29 of 2016 Concerning Procedures for Granting, Disposal, or Transfer of Right to Residential or Residential Ownership by Foreigners domiciled in Indonesia. Articles 1, 3, 6, 8, 17
Hak Sewa (Right to Lease)
Duration: 30 + 20 + 30 years (Up to 80 years)
Appropriate for: Residential; Long-term sub-lease
Eligible to: Indonesian citizens; legal entities established in Indonesia; Foreign citizens
Legislation: The Law of the Republic of Indonesia, Act No. 5 of 1960 Concerning Basic Regulations on Agrarian Principles Article 44
Hak Milik Atas Satuan Rumah Susun (Right of Ownership over SHM Condominium Units)
Duration: 25 + 20 + 25 years (up to 70 years)
Appropriate for:Residential or commercial
Eligible to: Foreigners
Note: can be issued on top of Hak Milik, HGB, Hak Pakai
Legislation: Law Number 16 of 1985 on Condominium “Condominium Law”
Hak Guna Usaha (HGU) (Right to Cultivate)
Duration: 25 + 25 + 25 years (up to 75 years)
Appropriate for: Fisheries, Agriculture, Animal Husbandry
Eligible to: Indonesian citizens (35 years); legal entities established in Indonesia
Legislation: Law Number 5 of 1960 Concerning Agrarian Principles (UUPA) Article 28
The Solution ?
The only solution to be safe in the current landscape is to ensure you have a competent team conducting the due diligence before you pay the money to secure your new piece of paradise. It is possible to conduct yourself, however you will need to know your way around the Indonesia system, the Indonesian language and be prepared to allocate sufficient time. Most of our clients prefer to have these matters dealt with by experts in the area and that's how Alam Santi and our partners become your legal consultants.
How Alam Santi Can Help
We are experienced in conducting thorough due diligence that will give you peace of mind whether you are relocating, starting a business or investing in Indonesia. If you are new to understanding due diligence in Indonesia or a well-seasoned expat, our consultants can advise and coordinate your due diligence and commence the legal work streams right away.
Can we help you ?
Contact us to arrange a consultation.
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