Understanding Property Ownership in Indonesia: A Guide to Freehold and Leasehold

Understanding Property Ownership in Indonesia: A Guide to Freehold and Leasehold

Defining property ownership in Bali and Indonesia as a whole isn’t as straightforward as it is in the U.S. or Australia. In Indonesia, various forms of property ownership exist, each represented by different land titles and certificates. Understanding these distinctions is crucial for potential buyers, as each type of title carries specific rights and constraints.

In this article, we’ll explore the six most common types of property ownership in Indonesia.

1. Freehold Ownership:

   • Hak Milik (HM) – Right to Own:

     • This is the highest form of land title in Indonesia, granting complete ownership rights. However, only individual Indonesian citizens can hold this title, making it unavailable to foreign nationals, foreign-owned companies, and even domestic companies. Properties under Hak Milik can be sold, transferred, inherited, or mortgaged.

   • Hak Guna Usaha (HGU) – Cultivation Rights:

     • Granted to locals and legal entities, including foreign ones, HGU allows land use for agricultural purposes. It’s a 25-year title extendable for another 35 years and is monitored by the National Land Agency.
       Hak Guna Bangunan (HGB) – Right to Build:

     • The HGB title allows ownership of a building on land that belongs to someone else, such as the state or an Indonesian person. Legal entities like PT PMA can obtain this title, but individual foreigners cannot.

     • Foreigners interested in owning land in Indonesia can establish a PT PMA company to obtain an HGB title. However, this process involves significant paperwork and a starting capital of at least IDR 10 billion (approximately USD 600 thousand), making it primarily viable for well-funded investors.

     • HGB title holders can use their buildings for personal or business purposes, sell, buy, or inherit the title. The National Land Agency grants this title for 30 years, extendable up to 80 years.

       
       

2. Hak Pakai (HP) – Right to Use:

   • The Hak Pakai title allows Indonesians and foreign nationals with residency permits to own property, subject to several restrictions:

     • Foreigners must hold either a KITAS (temporary residence permit) or KITAP (permanent residence permit).

     • Ownership is limited to land with existing buildings.

     • The title is for residential purposes; using the property for business faces limitations.

     • Minimum purchase requirements: IDR 5 billion for land with a building, and IDR 2 billion for an apartment.

     • Limited to owning one property.

     • Due to these restrictions, only a few foreigners in Bali choose the Hak Pakai option.

   
   

3. Hak Milik Atas Satuan Rumah Susun (HMSRS) – Strata Title:

   • Also known as Strata Title, this allows ownership of units in multi-story buildings (e.g., apartments) without extending rights to the land. Foreigners with valid residency permits can own these units, subject to a 49% limit on foreign-owned area within a building or complex.

     
     

4. Leasehold (Hak Sewa):

   • Leasehold in Bali refers to freehold title holders leasing their land to others for a specified period.

   • Unlike freehold, leasehold titles don’t come with a deed. The legal foundation is the lease agreement, officially documented by a licensed notary. This solidifies the property ownership.

   • Leasehold is popular among foreign resident-seekers and investors in Bali due to fewer limitations compared to other property titles.