Indonesian
land legislations do not recognize the concept
of freehold land rights. Instead, the various
rights attached to the land are subdivided
into separate titles.
The
Basic Agrarian Law (Law No. 5 of 1960) recognizes
types of rights on land of non-state-forest
area, whereas for the state-forest area,
the Law No. 5 of 1967 on forestry is applied.
To foreign as well as domestic investors,
the following three main rights are significant:
1.
The Land Cultivation Right /Hak Guna
Usaha (HGU)
2.
The Right of Building on Land/Hak Guna
Bangunan (HGB)
3.
The Right of Use on Land /Hak Pakai
(HP).
These
rights authorize the use of land in some
ways, and their difference are mainly on
the duration of validity, the nature of
utilization, the opportunity to mortgage
(to use as an asset or collateral) and proof
of title:
1. The
Land Cultivation Right (HGU) is the right
to use a State-Owned land for the purpose
of agriculture such as plantation, fishing,
or cattle raising. By law, the title is
granted a period of utility with a maximum
of 35 (thirty five) years but can be extended
to 25 years if the land is properly used
and managed. This title of right is given
to Indonesian individual(s) or legal entities
including PMA companies domiciled in Indonesia.
It can be used as a collateral or transferred
to a third party with the government approval.
2. The
Right of Building on Land (HGB) is the right
to construct and own buildings on a piece
of land that one has purchased. The title
is granted a period of utility for a maximum
of 30 years which can be extended for a
maximum of 20 years for Indonesian individual(s)
and/or legal entities including PMA companies
domiciled in Indonesia. and can also be
used as collateral or transferred to a third
party. This is also applicable and generally
granted to tenants in industrial estates.
3. The
Right of Use on Land (HP) is the right to
use land for a specific purpose for a period
of 25 years and can be extended for another
twenty years as long as the land is used
for a certain (normal) utilization. Now,
this right can also be used as a mortgage
and can be transferred to other party through
provided it is approved by the government.
.
A
dwelling house or a residence that can be
owned by a foreign person shall be:
A
separate house constructed on a piece of
land with the right of utilization on state
land controlled on the basis of an agreement
with a land title holder; or
An
apartment constructed on a piece of land
with the right of utilization on state land.
Foreign
Investors who obtained mining contract from
the Minister of Mines and Energy or from
the Governor/District Head or forest exploitation
rights or plantation rights from the Ministry
of Agriculture or the respective Governor/District
Head could automatically use the land within
the coverage of their business license In
case investors want to use the land for
different purpose, special application should
be submitted to the Ministry or the respective
Governor/District Head concerned. These
rights have no collateral value to the owner.
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