Can Foreign Investors own Land in Indonesia?

2011-09-23 08.43.47The foreign Investors can own land in Indonesia under certain land titles. Therefore, the foreign investors must aware of the following land titles: Right of Ownership, Right of Build, Right of Exploitation, and Right of Use. Law No. 5 of 1960 regarding Basic Agrarian Law created a uniform, though somewhat complex, system of land rights throught Indonesia. Land titles based on Basic Agrarian Law comprise amongst others e.g.: Right of Ownerhsip (“Hak Milik”), Right to Build (“Hak Guna Bangunan or HGU”), Right of Exploitation (“Hak Guna Usaha”), Right of Use (“Hak Pakai”), Right of Management (“Hak Pengelolaan”),Right of Lease (“Hak Sewa”).

Right of Ownership is the most complete form of land ownership in Indonesia. The title may only be held by individuals of Indonesian nationality and special legal bodies stipulated by the government, e.g. government bank, cooperatives etc. Neither limited liability companies nor foreign individuals may hold such title. This right is held in perpetuity. It can be sold, transferred, bequeathed, and hypothecated (mortgaged).

Right of Build is the right to build and possess a structure on land owned by other. The duration is maximum 30 years and can be extended for 20 years. This right can be sold, transferred, bequeathed and hypothecated. The Indonesian citizen and entities (such as a limited liability companies or PT, a foreign investment company) established under the Indonesian law can hold this right.

Right of exploitation is a right to cultivate on state land for agriculture. The duration is maximum for 25 years and it can be extended. It should be registered in the Land Register at the National Land Agency (“Badan Pertanahan Nasional”). This right can be hypothecated. The Indonesian citizen and Indonesian legal entities can hold this right. Right of Use is a right to use and/or harvest from land directly owned by the State, or private land. This may be applied to land for use as a building site or agriculture purposes. The transfer of this right must obtain the local government approval.

The foreigners may obtain land in Indonesia. However, the foreign investors must obtain advice from professional person in this area. Also the due diligence is performed. We suggest that you contact the Notary/PPAT where your land is located.

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