Based on Indonesian Law 5 of 1960 on the Basic Provisions concerning the Fundamentals of Agrarian Affairs (Land Law), only Indonesian citizens are able to fully own Indonesian land. The rights of foreigners and foreign investment companies to own land are limited. But, there are three land rights in indonesia that available for the foreigners. In this column we will provide an overview of the types of land rights available to foreign investors in Indonesia: hak guna-usaha (the right to cultivate), hak guna-bangunan (the right to build), and hak pakai (the right to use).
HAK GUNA USAHA (HGU), OR THE RIGHT TO CULTIVATE
Hak Guna Usaha (HGU) is the right to work on land which is directly controlled by the Indonesian state. HGU is granted for a period up to a maximum of 35 years and may be extended for a maximum period of 25 years.
HGU is granted on lands that are larger than five hectares and can be granted to Indonesian citizens and corporate bodies in Indonesia (the latter includes foreign investment companies).
HAK GUNA BANGUNAN (HGB), OR THE RIGHT TO BUILD
Hak Guna Bangunan (HGB) is the right to construct buildings on land that is not owned by the person or entity constructing such buildings. HGB is granted for an initial period of 30 years and may be extended for another 20 years and may be renewed for another 30 years based on the decision of the related government agency.
HGB, just like Hak Guna Usaha (HGU), is granted to Indonesian citizens and corporate bodies (including foreign investment companies) in Indonesia.
HAK PAKAI, OR RIGHT TO USE
Hak Pakai is the right to use and/or to collect products from lands controlled by a third party (this can be either the Indonesian state or an individual). It is a weaker right than e.g. Hak Guna Bangunan. Also, Hak Pakai can be granted to Indonesian citizens and corporate bodies in Indonesia. Moreover, Hak Pakai can be granted to foreign individuals, based on article 39 Government Regulation 40 of 1996 on Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai Atas Tanah (Government Regulation).
*Please note that the above-mentioned land rights have been re-regulated under article 22 of the Indonesian Law 20 of 2007 on Investment (Investment Law), which alters the grant, extension and renewal periods of the land rights. However Constitutional Court decision number 21-22/PUU-V-2007 has voided this article and refers to Government Regulation for matters regulated in article 22 Investment Law.