Land rights in Indonesia explained

Indonesia's land law is based on the Basic Agrarian Law (UUPA) No. 5 of 1960. The core principle: the state retains ultimate control over all land, and various rights are granted to individuals and entities to use it. Which rights you can hold depends on your citizenship and entity type.

There are four land rights foreign investors encounter. Understanding the differences is essential before committing capital.

Hak Milik — freehold ownership

Hak Milik is the strongest land right under Indonesian law: perpetual, fully transferable, and mortgageable. It is the closest equivalent to freehold in Western legal systems.

It is also unavailable to foreigners. Only Indonesian citizens can hold Hak Milik. If a foreigner inherits it, they must divest within one year. No foreign company — including a PT PMA — can hold Hak Milik under any circumstances.

HGB — the right to build

HGB (Hak Guna Bangunan) is the most important land right for foreign investors. It grants the right to construct and own buildings on state-controlled land. Indonesian citizens, local PTs, and PT PMAs can all hold HGB.

Duration follows a three-stage structure: an initial grant of 30 years, a first extension of up to 20 years, and a second extension of up to 30 years — totalling a maximum of 80 years. HGB is fully transferable and can be mortgaged through Hak Tanggungan, meaning Indonesian banks accept it as collateral.

Extension is not automatic. The landowner must apply, and BPN (Badan Pertanahan Nasional) evaluates whether to grant it. Start the process one to two years before expiry. BPN assesses productive use, permit compliance, tax payments, company status, alignment with regional spatial planning, and whether the government needs the land for other purposes.

Extension costs typically run 2–5% of land value, covering government fees (1–2% of NJOP), notary and PPAT fees (0.5–1% of property value), and administrative costs.

Why HGB is often called "freehold"

Agents frequently market HGB via PT PMA as "freehold." It is not. True freehold (Hak Milik) is perpetual. HGB is time-limited with renewal expectations. Despite the difference, HGB is bankable, transferable, and renewable. For most investment horizons — certainly anything under 50 years — it functions similarly to freehold ownership. The first modern HGBs have not yet reached 80 years, so there is limited precedent on what happens at the boundary.

Hak Pakai — right to use

Hak Pakai grants the right to use land for a specific purpose. Foreign individuals with valid residency (KITAS or KITAP) can hold it — but only for residential use. Commercial activity is not permitted. Maximum duration is 70 years (25 + 20 + 25). Transferability is limited.

Hak Sewa — leasehold

Hak Sewa is a contractual lease, not a registered land right. It is the most accessible option for foreigners but offers the weakest legal protection. Typical terms run 25–30 years. Crucially, leasehold is not registered at BPN and cannot be used as bank collateral.

Key risks include: no registered right, potential landowner disputes, extension uncertainty, unclear building ownership at lease end, and no access to bank financing.

Comparison at a glance

Which right fits your profile

At Horizen, all villa purchases are structured through PT PMA with HGB — the standard for commercial foreign investment in Indonesian real estate.

This article is for general informational purposes only and does not constitute legal advice. Indonesian land law is complex and subject to change. Always consult qualified Indonesian legal professionals before making property investment decisions.