Under the Indonesian Land Law, ownership of a land is divided into some land titles. The Right of Ownership (Hak Milik) may only be owned by Indonesian citizen, while for the Right to Build (Hak Guna Bangunan – HGB) and Right to Cultivate (Hak Guna Usaha – HGU) may be owned by Indonesian citizen or Indonesian legal entities. So, are expatriates may or can own a land or property (house or strata title) in Indonesia?
If we look into the provisions of the Agrarian Law, the Law No. 5 Year 1960 (“Agrarian Law”), expatriates may only own a Right to Use title (Hak Pakai) (Article 42) and Rent (Hak Sewa) (Pasal 45). Here are the explanations of the Hak Pakai and Rent according to the law.
According to Article 41 of Agrarian Law, Hak Pakai means a right to a land which is directly controlled by the state or a land which is owned by another person. Further, article 41 of Government Regulation Number 40 Year 1996 (“GR 40/1996”) states that Hak Pakai may only be granted over the State’s Land, land with the Right of Management (Hak Pengelolaan), and Hak Milik.
The granting of Hak Pakai depends on the title of the land on which Hak Pakai is situated. If Hak Pakai is granted over a Land controlled directly by the state then Hak Pakai may only be granted by virtue of a decree issued by the Minister or an appointed official (article 42 paragraph (1)). If Hak Pakai is to be granted over a Hak Pengelolaan Land, it will be granted based on a virtue of a decree issued by the Minister or an appointed official based on the motion from the holder of the Hak Pengelolaan (Article 42 paragraph (2)). Lastly, if Hak Pakai is to be granted over a Hak Milik Land, it may be granted after there is an agreement to grant the land entered by and between the expatriate and the holder of Hak Milik (Article 44 paragraph 1 of GR 40/1996 in conjunction with Article 41 paragraph (1) of Agrarian Law). The agreement referred in the latest is not a rent agreement or a land management agreement.
A Hak Pakai is required to be registered in the Land Office. After it is registered, the owner of Hak Pakai shall receive a Certificate of Hak Pakai as the proof of ownership the Hak Pakai Land.
The owner of Hak Pakai doesn’t have freedom to transfer the land. According to Article 43 of Agrarian Law, the owner of Hak Pakai may only transfer its Hak Pakai title to other party if:
- the owner obtains prior consent from the authorized official, this is the case if the Hak Pakai is located in the state’s land; and
- such transfer is allowed under the agreement entered with the owner of Hak Milik or received prior written consent from the owner of Hak Milik, this is the case if the Hak Pakai is located in Hak Milik Land.
A Hak Pakai has a validity period, which is in the maximum of 25 years. For Hak Pakai that is located in the State’s Land or Right of Management Land, such validity period may be extended for another 25 years (Article 45 paragraph (1) of GR 40/1996). For Hak Pakai that is located in Hak Milik Land, the validity period cannot be extended once it is expired (Article 49 Paragraph (1) of GR 40/1996). Although its validity period expired, a Hak Pakai may be renewed. This renewal is considered as a granting of a new Hak Pakai over the same land. If such Hak Pakai has expired and is not extended nor renewed the land should be returned to the State, to the holder of Right of Management or to the owner of Hak Milik (Article 50.d of GR 40/1996).
A Hak Pakai may also be used as a security for a loan by attaching it with Hak Tanggungan (Mortgage) (Article 53 paragraph (1) of GR 40/1996). In addition, if the validity period of Hak Pakai expires, it shall terminate the Hak Tanggungan (Article 53 paragraph (2) of GR 40/1996).
Hak Pakai may be inherited to the heir. According to Article 54 of GR 40/1996 the passing down of Hak Pakai should be proven by virtue of a will or statement of inheritance issued by an authorized institution.
Other than Hak Pakai, expatriates also have the right to rent a building (Article 44 paragraph (1) of Agrarian Law). This Rent is only for building only. This Rent is basically just a rent agreement entered by and between an expatriate and the land owner, whereas the expatriate shall receive a rent from the owner and pay the rent.
The difference between Hak Pakai and Rent is that Hak Pakai should be registered to the Land Office, while rent does not have such requirements.
Landed Property and Strata Title Ownership by Expatriates
Now the question is, what if an expatriate wish to own a property for a residence in Indonesia?
According to article 2 paragraph (1) of Government Regulation number 103 year 2015 (“GR 103/2015”), expatriates may own a property for residence with Hak Pakai. In general, property ownership in Indonesia follows the ownership of the land, in which the property is located. Therefore, as regulated in Article 2 paragraph (1) of GR 103/2015, expatriates may own a property as a residence with the condition that the property is located in a land with Hak Pakai title.
Further explained in Article 4 of GR 103/2015 that the property which may be owned by expatriates are either landed house or strata title. Both landed house and strata title should be built over a Land with Hak Pakai title.
Based on the GR 103/2015, the period of ownership for the landed house and strata title is different than the validity period of Hak Pakai as explained in the beginning. Expatriates may own a landed house with Hak Pakai for the period of 30 (thirty) years and extendable for another 20 (twenty) years. After the expiry of the extension period expatriates may request for a renewal for the period of 30 (thirty) years. This will apply for the landed house located in a land with Hak Pakai title and a Land with Hak Pakai title which located in Hak Milik Land. As a note, the ownership of a land with Hak Pakai title located in land with Hak Milik as regulated under the GR No 40/1996 may not be extended, but it can be renewed.
Requirements for Expatriates to own Property in Indonesia
Not all expatriate is eligible to own a property as explained above. The conditions stipulated in Article 1 point 1 of GR 103/2015 stated expatriates may own a property in Indonesia if their presence brings benefit, for doing business, for working, or for making investment in Indonesia. This condition is further regulated that such Expatriate may own a property in Indonesia if they obtain residence permit (see article 2 paragraph (2) of GR 103/2015). This residence permit is granted by Indonesian immigration to an expatriate who fulfill certain conditions, for example as a worker or investor.
Termination of Hak Pakai
There are several conditions that may result in the termination of Hak Pakai. In the foregoing explanation, we have mentioned that if the period of Hak Pakai expires and it is not extended nor renewed then the Hak Pakai title shall be terminated.
Other than the expiry of period, there are other conditions that may result in the termination of Hak Pakai. According to Article 55 paragraph (1) of GR 40/1996 these conditions are:
- expiration of Hak Pakai period;
- the Hak Pakai is revoked by the authorized officials, holder of the Right of Management title, and the owner of Hak Milik:
- voluntarily released by the holder of Hak Pakai before the expiry of the period;
- revoked pursuant to the provision of the Law No 20 Year 1961, for the public interest;
- the land is destroyed;
- the holder of Hak Pakai becomes ineligible to hold a Hak Pakai and in the period of 1 year the land is not released nor transferred.
With regards to point number 2 above, it may be happened due to the following reasons:
- the expatriate who hold the Hak Pakai does not fulfill its obligations as a holder of Hak Pakai under the laws and regulations;
- the expatriate who holds the Hak Pakai does not fulfill the requirements or the contractual obligations as stipulated in the agreement to grant Hak Pakai entered by and between the holder of Hak Pakai and the owner of Hak Milik or holder of Hak Pengelolaan;
- there is a court decision which already has permanent legal force.
With regards to point number 4, one reason which causes this is that the land in the location of Hak Pakai has been determined by the government will be used for a development project for public interest, and thus the land title is revoked pursuant to the laws and regulation.
For the abandonment matters, according to the provision of article 9 paragraph (1) of Government Regulation Number 11 Year 2010, a land may be stated as an abandoned land by a stipulation of the head of National Land Office.
It needs to be noted also the provision of article 10 of GR 103/2015 which states that in the event an expatriate or his/her heir who own a property with Hak Pakai is no longer residing in Indonesia, within the period of 1 year must release or transfer the property (land and its building) to other party. The property will be sold in an auction by the state and if it is constructed above a Hak Pakai that is located in Hak Milik, then the property shall become the ownership of the owner of Hak Milik.
And lastly, with regards to the point number 7 above, one thing that needs to be considered is about the validity period of residence permit. Although a Hak Pakai may be valid for a period of 25-30 years and extendable, the residence permit granted by the immigration does not have the validity period for 25-30 years. Therefore if the residence permit has expired and not extended it may also result in the expatriate loses its Hak Pakai, including its property for residence in Indonesia.
Hope it helps.
FREDRIK J PINAKUNARY LAW OFFICES
This article is also available in Bahasa Indonesia: Kepemilikan Tanah, Rumah, dan Rumah Susun bagi Warga Negara Asing di Indonesia