Indonesia: Land & Property Ownership And Utilization In Indonesia Vol. 1

The Indonesian Government has implemented policy directives to strengthen the Land Management Rights (Hak Pengelolaan Tanah or "HPT"), land titles, Condominium/Apartment Units. The government has also granted rights for overground and underground lands as well as accelerating of land registration through electronic-based means. These new policies aim to provide solutions to bureaucratic and regulatory obstacles and address challenges that businesses often need to overcome in utilizing lands and buildings in Indonesia.

The new policy is consolidated into Government Regulation No. 18 of 2021 on the Right of Land Management, Land titles, Apartment Units, and Land Registration ("GR 18/2021"). The regulation aims to harmonize, amend, and replace the existing land regulatory regimes that are no longer relevant, including provisions from Government Regulation No. 40 of 1996 on Cultivation Right, Building User Right, and Utilization Right, Government Regulation No. 24 of 1997 on Land Registration, Government Regulation No. 103 of 2015 on Ownership of Residential Houses by Foreigners Domiciled in Indonesia, and various provisions regarding HPT in Government Regulation No. 8 of 1953 on Control of State Lands. GR 18/2021 came into force on 2 February 0221. Although it is an implementation regulation of Law No. 11 of 2020 on Job Creation, which has also been revoked by Government Regulation in Lieu of Job Creation No. 2 of 2022 ("Perppu 2/2022"), GR 18/2021 remains in effect and valid, as long as it does not contravene with Perppu 2/2022.

As provided in our previous legal insights on the Land & Property Title Ownership In Indonesia: Common Misconceptions Of Foreign Investors (here), we have provided a general overview of land and property title ownership in Indonesia, including its common misconceptions for foreign investors. This article, however, we are providing further analysis of key concepts of land and title ownership stipulated in GR 18/2021, including HPT, the right to cultivate (Hak Guna Usaha or "HGU"), the right to build (Hak Guna Bangunan or "HGB"), and the right to utilize (Hak Pakai or "HP"). Additionally, this article would also provide the regulatory overview on ownership of apartment units, HPT, HGB, and HP for underground and overground spaces, land registration, and conversion of rights.

HPT

Generally, HPT is defined as the ownership rights of the state that has been given to the HPT utilizer (Article 1 (3) of GR 18/2021). The objects of HPT are over State Land (Tanah Negara or "SL") and Customary Land (Tanah Ulayat or "CL"), where:

1. HPT over SL only could be granted to central government bodies; local government; state and local government-owned enterprises; state and local government-owned legal entities; Land Bank Agency (Badan Bank Tanah); and legal entity appointed by the central government; and/or
2. HPT over CL would only be granted to the customary law community.

(Article 5 of GR 18/2021)

HPT holder may utilize the land directly or through an arrangement with a third party, where the arranged fee and any contributions between the parties is the HPT holder's entitlement. Such arrangements shall be in a form of a Land Utilization Agreement (Perjanjian Pemanfaatan Tanah "LUA"), where it could also be granted with land titles such as HGU, HGB, or HP depending on the principle plan to their nature and function (Article 7 (1) & Article 8 (1) of GR 18/2021). The use and utilization of land right on the HPT must be under the recommendation of the HPT holder and stipulated in an LUA (Article 13 (2) of GR 18/2021).

HGU, HGB, and HP under GR 18/2021

GR 18/2021 provides the following changes on the general provision of HGU, HGB, and HP:

Under GR 18/2021, existing land title holders shall be granted priority to obtain new right over the same plot of land after the existing title has expired under certain conditions which include must be by the request of the holder and granted approval from the HPT holder. The extension request must be submitted prior to the expiry of the land title and the renewal must be made within 2 (two) years of expiry date of the relevant land titles (Article 25, Article 26 (2), Article 40, Article 41 (2), Article 55, Article 56 (2) of GR 18/2021).

Land titles can be revoked if the holder of the titles does not utilize the rights within 2 (two) years since the relevant rights were granted (Article 27 (a), Article 42 (a), Article 57 (a) of GR 18/2021).

Right to Own Apartment by Foreigners

GR 18/2021 stipulates that foreigners may now hold Ownership Right (Hak Milik or "HM") of Apartment Unit strictly under certain conditions and it is also required for foreigners to hold immigration documents.

HPT, HGB, and HP for Overground and Underground Spaces

Overground and underground spaces could be granted with HPT, HGB, and HP (Article 77 (2) of GR 18/2021), the utilization of overground and underground spaces, are limited in respect of:

• the height limit according to the building's base coefficient and the building's floor coefficient regulated in the spatial plan for the overground; and
• the depth limit regulated in the spatial layout plan or up to the depth of 30 (thirty) meters from the ground surface for the underground.

(Article 74 (1) of GR 18/2021)

Land titles cannot be granted towards overground and undergrounds spaces if there are utilization of oil and gas as well as mineral and coal in such lands (Article 75 of GR 18/2021).

Land Registration

Land registrations are now performed electronically and would be gradually implemented subject to the readiness of the relevant electronic systems. Land titles deeds issued by a land conveyancer (Pejabat Pembuat Akta Tanah or "PPAT") may now be drawn digitally. Furthermore, the data and information in a form of electronic and/or printed are admissible as evidence in court (Article 84 of GR 18/2021).

The announcement of the land registration period must be made within 14 (fourteen) days for systematic land registration and 30 (thirty) days for sporadic land registration, the announcements shall be made available to the public in the Ministry of Agrarian Affairs and Spatial Planning of the Republic of Indonesia website (Article 88 of GR 18/2021).

Conversion of Rights

GR 18/2021 provides that HGB and HP owned by Indonesian citizen that is utilized as place of residences, including store and office houses, can be converted to HM upon application by the rights holder (Article 94 of GR 18/2021).

Other than the above, other land titles can also be converted if the spatial planning or utilization plan has been changes. In the event that the lands would be used by the government or the state, based on GR 18/2021, the government will provide the relevant title holder with the appropriate compensation. (Elucidation of Article 30 (2), Article 45 (2), Article 60 (2) of GR 18/2021)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.