1. Real Estate Law
1.1 Please briefly describe the main laws that govern real estate in your jurisdiction. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning and environmental should be listed in response to question 12.1. Those relating to tax should be listed in response to questions in Section 9.
The main laws relating to land titles and registration include:
- Law No. 5 of 1960 on Basic Principles of Agrarian ("Law 5/1960");
- Law No. 11 of 2020 on Job Creation ("Law 11/2020"); and
- Government Regulation ("GR") No. 18 of 2021 ("GR 18/2021") on Right to Manage, Right Over Land, Strata Titles and Land Registration – as the implementing regulation of Law 11/2020.
- The main laws relating to the ownership of landed houses and apartments include:
- Law No. 1 of 2011 on Housing and Settlement Areas, as amended by Law 11/2020;
- Law No. 20 of 2011 on Apartment, as amended by Law 11/2020; and
- GR No. 13 of 2021 on Organization of Apartment.
1.2 What is the impact (if any) on real estate of local common law in your jurisdiction?
The common law (customary law) was the reason and basis of the issuance of Law 5/1960, which adopted and accommodates the principles set out previously by the customary law, e.g., for the sale and purchase to be made in front of authorised officials (terang) and paid in full (tunai), and horizontal separation, which separates the owner of the land and the owner of the building constructed over the land.
1.3 Are international laws relevant to real estate in your jurisdiction? Please ignore EU legislation enacted locally in EU countries.
There are none.
2. Ownership
2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)?
Yes, Right of Ownership is restricted for any foreign or local legal entities, and foreign individuals (see section 3).
3. Real Estate Rights
3.1 What are the types of rights over land recognised in your jurisdiction? Are any of them purely contractual between the parties?
a. Right of Ownership (Hak Milik – "HM")
HM (equal to freehold), as the strongest land title over a piece of land, can only be granted to Indonesian citizens and certain legal entities as determined by the government. HM has no time limit and is inheritable.
b. Right to Build (Hak Guna Bangunan – "HGB")
HGB is the most common and suitable land title granted to, among others, foreign investor(s) – through the established foreign investment or foreign-owned company (Perseroan Terbatas Penanaman Modal Asing – "PMA" company). HGB provides the right to use the land (but not to cultivate the land or for agricultural purposes, see Right to Cultivate/Hak Guna Usaha ("HGU") below), including to build and own buildings over the land.
HGB could be granted over: (i) state land (land belongs to the state without any possession/ownership by any other party); (ii) land with Right to Manage/Hak Pengelolaan ("HPL") (see below); and (iii) land with HM, with a validity period of a maximum of 80 years in total, divided into (i) a 30-year maximum for the initial period, (ii) an extension for a 20-year maximum, and (iii) renewal for a 30-year maximum (after the expiry of the extension period).
c. Right to Cultivate (HGU)
HGU is the land title granted to, among others, PMA companies with cultivation/plantation or agricultural purposes. It provides the right to carry out cultivation/plantation or agricultural business activities, including to build supporting facilities over the land.
HGU could only be granted over: (i) state land; and (ii) land with Right to Manage/HPL (see below), with a validity period of a maximum of 85 years in total, divided into: (i) a 25-year maximum for the initial period; (ii) extension for a 35-year maximum; and (iii) renewal for a 25-year maximum (after the expiry of the extension period).
d. Right to Use (Hak Pakai – "HP")
HP is the land title that could be granted to, among others, wider foreign investors, individuals, representative offices, and PMA companies. It provides the right to utilise or collect the products from the land, including to build supporting facilities over the land.
HP could only be granted over: (i) state land; (ii) land with Right to Manage/HPL (see below); and (iii) land with HM, with a validity period of a maximum 80 years in total under GR 18/2021 (previously only 65 years), divided into: (i) 30 years maximum for the initial period; (ii) extension for a 20-year maximum; and (iii) renewal for a 30-year maximum (after the expiry of the extension period).
However, although HP seems similar to HGB, its common commercial use is to construct and to own houses or apartments for (eligible) foreign individuals.
e. Right to Manage (HPL)
HPL is the land title that is only granted to governmental bodies and agencies.
As for landed houses or apartment units for (eligible) foreign individuals residing/domiciled in Indonesia, the following are the title that could be granted:
i. Right to Use (HP)
HP is inheritable and limited to the landed houses constructed over: (i) land with HP; or (ii) land with HP over land with HM/HPL located in specific zones, and subject to the limitation of (i) minimum pricing, (ii) total area, (iii) the number of land or apartment unit, and (iv) purpose/utilisation of residency/occupancy.
ii. Strata Title (Hak Milik atas Satuan Rumah Susun – "SHMSRS")
SHMSRS is inheritable and limited to the apartments constructed over land with HP or HGB over: (i) state land; or (ii) land with HPL/HM, and subject to the limitation of (i) minimum pricing, (ii) total area, (iii) number of pieces of land or apartment units, and (iv) purpose/utilisation of the residency/occupancy.
The above land titles are transferable, can be encumbered, and must be registered to the relevant land office and evidenced by the issuance of relevant certificate.
As for land titles on a contractual basis, there are several types such as: (i) HGB over land with HM/HPL; (ii) HGU over land with HPL; and (iii) HP over land with HM/HPL, which are not purely on a contractual basis (since it must be followed by registration to the relevant land office); and (iv) the Right to Lease, which is purely on a contractual basis (and registration is not mandatory since it is not a land title).
Right to Lease is the right to use land owned by another party by way of payment of a sum of money to the owner. It could be granted to, among others: (i) a foreign individual residing in Indonesia; and (ii) a foreign representative office in Indonesia.
3.2 Are there any scenarios where the right to land diverges from the right to a building constructed thereon?
It is possible to have such a scenario due to the horizontal separation principle, by way of having contractual arrangement with the owner of: (i) land with HM; or (ii) land with HPL followed by registration to relevant land office to obtain (i) HGB over land with HM/HPL, or (ii) HP over land with HM/HPL.
3.3 Is there a split between legal title and beneficial title in your jurisdiction and what are the registration consequences of any split? Are there any proposals to change this?
Indonesian law does not recognise the separation of legal title and beneficial title, which in common law is adopted through the concept of nominee or trust of property. The legal/valid owner is the person/entity whose name is registered in the land certificate. At this stage, there is no legislative discussion or motion to change this principle.
4. System of Registration
4.1 Is all land in your jurisdiction required to be registered? What land (or rights) are unregistered?
Yes, it is mandatory as regulated under GR No. 24 of 1997 on Land Registration (as partially revoked by GR 18/2021). It has been the government's agenda to accelerate the land registration as mandated by GR 18/2021, due to the fact that there are still remaining plots of unregistered land.
The latest update on the above can be seen under the National Land Office (Badan Pertanahan Nasional – "BPN") Regulation No. 2 of 2022 on Land Registration of Tanah Kasultanan and Tanah Kadipaten in the Special Region of Yogyakarta enacted on and effective from March 2022. In essence, it provides more legal certainty on the registration and status of land owned by sultanate in the Special Region of Yogyakarta (including for relevant parties utilising such land to be able to be granted with types of land right as listed in question 3.1 above).
On a related note, as of March 2022, it is mandatory for the applicant to include a copy of registration/membership of the National Health Insurance programme (BPJS Kesehatan) for the submission of land registration to the relevant land office on the transfer of land rights due to a sale and purchase.
4.2 Is there a state guarantee of title? What does it guarantee?
A valid land certificate issued by the relevant land office serves as the strongest evidence of land ownership. It provides legal certainty and protection to the registered owner toward the ownership and usage of the land.
However, all land titles have social functions and are reserved for public interest, which allows the state to take over the land (by compensating the registered landowner) as elaborated in question 12.2 below.
Further, any claim, objection or legal action related to ownership over a plot of land would lapse after five years (statute of limitation) after the issuance of land certificate.
4.3 What rights in land are compulsorily registrable? What (if any) is the consequence of non-registration?
All land titles must be registered. See questions 3.1 and 4.1 above.
The consequence of non-registration is no valid evidence and legal certainty on the ownership and protection to the landowner (see question 4.1 above). It would also give rise to dispute of ownership over the land, in addition to the inability to use the land or encumber the land as security.
It is still possible to register unregistered land and this must be supported by evidencing documents, e.g., a statement letter of physical possession within the last five years since the enactment of GR 18/2021 (i.e., 2 February 2026).
4.4 What rights in land are not required to be registered?
All title over land must be registered (see questions 3.1 and 4.1), except a non-ownership right/title such as the Right to Lease, which is not mandatory to be registered.
4.5 Where there are both unregistered and registered land or rights is there a probationary period following first registration or are there perhaps different classes or qualities of title on first registration? Please give details. First registration means the occasion upon which unregistered land or rights are first registered in the registries.
There is a statute of limitation for any claim, objection or legal action related to ownership for a maximum of five years after the issuance of land certificate. There is no difference for first registration or the subsequent registrations.
4.6 On a land sale, when is title (or ownership) transferred to the buyer?
In principle, the title is transferred upon the execution of deed of sale and purchase, which then must be completed by a registration of the deed within seven working days since its execution.
4.7 Please briefly describe how some rights obtain priority over other rights. Do earlier rights defeat later rights?
See question 3.1 above.
5. The Registry / Registries
5.1 How many land registries operate in your jurisdiction? If more than one please specify their differing rules and requirements.
The authorised government institution for land registration is BPN, supported by around 513 land offices in regional areas (city or regent) across Indonesia.
5.2 How do the owners of registered real estate prove their title?
A valid land certificate issued by relevant land office serves as the strongest evidence of land title (see question 4.2 above).
5.3 Can any transaction relating to registered real estate be completed electronically? What documents need to be provided to the land registry for the registration of ownership right? Can information on ownership of registered real estate be accessed electronically?
Law 11/2020 and GR 18/2021 mandated the digitalisation on land registration. Throughout 2021, BPN issued several implementing regulations on land registration, e.g., electronic land certificate electronic land registration – although currently it is yet to be fully implemented.
To date, the transaction of land/property still needs to be completed physically by way of signing the relevant deed made before an authorised land deed official.
The land registration requires the deed of transfer and other administrative documents, e.g., Power of Attorney (if applicable), application letter, identity of the parties (the previous and the new owner), original copy of the relevant land certificate(s), and payment receipt of the land and building acquisition duty ("BPHTB") for the acquirer and income tax for the seller.
The information on ownership of registered land is publicly accessible but must be requested to the relevant land office directly. However, BPN is in the middle of a transformation to digitalise its services. It is expected that, in the future, the requested information could be obtained electronically once fully implemented.
5.4 Can compensation be claimed from the registry/registries if it/they make a mistake?
Although at this juncture there is no specific regulation on land registration that stipulates such compensation, in general, it is possible for the injured party to file a lawsuit and seek compensation from BPN.
5.5 Are there restrictions on public access to the register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and other rights affecting real estate and is this achieved by a search of the register? If not, what additional information/process is required?
Yes, the acquirer/buyer could request the relevant information required to carry out due diligence on the targeted land, e.g., the valid owner of the land, the land size and encumbrances (if any) (see question 5.3 above).
In April 2020, the government introduced an electronically integrated mortgage service, which allows easier access to information pertaining to land and their encumbrances through an application called HT-El and SentuhTanahku; however, the system is yet to be fully implemented. It is expected in the near future that all information pertaining to land will be able to be accessed and obtained electronically.
6. Real Estate Market
6.1 Which parties (in addition to the buyer and seller and the buyer's finance provider) would normally be involved in a real estate transaction in your jurisdiction? Please briefly describe their roles and/or duties.
Land deed official
The land deed official plays an important role in the land transaction (see question 4.6 above), as they have the obligation to conduct the checking on conformity and validity of the land, dispute and encumbrance over land, and being the only party authorised to prepare and execute the deed of transfer and registration of the land title. If there will be an encumbrance/mortgage over the acquired land, then the encumbering of mortgage also requires a mortgage deed to be made by the land deed official.
Appraiser
An appraiser may be needed to provide an assessment on the price of the property (for the parties' reference), particularly if the land is under/has special circumstances, e.g., contaminated/polluted.
Land/Property Agent
The land/property agent might be involved with: (i) assisting the seller to sell the land and liaise with potential buyer(s); or (ii) assisting the buyer to search for potential land to be acquired and liaise with the seller(s).
Lawyer
Although it is more common for the buyer to involve a lawyer in carrying land due diligence (including to provide legal advice on the structure of the transaction and review on the transactional documents), it is also common for the seller's side to involve a lawyer to ensure the transaction will be carried out in accordance with the agreed terms and conditions.
6.2 How and on what basis are these persons remunerated?
It is purely on a contractual basis, except for the land deed official fee, which is capped at a maximum of 1% of the transaction value.
6.3 Is there any change in the sources or the availability of capital to finance real estate transactions in your jurisdiction, whether equity or debt? What are the main sources of capital you see active in your market?
There is no limitation on the source of funding; it depends purely on the nature of the transaction. However, bank loans (including syndicated loans) are commonly used to fund any land/property transaction, e.g., for the purchase of a landed house/apartment unit, and the funding of construction projects.
6.4 What is the appetite for investors and/or developers to invest in your region compared to last year and what are the sectors/areas of most interest? Please give examples.
We have not seen any specific laws/regulations that stimulate or provide certain facilities to attract investors and/or developers.
However, in early 2020, the government issued a new regulation for special economic zones that provides more facilities, e.g., taxes and levies, manpower, land and spatial planning/zoning, and business licensing. The recently hyped Mandalika International Street Circuit was one of the special economic zones prioritised as "new Bali projects", which successfully attracted the local tourism in Lombok, Nusa Tenggara Barat.
6.5 Have you observed any trends in particular market sub sectors slowing down in your jurisdiction in terms of their attractiveness to investors/developers? Please give examples.
As Indonesia is currently in a "rebound" stage, many markets are back to business as usual, despite the spike of suspension of debt payment and insolvency cases throughout 2020–2021.
7. Liabilities of Buyers and Sellers in Real Estate Transactions
7.1 What (if any) are the minimum formalities for the sale and purchase of real estate?
For the sale and purchase of land, the deed of sale and purchase shall be drawn up by and signed before the land deed official in Bahasa Indonesia. A notarised Power of Attorney is required if the deed is signed by proxy of the seller/buyer.
The purchaser must make full payment before or at the time of execution of the deed.
7.2 Is the seller under a duty of disclosure? What matters must be disclosed?
No statutory provisions mandate specific disclosure. However, it is advisable for the seller to do so as, based on the Indonesian Civil Code, the seller could be held liable for any defects undisclosed to the purchaser.
7.3 Can the seller be liable to the buyer for misrepresentation?
Yes, the seller could be held liable for the loss suffered by the buyer due to misrepresentation, particularly if it is agreed contractually.
In a land transaction, a good faith buyer is protected, yet to establish so, the buyer shall ensure that they carry out the transaction by signing a deed of transfer executed before a land deed official and carry out the due diligence in due care, to ensure that: (i) the seller is the authorised person to sell the land; (ii) the land is not disputed/encumbered; and (iii) confirmation is obtained from BPN for certificated land for its historical record.
7.4 Do sellers usually give any form of title "guarantee" or contractual warranties to the buyer? What would be the scope of these? What is the function of any such guarantee or warranties (e.g. to apportion risk, to give information)? Would any such guarantee or warranties act as a substitute for the buyer carrying out his own diligence?
Yes, the laws/regulations require the seller to represent and warrant that the land is legally and validly owned by the seller and the land is not disputed/encumbered. Usually, it is stipulated under a statement letter and transactional documents.
7.5 Does the seller retain any liabilities in respect of the property post sale? Please give details.
In general, under the Indonesian Civil Code, the seller is liable for hidden defects on the property unknown by the buyer. However, it can also be stipulated as agreed contractually between the parties.
7.6 What (if any) are the liabilities of the buyer (in addition to paying the sale price)?
The buyer is liable to pay property tax, while the fee for the land deed official is usually split and borne equally with the seller.
8. Finance and Banking
8.1 Please briefly describe any regulations concerning the lending of money to finance real estate. Are the rules different as between resident and non-resident persons and/or between individual persons and corporate entities?
The loan facility for property ownership programme (landed house or apartment unit) is available and commonly only provided by banks to individuals (Indonesian or certain expatriates), subject to relevant regulations in the banking sector. As for legal entities, e.g., real estate developers, it is usually in the form of a syndicated loan from participating banks.
However, for Indonesian citizens that fulfil the criteria to receive and acquire a government-subsidised landed house/apartment unit, they may receive a lower interest amount and capped price to be subsidised by the government for 10–20 years.
8.2 What are the main methods by which a real estate lender seeks to protect itself from default by the borrower?
As security, the lender requires the borrower to encumber the acquired land/property by way of a mortgage (hak tanggungan).
A mortgage can only be granted by way of an execution of a deed of mortgage before the land deed official, and it must be registered to the relevant BPN to effectuate the mortgage. Thereafter, BPN will issue a certificate of mortgage.
8.3 What are the common proceedings for realisation of mortgaged properties? Are there any options for a mortgagee to realise a mortgaged property without involving court proceedings or the contribution of the mortgagor?
The execution of a mortgage deed can be by way of parate execution (direct execution by selling through public auction), title executorial/fiat execution (by requesting court decree and to later be sold through public auction), and private sale (only if agreed between the parties and provided that the price will be higher than sold through public auction).
8.4 What minimum formalities are required for real estate lending?
There are none. It is purely on a contractual basis, as long as it fulfils certain regulations of banking and financing sectors.
8.5 How is a real estate lender protected from claims against the borrower or the real estate asset by other creditors?
The mortgage deed provides legal certainty and rights for the creditor as a secured creditor, which is prioritised compared with other non-secured creditors, particularly in the event of bankruptcy or insolvency.
8.6 Under what circumstances can security taken by a lender be avoided or rendered unenforceable?
Assuming the loan agreement and the mortgage are validly created and exist, the only possibility of hindrance to the enforcement of the mortgage deed is if the execution is not in accordance with the allowed extent as mentioned in question 8.3 above. It is also not possible for the creditor to own the mortgaged land/property.
8.7 What actions, if any, can a borrower take to frustrate enforcement action by a lender?
Commonly, the borrower without good faith would challenge the enforcement through filing a civil claim/lawsuit based on an unlawful act, or an opposition claim toward the court decree.
8.8 What is the impact of an insolvency process or a corporate rehabilitation process on the position of a real estate lender?
In the event of insolvency, the mortgage holder/lender's right to enforce the mortgage deed will be subject to a 90-day stay period after the decision of bankruptcy is declared. Afterwards, the enforcement must be completed no later than two months after declaration of the insolvency condition.
8.9 What is the process for enforcing security over shares? Does a lender have a right to appropriate shares in a borrower given as collateral? If so, can shares be appropriated when a borrower is in administration or has entered another insolvency or reorganisation procedure?
A pledge is the most common security form over shares. Security rights from a pledge of shares would entitle the pledgee to enforce it by way of selling the shares to a third party and collecting the proceeds from the sale, but not appropriating the shares. This also applies in the insolvency of the borrower.
The lender shall be able to enforce the pledge through public auction or private sale based on court order/decision. While the procedures are available to enforce the pledge of shares by way of a private sale, there are "public policy" grounds available for the court to use its discretion not to enforce a strict pledge of shares agreement.
9. Tax
9.1 Are transfers of real estate subject to a transfer tax? How much? Who is liable?
As a general rule, the seller will be subject to income tax of 2.5% of the transaction value, while the buyer will be subject to BPHTB of 5% maximum of the transaction value.
9.2 When is the transfer tax paid?
As a general rule, it must be paid before the execution of deed of transfer.
9.3 Are transfers of real estate by individuals subject to income tax?
See question 9.1 above.
9.4 Are transfers of real estate subject to VAT? How much? Who is liable? Are there any exemptions?
As a general rule, the transfer of real estate will be subject to VAT 10%, which shall be paid by the buyer.
9.5 What other tax or taxes (if any) are payable by the seller on the disposal of a property?
In addition to the tax outlined above in question 9.1 above, land and building tax (Pajak Bumi dan Bangunan – "PBB") of 0.5% is applicable.
9.6 Is taxation different if ownership of a company (or other entity) owning real estate is transferred?
There may be tax exposure from this transaction and advice should be sought from tax counsel.
9.7 Are there any tax issues that a buyer of real estate should always take into consideration/conduct due diligence on?
In practice, the buyer shall make sure that there are no outstanding tax obligations over the land, particularly BPHTB, income tax and PBB, from the previous transactions.
10. Leases of Business Premises
10.1 Please briefly describe the main laws that regulate leases of business premises.
The lease of land/property is on a contractual basis, subject to the Indonesian Civil Code.
10.2 What types of business lease exist?
There is no classification on the lease of land/property; it is purely on a contractual basis.
10.3 What are the typical provisions for leases of business premises in your jurisdiction regarding: (a) length of term; (b) rent increases; (c) tenant's right to sell or sub-lease; (d) insurance; (e) (i) change of control of the tenant; and (ii) transfer of lease as a result of a corporate restructuring (e.g. merger); and (f) repairs?
Length of term, rent increases
This is subject to an agreement between parties; once agreed, the parties can only change it by way of written consent.
Tenant's right to sell or sub-lease
Unless agreed otherwise, the tenant is prohibited from selling the rented land/property, and written approval from the landlord/owner is required for the tenant to sub-lease the rented land/property.
Service charge
This is a sum of payment that is required to be paid by the tenant to the landlord/owner with regard to the cost of operation of the building (being leased). Service charges are usually subject to review from time to time by the landlord/owner.
Security deposit
It is very common in practice for the landlord/owner to require the tenant to submit a certain amount of security deposit. The security deposit amounts usually consist of three months of payment equal to the lease fee and service charge.
Insurance
In practice, the insurance premium during the lease period will be borne by the tenant.
Fit-out provision
This refers to everything related to the fit-out works of the leased premise, including the approval of the fit-out layout of the leased premise and charges imposed on the tenant during the fit-out period (e.g., electricity and water).
Permitted use of the leased premise
This refers to strict limitation on the use of the leased premise (e.g., within a building office, the leased premise must only be used for the operation/office activities and cannot be used for other usage).
Change of control
In certain transactions, the landlord/owner would usually require notification from the tenant on the change of control.
Repairs
Unless agreed otherwise, the landlord/owner shall be liable for any repairs provided except for damages caused by the tenant.
Non-competition/exclusivity
For a lease agreement within an office building and/or mall, it is common to include a non-competition clause to ensure that the landlord/owner would not engage with any other tenants whose business activity is in competition with the tenant in question.
10.4 What taxes are payable on rent either by the landlord or tenant of a business lease?
As a general rule, income tax applies for the landlord/owner and VAT applies for the tenant.
10.5 In what circumstances are business leases usually terminated (e.g. at expiry, on default, by either party etc.)? Are there any special provisions allowing a tenant to extend or renew the lease or for either party to be compensated by the other for any reason on termination?
This could be terminated due to expiration, mutual consent, or occurrence of an event of default, in which the parties are entitled for payment of penalties and/or refund of rent.
10.6 Does the landlord and/or the tenant of a business lease cease to be liable for their respective obligations under the lease once they have sold their interest? Can they be responsible after the sale in respect of pre-sale non-compliance?
Yes, the landlord/owner and/or tenant's liability of their respective obligations under the lease would cease once the lease is novated unless agreed otherwise.
10.7 Green leases seek to impose obligations on landlords and tenants designed to promote greater sustainable use of buildings and in the reduction of the "environmental footprint" of a building. Please briefly describe any "green obligations" commonly found in leases stating whether these are clearly defined, enforceable legal obligations or something not amounting to enforceable legal obligations (for example aspirational objectives).
The concept of "green leases" or "green obligations in lease agreement" is yet to be recognised.
10.8 Are there any trends in your market towards more flexible space for occupiers, such as shared short-term working spaces (co-working) or shared residential spaces with greater levels of facilities/activities for residents (co-living)? If so, please provide examples/details.
Currently, the policy to work from home remains implemented in several industries and, thus, preference to have a permanent business place is lacking. Therefore, the number of co-working/living spaces has been growing, given their flexibility for the business owners.
11. Leases of Residential Premises
11.1 Please briefly describe the main laws that regulate leases of residential premises.
See question 10.1 above.
11.2 Do the laws differ if the premises are intended for multiple different residential occupiers?
No, they do not.
11.3 What would typical provisions for a lease of residential premises be in your jurisdiction regarding: (a) length of term; (b) rent increases/controls; (c) the tenant's rights to remain in the premises at the end of the term; and (d) the tenant's contribution/obligation to the property "costs" e.g. insurance and repair?
See question 10.3 above.
11.4 Would there be rights for a landlord to terminate a residential lease and what steps would be needed to achieve vacant possession if the circumstances existed for the right to be exercised?
This is subject to agreement between the parties.
12. Public Law Permits and Obligations
12.1 What are the main laws which govern zoning/permitting and related matters concerning the use, development and occupation of land? Please briefly describe them and include environmental laws.
Land utilisation is mainly governed under Law No. 26 of 2007 on Spatial Planning and Law No. 28 of 2002 on Buildings ("Law 28/2002") as amended by Law 11/2020, GR No. 16 of 2021 on Implementing Regulation Law 28/2002 ("GR 16/2021"), GR No. 21 of 2021 on the Organization of Spatial Planning, and BPN Regulation No. 13 of 2021 on the Implementation of Conformity of Spatial Utilization Activities.
In essence, several licences/permits as elaborated in question 12.4 below must first be obtained before obtaining business licences/permits and commencing construction work.
Environmental matters are mainly governed under Law No. 32 of 2009 on Environmental Protection and Management as amended by Law 11/2020 ("Law 32/2009"), GR No. 22 of 2021 on the Organization of Environmental Protection and Management, and Minister of Environment and Forestry ("MOEF") Regulation No. 4 of 2021 on Mandatory Business to Procure Environmental Documents.
In essence, Environmental Approval must first be obtained before obtaining business licences/permits.
12.2 Can the state force land owners to sell land to it? If so please briefly describe including price/compensation mechanism.
Yes, if the land is intended for public use (e.g., roads, dam, and infrastructures). The compensation must be in the form of money, substitute land, resettlement, share ownership or other forms agreed by both parties. Pricing will be subject to assessment by the public appraiser.
In general, the procedures are as follows: planning; preparation; implementation; and handover of procured land.
If the landowner refuses the offered compensation, they can file an objection to the local District Court and the compensation money can be consigned to the District Court, in which the land will then be deemed to have been legally transferred to the relevant government institution.
12.3 Which bodies control land/building use and/or occupation and environmental regulation? How do buyers obtain reliable information on these matters?
The relevant authorities are BPN/the relevant land office and the Ministry of Public Works and Housing ("PUPR") for land/building use, and MOEF for environmental related matters.
Commonly, the buyer would request the above authorities to obtain information related to the target land, among others, Certificate of Land Registration (Surat Keterangan Pendaftaran Tanah) or Spatial Layout Information (Informasi Tata Ruang).
The Certificate of Land Registration will consist of information related to land ownership (e.g., the owner, area, transfer history of the land ownership, records on any encumbrances attached to the land), whereas Spatial Layout Information will consist of information related to the spatial use of the land pursuant to the prevailing laws and regulations (e.g., the land is to be used for industrial activities or housing area).
As for environment-related matters, in general, any business engaging in activities potentially impacting the environment must require an environmental plan in the form of an Environmental Impact Analysis (Analisis Mengenai Dampak Lingkungan Hidup – "AMDAL") or Environmental Management and Monitoring Programmes (Upaya Pengelolaan Lingkungan Hidup-Upaya Pemantauan Lingkungan Hidup – "UKL-UPL"), which set out the steps the relevant business activity must take to protect the environment. Every person/entity undertaking such business activity requiring AMDAL or UKL-UPL must also obtain Environmental Approval (Persetujuan Lingkungan).
Whether an AMDAL or UKL-UPL is required for the business activity will depend on the classification under the relevant prevailing laws and regulations.
12.4 What main permits or licences are required for building works and/or the use of real estate?
Below are the main permits/licences pertaining to land/building usage:
- Land Transfer Permit (Izin Peralihan Hak – "IPH"), a permit issued by BPN that is required to transfer the plot of land. However, IPH is not required for every transfer unless it is explicitly stated in the respective land certificate.
- Conformity of Spatial Utilization Activities (Kesesuaian Kegiatan Pemanfaatan Ruang – "KKPR"), before obtaining business licences and acquiring the land. It is a permit that gives the right or permission to procure and/or utilise a plot of land area as specified in the KKPR for investment purposes. Note that KKPR is not a document evidencing the title or ownership of the land or giving the rights to building.
- Description Plan of City (Keterangan Rencana Kota – "KRK"), this permit is issued by the relevant regional government and may not be applicable to all regions in Indonesia. KRK covers the information of building layout including building coverage ratio (koefisien dasar bangunan), floor area ratio (koefisien lantai bangunan), green plot ratio (koefisien dasar hijau) and tread basement ratio (koefisien tapak basemen).
- Building Approval (Persetujuan Bangunan Gedung – "PBG"), before commencing construction work, this permit is granted to start the construction work of a building.
- Certificate of Worthiness (Sertifikat Laik Fungsi – "SLF"), before utilising the building; it is an evidentiary document that a building that has been constructed is able to be utilised.
- Building Ownership Evidencing Letter (Surat Bukti Kepemilikan Bangunan Gedung – "SBKBG"), as the name suggests, this serves as an evidentiary document of a building ownership.
12.5 Are building/use permits and licences commonly obtained in your jurisdiction? Can implied permission be obtained in any way (e.g. by long use)?
Yes, PBG and SLF are mandatory to be obtained before the construction and the utilisation of the building. There is no implied permission.
12.6 What is the typical cost of building/use permits and the time involved in obtaining them?
In essence, Appendix of GR 16/2021 provides the calculation for the cost of PBG and SLF, which depends on the size of the building. PBG and SLF will be issued within 28 working days.
12.7 Are there any regulations on the protection of historic monuments in your jurisdiction? If any, when and how are they likely to affect the transfer of rights in real estate or development/change of use?
In general, cultural heritage is protected and governed by specific law and regulation. We have not seen it affect the transfer of land rights.
12.8 How can, e.g., a potential buyer obtain reliable information on contamination and pollution of real estate? Is there a public register of contaminated land in your jurisdiction?
There is no public register on the contaminated land.
12.9 In what circumstances (if any) is environmental clean-up ever mandatory?
In general, Law 32/2009 mandates the party who is proven to pollute and/or damage the environment to carry out mitigation and restoration/remediation, which must be carried out until obtaining a Decree of Completion (Penetapan Status Telah Selesainya Pemulihan Lahan Terkontaminasi) and Closing Report (Penetapan Penghentian Kegiatan).
12.10 Please briefly outline any regulatory requirements for the assessment and management of the energy performance of buildings in your jurisdiction.
See question 13.3 below.
13. Climate Change
13.1 Please briefly explain the nature and extent of any regulatory measures for reducing carbon dioxide emissions (including any mandatory emissions trading scheme).
The framework of reducing carbon was introduced by Presidential Regulation No. 98 of 2021 on the Carbon Economic Value for Nationally Determined Contributions and Control of Greenhouses Gas Emissions ("PR 98/2021").
However, further regulations are to be implemented.
13.2 Are there any national greenhouse gas emissions reduction targets?
Based on PR 98/2021, the government targeted to reduce greenhouse gas emissions by between 29% and 41% by 2030.
13.3 Are there any other regulatory measures (not already mentioned) which aim to improve the sustainability of both newly constructed and existing buildings?
The government has issued several regulations for sustainable construction, including the guidelines and evaluation of the green buildings concept under GR 16/2021, PUPR Regulation No. 9 of 2021 and PUPR Regulation No. 21 of 2021. Incentive(s) from the government in the form of dispensation of PBG retribution fees, awards, and/or publications or promotions. may be granted to owners of green buildings.
14. COVID-19
14.1 Please detail any laws that govern real estate in your jurisdiction which were introduced in response to the effect of the Coronavirus (COVID-19) pandemic and which remain in place.
Previously, due to COVID-19, for land titles that expired on 31 March 2020, BPN granted the grace period for submission of the application to obtain/extend land titles until 31 December 2021.
In addition, BPN also introduced several regulations regarding electronically based services, e.g., registration of mortgage deeds, registration of land and issuance of electronic land certificates.
Originally published by ICLG.com
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.
