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| INVESTMENT IN BALI, INDONESIA. |
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With the emergence of foreign investment and buisness in Indonesia, many foreign investors are looking for land to accomidate buisnesses or private Villas. However Indonesian land laws are quiet different from the laws that apply in most other countries. The land law Act No. 5 of 1960 is the basic law applicable in Indonesia regarding rights over land ownership. With this law, only Indonesian citzens are allowed to own land in Indonesia with freehold title. Foreigners who wish to use or purchase land for whatever reason need to be aware of the facts and not assume that the conventions that apply in their home land, apply in Indonesia. These are the types of landownership that can be obtain fron the Indonesian Goverment. 1. Hak Milik (Right of Ownership) ("HM") HM is the most complete land title available under Indonesian law. HM is transferable and may be encumbered. HM is equivalent to freehold land or fee simple absolute under the common law system. Unfortunately, except for certain legal entities (not including PMA companies) designated by the Indonesian government, only Indonesian citizens are allowed to hold HM. However foreigners can hold property indirectly through arrangements called nominee or trustee arrangements. This is where a foreigner funds the Indonesian purchasing the property and then takes a formal security investment or mortgage on the land purchased. These arrangements are witnessed by a legal Notaries and are considered legally binding. 2. Hak Guna Usaha (Right of Cultivation) ("HGU") HGU gives the owner the right to exploit land for a certain period for the purposes of agriculture, fisheries or cattle breeding. HG- U is transferable and may be encumbered. Land with HGU title may be owned by (i) Indonesian citizens and (ii) legal entities established under Indonesian law and domiciled in Indonesia, including PMA companies. HGU is granted for a maximum period of 35 years and extendable for further 25-year period. Upon the expiration of such extension, the HGU may be renewed. The same Nominee / Trustee arrangement can be used with HGU. 3. Hak Guna Bangunan (Right to Use Building) ("HGB") HGB is right to construct and own buildings on land. HG is transferable and may be encumbered. Land with HGB title may be owned by (i) Indonesian citizens and(ii) legal entities established under the Indonesian law and domiciled in Indonesia, including PMA companies, HGB is granted for a period of up to 30 years and extendable for a farther 20-year period. Upon the expiration of such extension, new HGB title may be granted on the same land. This is the title most PMA companies use to hold real estate. 4. Hak Pakai (Right to Use) ("HP") HP is the right to use and/or to harvest from land, which is directly controlled by the State, or land of other persons. HP may be encumbered. HP may be owned by: (i) Indonesian citizens; (ii) Legal entities established under the laws of Indonesia and domiciled in Indonesia, including PMA companies; (iii) Departments, Non-Departmental State Agencies, and Regional Governments; (iv) Religious and social organizations-, (v) Foreigners residing in Indonesia; (vi) Foreign legal entities which have representatives in Indonesia; (vii) Representatives of foreign countries and international organizations. Ordinarily, HP is granted for a period of up to 20 years and can be extended for 20 years. Upon expiration of the extension period, HP may be renewed. This is the title used, in recent years, to "sell" condominium units (both commercial and residential property) to foreign individuals. 5. Hak Sewa (Right to Lease) ("HS") An owner of HS is entitled to use property of others, with the owner of HS obligated to make rental payments to the owner of such property. There is no fixed term for HS. The following persons are eligible to hold HS: (i) Indonesian citizens; (ii) Foreigners residing in Indonesia; (iii) Legal entities established under the Jaws of Indonesia and domiciled in Indonesia, including PMA companies;(iv) Foreign legal entities which have representatives in Indonesia. This is the title held by foreign individual and company renters of houses in Indonesia. |
