After reading through a summary of the proposed new real property law changes that [supposedly] would allow a foreigner to "own" or buy a property in Indonesia -- I am left with this thought, WHAT IN THE WORLD IS INDONESIA THINKING OR TRYING TO ACCOMPLISH WITH THIS HERE ??!!
I go back to my very first post here where I said the new changes are OVERLY RESTRICTIVE & COUNTER-INTUITIVE on the part of the Indonesian government! There is no way they are going to stimulate the Indonesian economy with this ridiculous move.
Looking at this whole scenario as an outsider, expat, and real estate professional who would be contemplating buying a real estate property in Indonesia; if I was going to invest in the purchase of real estate property in a foreign country, Indonesia would be the LAST place on earth I would consider doing it ! Is this what the Indonesia government is trying to accomplish ? Trying to make it so restrictive and difficult that a foreign investor would run in the other direction ? If that's what the legislature was trying to accomplish, they've done an outstanding job at accomplishing this objective. If, on the other hand, their goal was to find ways to stimulate the Indonesian economy and broaden or foster greater relationships with other countries (particularly the USA and the UK) then they have done an absolutely miserable job of that and this legislation will prove to be a colossal failure.
What's also counter-intuitive is that if I, as a savvy and experienced [expat] real estate professional, do not have any confidence in the new real property law amendments as they relate to foreign investors, how in the world am I expected to convince or "sell" some other expat on the notion of "buying" a property in Indonesia ? Not very intuitive, is it ?
Indonesian government officials ? I hope you're listening and reading this and will reconsider your overly restrictive measures. There's another way to do this that would be a win-win situation for the Indonesian people at large, the Indonesian government and economy which it supports, and foreign investors alike. I would love to have the opportunity to appear before the 550-member People's Representative Council (Dewan Perwakilan Rakyat, DPR) and/or the 128-seat Regional Representatives Council (Dewan Perwakilan Daerah) to make my recommendations or suggestions in support of this new measure.
Showing posts with label Indonesia property law real estate. Show all posts
Showing posts with label Indonesia property law real estate. Show all posts
Saturday, June 12, 2010
Indonesia Property Ownership & Use Laws - Course 101
All property matters, except for those pertaining to the mining and forestry sectors, fall under the jurisdiction of the national land agency (Badan Pertanahan Nasional, or BPN for short), which was formed to administer all matters relating to the basic "Agrarian Law of 1960", such as the registration of the use of land.
The Indonesian land legislation is based on the basic Agrarian law number 5 of 1960.
The Basic Agrarian Law recognizes several types of rights over Real Estate, all of which are outlined below. However, to the foreign investor, the following five (5) main rights are relevant:
1. Right of Ownership - (Hak Milik)
2. Right to Rent [or lease] - (Hak Sewa)
3. Right to Build - (Hak Guna Bangunan or HGB)
4. Right of Use - (Hak Pakai)
5. Right of Exploitation [of land] - (Hak Guna Usaha or HGU)
These rights all authorize the use of land. The differences lie in the duration of validity and nature of utilization and the opportunities for obtaining a mortgage. The right of ownership is an inheritable right that can be held only by Indonesian citizens.
Right of Ownership - Hak Milik :
This refers to absolute ownership of land and corresponds to freehold title in common law terms. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural cooperatives, religious bodies, and social right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and mortgaged.
Right to Rent - Hak Sewa :
This is the right to use or lease land owned by another private party for habitation purposes. The right cannot be registered at the land office and therefore does not exist in certificate form. Land leases are not public documents. The law does not stipulate a [maximum] period for such lease agreements and whether or not a lease agreement may be transferred depends on the original lease agreement between the parties (lessor & lessee). This right may be held by a foreigner permanently domiciled in Indonesian or a foreign legal entity having a representative office in Indonesia, and may not be mortgaged.
Right to Build - Hak Guna Bangunan (HGB) :
Better known by its abbreviation, "HGB", this is the right to construct a building/s on a plot of land for a period of 20 or 30 years, and which can be renewed on the consideration of policy of the regional government. This right can be sold, exchanged, transferred, and mortgaged, and can be held directly by any corporate entity whether it is a local company or a government approved PMA (joint venture) company. If a joint venture company needs land for a factory, storage, employee housing or whatever, the company can be granted the right of building (HGB) in accordance with existing regulations.
Right of Use - Hak Pakai :
This is the right of use over state-owned (crown land) or property owned by public or private persons/entities for a specific purpose for (generally) a finite period and occasionally for an indefinite period. This land right may not be sold, exchanged or transferred unless explicitly stated in an agreement. Hak Pakai may be held by an Indonesian individual or entity. or foreigner permanently domiciled in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign Banks, embassies, etc.
Right of Exploitation - Hak Guna Usaha :
This is the right to exploit state-owned land for agricultural, fishery or animal husbandry purposes. Title is normally granted for a period of 35 years, which may be extended for a maximum of 25 more years, conditional that the company is still operational and sound. This right can be held by Indonesian individuals/entities as well as government approved PMA (foreign joint venture) companies, and may be mortgaged. Foreign investors who have obtained mining rights from the Minister of Mines and Energy or exploitation rights from the Minister of Agriculture or the Minister of Forestry have automatically obtained the right to use the land within their concession boundaries for purposes directly connected with the operations of the enterprise.
The Indonesian land legislation is based on the basic Agrarian law number 5 of 1960.
The Basic Agrarian Law recognizes several types of rights over Real Estate, all of which are outlined below. However, to the foreign investor, the following five (5) main rights are relevant:
1. Right of Ownership - (Hak Milik)
2. Right to Rent [or lease] - (Hak Sewa)
3. Right to Build - (Hak Guna Bangunan or HGB)
4. Right of Use - (Hak Pakai)
5. Right of Exploitation [of land] - (Hak Guna Usaha or HGU)
These rights all authorize the use of land. The differences lie in the duration of validity and nature of utilization and the opportunities for obtaining a mortgage. The right of ownership is an inheritable right that can be held only by Indonesian citizens.
Right of Ownership - Hak Milik :
This refers to absolute ownership of land and corresponds to freehold title in common law terms. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural cooperatives, religious bodies, and social right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and mortgaged.
Right to Rent - Hak Sewa :
This is the right to use or lease land owned by another private party for habitation purposes. The right cannot be registered at the land office and therefore does not exist in certificate form. Land leases are not public documents. The law does not stipulate a [maximum] period for such lease agreements and whether or not a lease agreement may be transferred depends on the original lease agreement between the parties (lessor & lessee). This right may be held by a foreigner permanently domiciled in Indonesian or a foreign legal entity having a representative office in Indonesia, and may not be mortgaged.
Right to Build - Hak Guna Bangunan (HGB) :
Better known by its abbreviation, "HGB", this is the right to construct a building/s on a plot of land for a period of 20 or 30 years, and which can be renewed on the consideration of policy of the regional government. This right can be sold, exchanged, transferred, and mortgaged, and can be held directly by any corporate entity whether it is a local company or a government approved PMA (joint venture) company. If a joint venture company needs land for a factory, storage, employee housing or whatever, the company can be granted the right of building (HGB) in accordance with existing regulations.
Right of Use - Hak Pakai :
This is the right of use over state-owned (crown land) or property owned by public or private persons/entities for a specific purpose for (generally) a finite period and occasionally for an indefinite period. This land right may not be sold, exchanged or transferred unless explicitly stated in an agreement. Hak Pakai may be held by an Indonesian individual or entity. or foreigner permanently domiciled in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign Banks, embassies, etc.
Right of Exploitation - Hak Guna Usaha :
This is the right to exploit state-owned land for agricultural, fishery or animal husbandry purposes. Title is normally granted for a period of 35 years, which may be extended for a maximum of 25 more years, conditional that the company is still operational and sound. This right can be held by Indonesian individuals/entities as well as government approved PMA (foreign joint venture) companies, and may be mortgaged. Foreign investors who have obtained mining rights from the Minister of Mines and Energy or exploitation rights from the Minister of Agriculture or the Minister of Forestry have automatically obtained the right to use the land within their concession boundaries for purposes directly connected with the operations of the enterprise.
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