Asia Property Finance

INDONESIAN LAND TITLE DEFINITIONS RIGHT OF OWNERSHIP ("HAK MILIK"),
RIGHT TO BUILD (HAK GUNA BANGUNAN OR "HGB") AND RIGHT TO USE ("HAK PAKAI")

ITEM

HAK MILIK

HGB

HAK PAKAI

COMMENTS

Summary

Hak Milik is the most complete form of ownership of land in Indonesia. The title may in principle only be held by individuals of Indonesian nationality and special bodies as authorized by government regulation and is of indefinite duration. Hak Milik title is evidenced by a registered certificate of title and can be sold, exchanged, gifted, bequeathed or otherwise transferred to an eligible recipient and can be encumbered with a security right (or mortgage, known in Indonesia as a "Hak Tanggungan").

The holder of HGB title has the exclusive right to use the land and the right to erect and exclusively possess structures on the land. HGB title is valid for an initial period of up to 30 years, which is extendable and renewable. HGB title may be owned by Indonesian citizens and legal entities. HGB title is evidenced by a registered certificate of title and can be sold, exchanged, gifted, bequeathed or otherwise transferred to an eligible recipient and can be encumbered with a Hak Tanggungan.

The holder of Hak Pakai title has the exclusive right to use the land and to exclusively possess structures on the land. In practice, a Hak Pakai title holder has the right to build structures with the requisite Building Permit as per HGB title holders. Hak Pakai title is valid for an initial period of up to 25 years, which is extendable. Hak Pakai title is evidenced by a registered certificate of title and can be sold, exchanged, gifted, bequeathed or otherwise transferred to an eligible recipient and can be encumbered with a Hak Tanggungan.

Eligible Title Holders

a.	Indonesian citizens; and
b.	Indonesian legal entities specifically authorized by governmental regulation.

a.	Indonesian citizens; and
b.	Indonesian legal entities including PMA companies.

a.	Indonesian citizens;
b.	Indonesian legal entities including PMA companies;
c.	Government bodies;
d.	Social and religious bodies;
e.	Foreigners domiciled in Indonesia;
f.	Foreign legal entities having a legal branch or representative office in Indonesia; and
g.	Representative offices of foreign countries and international bodies.

Type of land titles that can be certificated

a.	State Land;
b.	Hak Milik title can be transferred to an eligible title holder without being relinquished to the State.

a.	State Land;
b.	Land subject to a continuing Right of Management ("Hak Pengelolaan");

a.	State Land;
b.	Land subject to a continuing Hak Pengelolaan;

a.	The term "State Land" in this report means land owned by the State or relinquished to the State by the seller for purposes of transfer of title.
b.	HGB, Hak Milik and Hak Pakai on State Land is evidenced by BPN certificate registered with the local Land Office.

c.	Land subject to a continuing Hak Milik title;

c.	Land subject to a continuing Hak Milik title.

Hak Milik, HGB or Hak Pakai is acquired by Deed of Sale and Purchase and the endorsement and re-issuance of the registered certificate in the name of the purchaser, or by Deed of Relinquishment (if the seller's title is different from the title the buyer intends to acquire) and the issuance of a new certificate as determined by the Land Office.

d.	HGB title can be transferred to an eligible title holder without being relinquished to the State.

HGB or Hak Pakai over land with a continuing Hak Pengelolaan or Hak Milik title is granted by the underlying title holder by a notarized Deed and evidenced by BPN certificate registered with the local Land Office based on the recommendation of the Hak Pengelolaan holder. This kind of HGB/Hak Pakai certificate will be subject to the underlying Hak Pengelolaan or Hak Milik title.

Duration

Indefinite.

a.	on State Land (i.e. including when the existing Hak Milik title of seller is relinquished to the state on closing): Up to 30 years, extendable for up to 20 years and renewable for up to 30 years.

a.	on State Land (i.e. including when the existing Hak Milik or HGB title of seller is relinquished to the state on closing): Up to 25 years* and extendable for up to 20 years. After the expiry date of the Hak Pakai and its extension, the Hak Pakai holder may request the renewal of its Hak Pakai.

* Hak Pakai can be granted for an unlimited period but only to a) Indonesian government authorities; b) representative offices of foreign countries and international bodies; and c) religious and social bodies. The request to extend and renew Hak Pakai and HGB should be made at least two years before the expiry date of such rights. However, in practice, it is our experience the Land Office will not accept a renewal/extension application until within one year of the expiry of the land certificate

b.	over a continuing Hak Pengelolaan title: Up to 30 years, extendable for up to 20 years and renewable for up to 30 years, in each case with the approval of the Hak Pengelolaan title holder.

b.	over a continuing Hak Pengelolaan title: Up to 25 years and extendable for up to 20 years with the approval of the underlying Hak Pengelolaan title holder. Thereafter, the Hak Pengelolaan title holder may agree to renew the Hak Pakai title.

c.	over a continuing Hak Milik title: Up to 30 years. Thereafter, the Hak Milik owner and the HGB holder may agree to renew the HGB title.

c.	over a continuing Hak Milik title: Up to 25 years. Thereafter, the Hak Milik owner and the Hak Pakai holder may agree to renew the Hak Pakai title.

d.	upon transfer of existing HGB title: For the remaining term of the HGB title on such land, subject to any applicable extensions or renewals as described in point a. above.

How Acquired

a.	Sale and purchase if the current title is Hak Milik, or relinquishment of rights by the seller if current title is other than Hak Milik title.

a.	Sale and purchase if the current title is HGB, or relinquishment of rights by the seller if the current title is other than HGB title.

a.	Sale and purchase if the current title is Hak Pakai, or relinquishment of rights by the seller if the current title is other than Hak Pakai;

b.	Exchange
c.	Gift
d.	Inheritance.

b.	Exchange
c.	Capital contribution;
d.	Gift
e.	Inheritance.

b.	Exchange
c.	Gift
d.	Inheritance.

Use as Security

Land with Hak Milik can be mortgaged with Hak Tanggungan.

Land with HGB can be mortgaged with Hak Tanggungan.

Land with Hak Pakai, except Hak Pakai over a continuing Hak Milik title, can be mortgaged with Hak Tanggungan.

Fees involved

a.	Purchase price paid to the seller;

a.	Same as Hak Milik;

a.	Same as Hak Milik;

a.	Committee A is a committee of BPN officials tasked with undertaking land examinations for the processing of applications to obtain Hak Milik, Hak Pengelolaan, HGB and Hak Pakai and for the settlement of such applications.

b.	Fees payable to the local government with respect to land use planning, the amount of which will vary from region to region;

b.	Same as Hak Milik;

b.	Same as Hak Milik;

b.	In practice, the 5% duty and 5% income tax on land transfers are assessed on the value attributed to the land in the Deed of Sale and Purchase and such value is typically higher than the assessed value for property tax purposes.

c.	Honorarium for BPN team(s) established for land acquisition and registration (Please note that the honorarium for each involved member of Committee A is 0.25% of the amount of the estimated purchase price based on the assessed value for municipal tax purposes (NJOP) plus travel expenses for the committee);

c.	Same as Hak Milik;

c.	Same as Hak Milik;

d.	PPAT's fees, including fees for drawing up, executing and registering land documents, which may not exceed 1% of the purchase price;

d.	Same as Hak Milik;

d.	Same as Hak Milik;

e.	Contribution to the State;

e.	Same as Hak Milik;

e.	Same as Hak Milik;

f.	Registration fees;
g.	Land Transfer duty paid by the buyer in the amount of 5% of the greater of (i) the assessed value for property tax purposes and (ii) the purchase price. Final withholding income tax paid by the seller in the amount of 5% of the purchase price;
h.	Unpaid Land and Building Tax (PBB or property tax), if any.

f.	Same as Hak Milik;
g.	Same as Hak Milik;
h.	Same as Hak Milik;

f.	Same as Hak Milik;
g.	Same as Hak Milik;
h.	Same as Hak Milik;

Permitted Uses

Any purpose although technically not for agricultural purposes subject to zoning or other applicable requirements.

Any purpose other than agricultural subject to zoning or other applicable requirements.

Additional Licenses

The owner may need to obtain certain licenses and permits to build on and/or use the land such as, among others, construction permits, environmental permits and nuisance permits.

a.	Same as Hak Milik;
b.	A company must obtain a location permit to acquire HGB land unless the land is located within an industrial estate or other limited conditions apply.

a.	Same as Hak Milik;
b.	A company must obtain a location permit to acquire Hak Pakai land unless the land is located within an industrial estate or other limited conditions apply.

Perception

Hak Milik is locally perceived as having a greater value than land with other types of title (such as HGB and Hak Pakai) because Hak Milik title is of indefinite duration.

HGB is now commonly held by domestic and foreign investment companies and is therefore accepted as having a strong market value.

Hak Pakai is rather new in practice and its market value is less well established.

Renewal Fees

N/A

The amount of these official fees will vary from region to region. For HGB titles over a continuing title, the renewal/extension fee charged by the underlying title holder is a matter of negotiation.

Same as HGB.

Hak Tanggungan Fees

The PPAT fees for making, executing and registering the Hak Tanggungan can be as high as 0.5% of the amount secured. Tax is also payable thereon to the State Treasury in the amount of 6% of the PPAT fee. There is also an administration fee payable to the local Land Office for registration of such Hak Tanggungan, the amount of which varies from region to region.

Same as Hak Milik.