Indonesia Real Estate Guide (2017 Edition)

Indonesia
Real Estate Guide

2017 EDITION
Indonesia Real Estate Guide
Table Of Content
A. REAL ESTATE IN INDONESIA 1

1. Introduction 1
2. Practice and Procedures 1
3. Foreign Investment in Real Estate 1
4. Restricted Activities 1
B. REGULATORY REGIME AND LAND TITLES 2
1. Regulatory 2
2. Types of Land Titles 2
C. TITLE REGISTRATION, EXTENSION AND RENEWALS 9
1. Land Title Registration 9
2. Maximum Area Limitations 9
3. General Extension Timing 9
4. General Extension Conditions 10
D. STRATA TITLE 12
1. Introduction 12
2. Owner Requirements 13
3. Cessation of HMSRS 13
4. Procedure 14
E. LAND ACQUISITION 15
1. Acquiring Entity 15
2. Land Titles 16
3. Due Diligence 16
4. Location Permit 17
5. Options on Acquisition Structure 18
6. Mechanism to Transfer Land Titles 20
F. FOREIGN CITIZENS' OWNERSHIP OF PROPERTY 22
1. Requirements 22
2. Title Conversion 22
3. Underlying Title 22
4. Minimum Prices 22
5. Term of Title 23
G. SECURITY RIGHT OVER HGB LAND AND HMSRS OVER LAND WITH HGB
TITLE 23
ATTACHMENT 1 GENERAL TAX AND DUTY RELATED WITH LAND 24
1. Sale and Purchase of Land 24
2. Lease of Land 25
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3. Luxury and Super Luxury Taxes 25
4. Other Payments 25
ATTACHMENT 2 OTHER KEY CONSIDERATIONS FOR LAND ACQUISITION AND
CONSTRUCTION 27
1. Zoning (Spatial Planning) 27
2. Obligation to Obtain SP3L and SIPPT for Acquisition of More Than
5,000 m2 Land in Jakarta 28
3. Obligations to Construct Public Apartments and Low Cost Housing 29
4. Building Construction 30
5. Green Building Requirements in Jakarta 31
6. Amdal/UKL – UPL 31
7. Building Function Worthiness Certificate/Sertifikat Kelaikan Fungsi
Gedung ("SLF") 32
8. Building Use Permit/Izin Penggunaan Bangunan ("IPB") in Jakarta 32
9. Building Usage Worthiness /Kelayakan Menggunakan Bangunan
("KMB") in Jakarta 32
10. Nuisance Permit (HO) 32
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A. REAL ESTATE IN INDONESIA

1. Introduction
Indonesia’s jurisprudence is based on the European civil law system. This difference
from many other jurisdictions in the region, together with ongoing regulatory changes,
requires careful consideration of the issues that arise in real estate business and
transactions.
Indonesian law is constantly changing and many provisions in laws, in the absence of
implementing regulations, are not always clear. In addition, it is likely that there will
be amendments to existing laws and regulations or new laws and regulations in the
near future.
This guide has a general focus on mergers and acquisitions with a primary focus on
capital markets issues in the latter part of the guide.
2. Practice and Procedures

Practice, procedure and policy of relevant Indonesian government agencies or
regional government agencies, including the National Land Agency or Badan
Pertanahan Nasional ("BPN"), Governor Offices, the Ministry of Law and Human
Rights ("MOLHR") and the Capital Investment Coordination Board or Badan
Koordinasi Penanaman Modal ("BKPM") will be as important in consummating a real
estate transaction.
3. Foreign Investment in Real Estate

Foreign investors must establish an Indonesian foreign investment limited liability
company ("PMA") to undertake real estate business in Indonesia. Consequently,
matters relating to foreign investment in the real estate sector must be reported to or
approved by BKPM.
The latest negative list of investments was published in May 2016. The negative list
determines what business sectors are closed for foreign investments or open for
foreign investment with limitations. Additional material on the negative list is available
on request.
As real estate development is not listed in the current negative list, a company
engaged in real estate development can be 100% foreign owned.
4. Restricted Activities
Although real estate development companies can be 100% foreign owned, certain
property activities remain closed for foreign investment, eg:
(a) Property agent/brokerage, closed for foreign investment
(b) Property management, only permitted if the entire property is owned or

leased by the property management company - otherwise the activity will be
deemed as property agency/brokerage activities
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B. REGULATORY REGIME AND LAND TITLES
1. Regulatory
In Indonesia, except for freehold and customary land (owned by Indonesian
individuals), the government holds title to all land under Law No. 5 of 1960 on Basic
Agrarian Provisions ("Agrarian Law").
Generally, anyone who wants to use land must obtain a land title from the
government. Most land titles granted by the government have a fixed validity period.
Where applicable, the validity period of a land title may be extended if the holder of
the land title has met the extension requirements and there are no zoning changes or
other public interest requirements.
The Agrarian Law adheres to the horizontal separation theory, where land and
building ownership are separated. Thus, it is common to find that owners of land do
not own buildings constructed above the land.
Other than the Agrarian Law, land in Indonesia is regulated in various government
regulations and decrees/regulations issued by the State Ministry of Agrarian Affairs or
the Chairman of BPN. Regulations include Government Regulation No. 40 of 1996 on
Right to Cultivate, Right to Build and Right to Use ("GR 40/1996") and Government
Regulation No. 24 of 1997 on Land Registration ("GR 24/1997").
The Parliament has been deliberating a Land Bill since 2014 and it remains one of
the priority bills to be completed. The Bill is meant to provide clarity, to act as a bridge
between the Agrarian Law and current conditions, and to codify the key implementing
regulations of the Agrarian Law related to land.
2. Types of Land Titles

Under the Agrarian Law, the main types of land titles are:
(a) Right to Own/Hak Milik ("HM")
HM is the strongest and fullest/highest hereditary right that may be held with
respect to land. HM does not have any validity period. However, all rights to
land in Indonesia (including HM) have a social function, meaning that the
usage of the land has to comply with the condition and nature of the right,
thereby benefiting the owner, the community and the country.
Only Indonesian citizens (individuals) and some legal entities determined by

the Government (eg, social and religious institutions) can hold a HM.
Indonesian legal entities and foreign citizens may not own land with HM. If a
company wishes to acquire land with HM, it will have to convert the HM to
become another land title that can be held by a company (eg, HGB or HGU
titles (as defined below)).
A HM can be transferred to a third party. However, land with HM cannot be

transferred or sold to a foreign citizen. Any such sale and purchase or transfer
of title will be void by law and the government will automatically control the
land.

HM can be encumbered for security purposes.
HM ceases to exist if either of the following occurs:
(i) The land is controlled by the government as a result of revocation of

the HM or due to voluntary relinquishment, abandonment or other
causes stated in the Agrarian Law.
(ii) The land ceases to exist.
Term
As explained above, HM is the strongest and the fullest of the land rights in
Indonesia, given that HM has an unlimited validity period and does not have
to be extended or renewed after a certain period.
(b) Right to Cultivate/Hak Guna Usaha ("HGU")
HGU title is the right to cultivate land that is administered by the state. HGU
title is normally granted over land to be used for agriculture cultivation related
businesses. GR 40/1996 specifically stipulates that HGU title can be used
only for agriculture, plantations, fisheries and poultry farming. BPN has the
authority to grant HGU title with a total land area of more than 200 hectares.
For land areas of 200 hectares or less, the provincial BPN office has the
authority to grant the HGU title.
For individuals the minimum area of land for HGU title is 5 hectares, and the
maximum is 25 hectares (for individuals). For corporate bodies, the total area
will be determined based on the discretion of BPN in consultation with the
local (provincial/regency) BPN office.
HGU title can be transferred to a third party. Further, GR 40/1996 permits

HGU titles to be encumbered for security purposes.
HGU title may be granted only to:
(i) Indonesian citizens
(ii) Indonesian legal entities domiciled in Indonesia
HGU title ceases to exist if (among other things):
(i) Its validity period expires.
(ii) Its validity period ends before its expiry date due to unfulfilled
requirements.
(iii) It is voluntarily relinquished by the holder of the HGU title before its
expiry date.
(iv) It is revoked and the land is used for public purposes.
(v) The land is abandoned.

(vi) The land ceases to exist.
Term
HGU is usually granted for a maximum of 35 years and can be extended for
an additional maximum of 25 years. A holder of a HGU title can also renew a
HGU title. In practice, the HGU term can be renewed for a maximum of 35
years after the term of the extension expires.
To extend or renew the rights over land under a HGU title, the holder must
submit an extension/renewal application to the relevant BPN office at least
two years prior to its expiration, although in practice the relevant BPN office
will only process the extension renewal within one year prior to its expiration.
Under GR 40/1996, for investment purposes, the extension and renewal of

HGU title can be done at one time, giving the holder rights over the land
under the HGU title for a maximum period of 95 years. However, since 2008
this one time process is no longer applicable, the Constitutional Court has
annulled this concept, which was also adopted under Law No. 25 on Capital
Investment ("Investment Law"), on the basis that it is contrary to the intent of
Article 33 of the Indonesian Constitution.
Under GR 40/1996, generally the holder of a HGU title can apply for an
extension/renewal of the term of the HGU title only if all of the following
conditions are met:
(i) The land is still being utilized in accordance with the nature and
intended use of the land stated in the HGU title.
(ii) The HGU holder still meets the requirements for the granting of the
HGU title.
(iii) The HGU holder still qualifies as a holder of HGU title.
(c) Right to Build/Hak Guna Bangunan ("HGB")
HGB title is a right to establish and construct buildings on a plot of land. HGB
title can be granted on state land, land with HPL title (as defined in point (f)
below) and land with HM title. HGB title over state land is granted by way of a
decree on the granting of the HGB title issued by the relevant BPN office.
Similar to a HGU title, GR 40/1996 permits a HGB title to be encumbered for

security purposes. A HGB title can also be transferred or assigned to a third
party.
HGB title may be granted to:
(ii) Indonesian legal entities established under Indonesian law and

domiciled in Indonesia

HGB title ceases to exist if (among other things):
(i) Its validity period as stated in the decree for the granting of the HGB
title expires.
(ii) For HGB title on HPL or HM land, it is cancelled by the competent

authority holding the HPL title or the owner of HM land.
(iii) It is voluntarily relinquished by the holder of the HGB title before its
expiry date.
Term
HGB title is granted for a maximum of 30 years and can be extended for an
additional maximum of 20 years. In practice, the HGB term can be renewed
for a maximum of 30 years after the term of the extension expires.
To extend or renew the rights over land under a HGB title, the holder of HGB
title must submit an extension/renewal application to the relevant BPN office
at least two years prior to its expiration 1, although in practice the BPN office
will only process the extension or renewal within one year prior to its
expiration.
Under GR 40/1996, the holder of a HGB title can apply for an

extension/renewal of the term of the HGB title only if all of the following
conditions are met:
intended utilization of the land as stated in the HGB title.
(ii) The HGB holder still meets the requirements for the granting of the
HGB title.
(iii) The HGB holder still qualifies as a holder of HGB title.
(iv) The utilization of the land remains in line with the local spatial plan
where the land is located.
(d) Right to Use/Hak Pakai ("HP")
The Agrarian Law defines HP as the right to use and/or collect the products
from the land. The land on which HP title can be granted includes state land,
HM land and HPL land. This means that HP title can be created on top of land
with HM and HPL titles and is not a direct title on the land itself.
1
Even though it is allowed under GR 40/1996 and the Investment Law, based on the same reasons as HGU,
extension and renewal of HGB for a straight 80 years cannot be done and HGB land titles can only be
extended and renewed after the initial period granted by the government.

Residential properties constructed on top of HP title or converted to HP title
(from HGB title) can be owned by foreign citizens residing in Indonesia.
HP title may be owned by:
(ii) Foreign citizens residing in Indonesia
(iii) Indonesian legal entities domiciled in Indonesia
(iv) Foreign corporate bodies with representatives in Indonesia
(v) Departments, non-departmental government bodies and regional

governments
(vi) Foreign country representatives and international organization

representatives
(vii) Religious and social institutions
GR 40/1996 permits a HP title to be encumbered for security purposes. HP

title can generally be transferred or assigned to a third party. For HP title over
HM land, the transferability must be agreed in the agreement on the granting
of HP title over the relevant HM land.
HP title ceases to exist if (among other things):
(i) Its validity period as stated in the decree or agreement for the granting
of HP expires.
(ii) For HP title on HPL title or HM land, it is cancelled by the competent

authority holding the HPL title or the owner of the HM land.
(iii) It is voluntarily relinquished by the holder of the HP title before its

expiry date.
Term
Under GR 40/1996, HP title over HPL or state land is granted for a maximum
of 25 years and can be extended by 20 years or another period of time as
long as the land remains utilized for a specific purpose. On the other hand,
HP title over HM land can be granted only for a maximum of 25 years and
cannot be extended. Only renewal is possible and the renewal must be based
on a new agreement between the holder of the HM and the holder of the HP.
The agreement must be made before a land deed official and the HP title
must be registered at the relevant BPN office.

In practice, it is possible for the relevant BPN office to grant a HP title for as
little as 10 years as seen in several parts of Indonesia, including in Jakarta, in
the past couple of years. For example, notaries/land deed officials have told
us that the BPN office in Jakarta usually considers the purpose of the land
before it determines the period of a HP title. For areas outside Jakarta, each
BPN office will have its own policy for granting HP title.
If a foreign citizen residing in Indonesia acquires a property which is built over

a HP title or a HGB title (which will 'automatically' be converted to a HP title
after the acquisition is complete), the term of the HP title will have the same
term as a HGB title (ie, a maximum of 30 years and can be extended for an
additional maximum of 20 years, and then can be renewed).
According to GR 40/1996, the holder of a HP title over state land can apply for
an extension/renewal of the term of its HP title only if all of the following
conditions are met:
intended utilization of the land with HP title.
(ii) The HP title holder still meets the requirements for the granting of the
HP title.
(iii) The HP holder still meets the requirements as a holder of the HGB
title.
(e) Right to Lease/Hak Sewa ("Hak Sewa").
Article 16 of the Agrarian Law lists Hak Sewa as one of the "titles" for land.
Article 44 of the Agrarian Law further provides that Hak Sewa is a land title
that gives its holder the right to construct a building on another person’s land,
upon payment of rent. While HP is a primary land title as it is granted by the
state over state land, Hak Sewa is a secondary or derivative title granted by a
holder of a land title.
Hak Sewa is not currently registrable as it may be in other countries with

more sophisticated land title systems. The only protection given to leases is
under Article 1576 (1) of the Indonesian Civil Code which loosely provides
that the "Selling of a leased object does not terminate the lease on the object
unless it has been agreed upon the entry into the lease agreement".
According to the Agrarian Law, Hak Sewa may be held by:
• Indonesian citizens
• Foreign citizens residing in Indonesia
• Indonesian legal entities domiciled in Indonesia
• Foreign corporate bodies with representatives in Indonesia

Term
Since a Hak Sewa is a secondary title and is based on negotiation, the term
of Hak Sewa is also commonly based on agreement between the landlord
and the lessee. We have seen leases over land granted for 25 and 50 years.
Lease Agreement
Hak Sewa, which in practice is the right to use land and buildings, similar to
many other jurisdictions, is granted through lease agreements.
As explained above, the Agrarian Law adheres to the horizontal separation

theory, where land and building ownership are separated. Under this concept,
land and a building constructed above the land can be owned by different
parties. Based on this, it is possible for a company, say, to enter into a certain
lease agreement with an individual with a HM, under which the company
leases the land for its use and builds a building on the land. Of course, once
the lease arrangement is terminated, the company would have to demolish
the building, or an arrangement can be made with the land owner on whether
the land owner wishes to acquire the building.
Certain regional governments, including the Jakarta local government, are

trying to conceptually accommodate the above type of arrangement by
stipulating in a Jakarta regional regulation provisions which govern the
issuance of building ownership certificates in Jakarta. However, we are not
aware of any building ownership certificates issued by the Jakarta local
government.
Please note though that leases are not registered instruments against the
land title and are not reflected in the land title certificate.
Consequently, there is a degree of risk in entering into lease arrangements,

which most foreign companies are uncomfortable with, although Article 1576
of the Indonesian Civil Code specifically provides that leases run with the land
(even if land is sold). Therefore, lease agreements should be carefully drafted
to include for the land owner obligations not to sell the land and to renew the
land title (especially if this is a renewable title), and for the lessee clear
signatory rights to demonstrate its lease interest and the usual obligations in
long term leases.
(f) Right to Manage/Hak Pengelolaan ("HPL")
The Agrarian Law does not mention HPL as a type of land title. HPL is never
stipulated at a "Law" level, but rather it is stipulated under various
implementing regulations of the Agrarian Law. In essence, HPL is defined as
the state's controlling right over land, the implementation of which is
delegated to the holder of the HPL right. The implementation right covers,
among other things, the right to plan the utilization of the HPL land and the
right to enter into cooperation with third parties to utilize the land.
It is important to note that HPL is granted only to state-owned companies and

government agencies and is normally granted with an unlimited term. A good
example of a HPL right granted to a government agency is the HPL right over

Batam, which was granted to the Batam Industrial Development Authority in

the past.
The land itself is usually state land, which is allocated specifically for a
particular state-owned company or government agency. As explained above,
other land titles (eg, HGB and HP) can be granted on top of HPL land by the
holder of HPL, and once the term of the HGB or HP land title expires, the title
returns to the HPL holder.
C. TITLE REGISTRATION, EXTENSION AND RENEWALS

1. Land Title Registration
HM, HGU, HGB, HP, HPL and Strata Titles/Hak Milik atas Satuan Rumah Susun
("HMSRS" - as defined in Part D below) are registrable property titles. Holders of
these titles will receive a land/HMSRS certificate as evidence of ownership.
The Indonesian land title registration system is also designed to provide the general
public with access to information on land titles that have been registered at the
relevant BPN office, although in practice getting access to land information will
require the consent of the land title holder.
The government adopts a negative land registration system, which means the
government does not guarantee the accuracy of the data registered at the BPN
office. Any claims over a land title that have been issued needs to be made in writing
to the land title holder and the relevant BPN office within five years from the date the
land title certificate is issued although in theory this claim can only be made for newly
registered land titles.
2. Maximum Area Limitations

The government imposes maximum area limitations for Indonesian individuals or
companies holding land titles. For business activities, the area limitations are usually
imposed based on the type of line of business and are applicable across groups of
companies. In general, groups of companies refer to companies with common
ownership or common management. For example, in the plantation sector, area
limitations are determined based on the type of plantation being cultivated.
3. General Extension Timing

Although in general GR 40/1996 states that a land title extension application must be
submitted within two years prior to the expiration of the land title, in practice the
relevant BPN office has sole discretion on whether or not an extension application
can be processed earlier than the statutory two-year period (we have seen a case
where an extension application was approved three years prior to the expiration of
the term, although this is very rare). The BPN office's main concern is to ensure that
the land value that will be used in the formula for the calculation of the extension fee
reflects the most up-to-date value of the land (the formula usually uses the tax object
sale value (NJOP)).

4. General Extension Conditions
An extension or renewal of HGB or HP is usually granted if all of the following
conditions are met:
(a) The land is being properly used in accordance with the situation, nature and
objective of the granting of the land title right.
(b) The requirements for the granting of the land title right are fulfilled by the title
holder.
(c) The titleholder still meets the requirements as a land titleholder.
(d) The land is still used in accordance with the Spatial Plan (Rencana Tata
Ruang Wilayah) of the relevant area.
A HGB or HP title holder has the right to erect, occupy and use buildings on the land
and to sell all or part of the land to a third party. However, the HGB or HP can be
revoked if any one of the following occurs:
(a) The period of the title stated in the decision/agreement of granting or

extending the title has expired and has not been renewed.
(b) The land office and/or the HPL title holder or HM title holder terminates the
leasehold before the expiry of the land title due to (i) non fulfilment of the
obligations on the land title, (ii) non-compliance with the requirements or
obligations stated in the decision/agreement between the HGB or HP holder
and the HPL or HM holders, or (iii) a final and binding court decision.
(c) The land title is revoked.
(d) The land title holder is not an eligible party to hold the title.
If HGB or HP on state-owned land is revoked, or is not renewed or extended, the

HGB or HP holder must demolish the buildings erected on such land and return the
land to the state within one year after the land title is revoked. If the HGB or HP on
HM or HPL land is not renewed or extended, the HGB or HP holder must return the
land to the HM or HPL land in accordance with the agreement between the parties.
5. Extension VS Renewal
As described above, most land titles granted by the government have a fixed validity
period, eg, HGU, HGB and HP. The land title validity period may be extended once if
the land title holder has met the applicable extension conditions and there are no
zoning changes or other public interest requirements ("Extension Conditions").
Upon the expiry of the extension period, it is also possible to apply for a renewal of
the land title, subject to fulfilment of the renewal requirements, which is quite similar
to the Extension Conditions ("Renewal Conditions").
The definitions of "extension" and "renewal" are as follows:
a. "extension of land title": means the extension of the validity period of a land
title without changing the terms and conditions that applied when the land title

was initially granted - from a documentation perspective, the relevant BPN

office usually just makes an extension annotation in the land certificate. (eg,
for HGU the initial term is a maximum of 35 years, and can be extended for 25
years).
b. "renewal of land title": means the granting of the same type of land title to the
same holder after the initial period and the extension period have expired -
from a documentation perspective, the relevant BPN office will document a
renewal similar to a granting of a new land title, ie, the issuance of a (i)
renewal decree by the relevant BPN, and (ii) a new land certificate by the
relevant BPN office. (eg, for HGU renewal can be given for a maximum term
of 35 years).
Based on the above, in essence, the difference is that (i) a land title extension is
granted under the same terms and conditions as the initial decree on the granting of
a land title, and (ii) a land title renewal is granted under new terms and conditions.
Although the Agrarian Law was enacted in 1960, it was only in the late 1970s and
early 1980s that the Indonesian economy started to emerge and private investment
was made.
Consequently, given the duration of land titles, more parties are now processing land
title extensions but the number is still quite low, and not many parties have
processed land title renewals.
6. Discrepancy of Area After Extension or Renewal

Land title area may change after an extension process is completed. The reason for
this is that BPN may require the area to be re-measured and the result of the re-
measurement may be smaller than what is stated in the land certificate. Unfortunately
in these cases, the land title holders tend to be forced to accept the new
measurement as BPN claims that the discrepancies occur because, among other
things, (i) there is physical change of the area possessed by the land title holder, (ii)
BPN has changed its measuring method after 1999, and (iii) BPN is now starting to
use GPS technology.
7. Rejection of Application for Extension of Renewal

Notwithstanding that the government has stated in several regulations (eg, BPN
Regulation No. 2 of 1993 on Procedures to Obtain Location Permit and Rights over
Land for Companies under the Scheme of Capital Investment), that it will guarantee
extensions and renewals of land titles provided that the land is used in compliance
with the intended purposes, the government may still reject an extension or renewal
application on the basis the applicant is unable to fulfil the Extension Conditions or
the Renewal Conditions, as the case may be.
8. Authority of BPN Offices in Granting Land Titles

In general, the authority of BPN offices will depend on the size of the land. Based on
BPN Regulation No. 2 of 2013 on Delegation of Authorities in the Granting of Land
Titles and Registration of Land Titles, currently the authority in BPN is structured as
follows:

Land Local BPN
Holder Purpose Province BPN Central BPN
Title (city or region)
≤50,000 m ≥50,000 m
2 2
Hak Milik Individual Agriculture -
≤3,000 m
2 2
Non >3,000 - >10,000 m
≤10,000 m
2
Agriculture
Entity Agriculture - - -
≤50,000 m
2 2
Non >50,000 - >150,000 m
≤150,000 m
2
Agriculture
≤3,000 m
2 2
HGB Individual Non >3,000 - >10,000 m
≤10,000 m
2
Agriculture
≤20,000 m
2 2
Entity Non >20,000 - >150,000 m
≤150,000 m
2
Agriculture
HGB issued on HPL Land - any - -

size
≤50,000 m
2 2
HP Individual Agriculture >50,000 - >100,000 m
≤100,000 m
2
≤3,000 m
2 2
Non >3,000 - >10,000 m
≤10,000 m
2
Agriculture
Entity Agriculture - - -
≤20,000 m
2 2
Non >20,000 - >150,000 m
≤150,000 m
2
Agriculture
HP issued on HPL Land - any size
Individual Agriculture - ≤200 Ha >200 Ha

HGU
Entity Agriculture - ≤200 Ha >200 Ha
D. STRATA TITLE
1. Introduction
Strata title (or in Indonesian known as HMSRS (see below)) is stipulated in Law No.
20 of 2011 on Apartments ("Apartment Law") and Government Regulation No. 4 of
1988 on Apartments ("GR 4/1988").
The provisions of the Apartment Law and GR 4/1988 are equally applicable to strata
title apartments for residential, non-residential and mixed-use purposes. In this guide
we will focus on non-residential units or purposes (and will use the term "Units" rather
than "Apartments" because it is used in the regulation).

Both the Apartment Law and GR 4/1988 recognize the concept of a mixed-use strata
title apartment in which a building is used for both residential and non-residential
purposes such as offices, hotel rooms and shopping malls. There is no specific law or
regulation in Indonesia which governs the development and operation of mixed-use
strata title apartments.
Strata title buildings may only be constructed on plots of land with HM, HGB or HP on
state-owned land, and HPL.
Regardless of the purpose or usage of any parts of a strata title complex (ie,
residential or non-residential), the title over a Unit is called a Right of Ownership over
an Apartment Unit or HMSRS and is evidenced by a HMSRS certificate to be issued
by the land office where the apartment is located.
The elucidation of Article 41 of GR 4/1988 stipulates that an HMSRS covers the

following:
(a) an individual right of ownership over the Unit
(b) common rights over the parts and structures of the apartment, including its
equipment, for the proper function of the apartment, including central services
equipment, electricity installations, lighting installations, gas supply, hot and
cold water, air conditioning system, water pumps, generators, compressors,
ducting for air conditioning system, and other installations, blocks, columns,
main foundations, roof, entrances, doors, corridors, hallways, stairs and
emergency exits for common use by the occupants
(c) a common right over facilities constructed over the common land
(d) a common right over the common land where the apartment is constructed
2. Owner Requirements
Article 47 of the Apartment Law provides that only individuals or legal entities that are
qualified to hold title over the land where the apartment is built can own a Unit. For
example, if the apartment is developed on HGB land, only those persons who are
qualified to hold a HGB title can own a Unit.
3. Cessation of HMSRS
According to GR 4/1988, a HMSRS will cease if:
(a) The underlying land title expires or becomes invalid under the prevailing laws
and regulations.
(b) The land and building no longer exist.
(c) All conditions for cancellation of the land title are met (eg, expiration of HGB
title).
(d) The land is voluntarily relinquished to the state.

4. Procedure
Before obtaining the HMSRS certificate for each of the Units, the developer of the
Apartment must obtain the following permits or documents (which is generally
applicable for residential, non-residential and mixed-use apartments):
(a) Building License (Ijin Mendirikan Bangunan or "IMB")
Before the construction, the developer must obtain an IMB from the local
government. The application form must indicate the purpose of the strata title
complex, ie, residential, non-residential or mixed-use. Any change in the
building structure or the time for completion of the construction of the strata
title complex or installations of the strata title units is subject to approval from
the local government.
(b) Building Specification ("Pertelaan")
After obtaining an IMB, the strata title complex developer must clearly specify
the boundaries of each strata title unit, common area, common land and
common property that comprise the strata title complex, and the proportional
ratio value (Nilai Perbandingan Proporsional or "NPP") of each strata title unit,
in the form of a deed ("Akta Pertelaan"). After an Akta Pertelaan is prepared,
the developer must obtain approval for the building specification (Pertelaan)
from the relevant Level II Regional Government (Regency) (in the case of DKI
Jakarta, from the Governor of DKI Jakarta through the Head of the DKI
Jakarta Land Office).
Any changes to the purpose of a strata title complex (eg, from residential use
to non-residential use or mixed-use), along with the corresponding changes to
the Pertelaan and NPP, must be approved in advance by the relevant local
government in accordance with the prevailing requirements.
(c) Occupation Permit
After construction of the strata title complex, the developer must obtain an
occupation permit ("Occupation Permit") from the relevant local
government. The local government will issue an Occupation Permit based on
its inspection of the architecture, construction, installation and other
supporting facilities of the strata title complex.
(d) Separation Deed
After an Occupation Permit is obtained, the developer must separate the

strata title complex into strata title units, common areas, common land and
common property with clear specifications in the forms of drawings,
descriptions and boundaries in vertical and horizontal directions as specified
in the Akta Pertelaan, by preparing a deed of separation ("Separation
Deed").
The Separation Deed is subject to approval from the relevant Level II

Regional Government (Regency) (in the case of DKI Jakarta, from the
Governor of DKI Jakarta through the Head of the DKI Jakarta Land Office).

The Separation Deed will be used as the basis for issuing strata title
certificates of the strata title complex.
Once the Separation Deed is approved, it must be registered at the relevant

BPN office by submitting, among other things, the underlying common land
certificate, the Occupation Permit and the approved Akta Pertelaan.
(e) HMSRS Certificate
After the Separation Deed is registered at the relevant land office, the land
office will issue a Land Book and a HMSRS certificate under the name of the
developer for each strata title unit in the strata title complex.
E. LAND ACQUISITION
1. Acquiring Entity
(a) Establish 100% foreign-owned real estate company:
As noted above, real estate development activity can be conducted by 100%

foreign owned companies.
Under the 2015 Indonesian Basic Classification of Businesses (KBLI), the real
estate line of business (KBLI 68110) covers the activities of "buying, selling,
leasing and operating real estate, which is either owned or leased, such as
apartments, and housing and non-housing buildings (eg, convention centers,
personal storage facilities, malls, shopping centers and others), also the
provision of housing, flats or apartments (furnished or non-furnished) for
permanent use, either on a monthly or an annual basis. It includes the
activities of selling land, building development to be self-operated (for space
leasing), land division without development and the operation of moveable
housing".
A real estate company must be in the form of PMA established in accordance

with the relevant regulations, which include the Indonesian Investment Law
and Indonesian Company Law. To operate in Indonesia, the PMA must obtain
approvals or licenses from, among others, BKPM, the Tax Office, the
MOLHR, and the Ministry of Trade.
The PMA must then acquire land (subject to the types of land titles discussed
here) and develop the land so that the company can be categorized as a real
estate company.
(b) Establish a joint venture company between a foreign party and a local party:
Similar to the above, this structure is possible given the absence of any
foreign investment limitation for real estate development in the current
negative list.
This structure is commonly used in situations where the proposed local joint
venture partner is the land owner (which land will eventually be purchased by
the joint venture PMA). One of the benefits in having a local joint venture

partner is availability of people on the ground for license processing and land
registration matters.
Please see our Desk Top Reference Guide on establishing a PMA company (as well
as our Investment and Company Law Guide).
2. Land Titles
Companies in Indonesia may own the following land and property rights in Indonesia:
(a) HGB
(b) HGU
(c) HP
(d) HMSRS/Strata Title.
For companies (except for agricultural activities), the most appropriate land right is
HGB, or alternatively HMSRS/Strata Title over HGB land.
Furthermore, as we have mentioned above, HGB title is granted for a period of 30

years and can be extended for 20 years (and can be renewed), thereby becoming the
longest land right which can be owned by a company (except for agricultural
activities).
It is possible for a company to apply for HGB on top of HPL. However, as we have
mentioned above, HPL is usually issued to State Owned Enterprises or government
agencies. Consequently, a company would need to obtain HGB over HPL from a
State Owned Enterprise or a government agency. An agreement must be entered
into by a company and the HPL holder, which may be very costly.
3. Due Diligence
(a) Required Information:
Given the absence of a centralized register of land and companies in

Indonesia, copies of land ownership documentation must be obtained from
the land owner, and searches can only be done with the knowledge of the
land owner.
The following are some of the basic documentation and information that must
be obtained from the land owner.
(i) Identity documents of the owner (ID card and tax number (for an
individual), or the latest articles of association, the relevant MOLHR
approval and tax (and VAT) registrations (for a company))
(ii) Land title certificates and BPN decree for the issuance of the land title
certificate
(iii) Location permit and/or land usage approval for the land

(iv) Construction license and or occupation permit for buildings over the
land (if there are already structures over the land)
(v) Information on any security interest over the land (and related
documentation)
(vi) Evidence of land and building tax payment for the land
(vii) Environmental documents for the land
(viii) Information on any litigation involving the land
(b) Land Searches in Indonesia:
Land searches in Indonesia are undertaken by requesting the relevant BPN

office where the land is located to manually search its land registration book.
Like most Government offices, there is no centralized online database of
these land registration records. The land registration book only records
information on encumbrances, land blockages and court attachments but
does not record covenants, easements and leasehold interests (given these
cannot be registered in Indonesia).
Consequently, these land searches are not conclusive given the following:
(i) They are dependent on the relevant BPN office being prudent and its
promptness in updating the register.
(ii) Although there is a maximum time for registration of an encumbrance

at the relevant BPN office (a total of five weeks until a mortgage is
registered), there could be delays in the mortgage registration at the
relevant BPN office, in which case the mortgage would still be
effective pending the registration.
Obtaining a land search confirmation letter may take two to three weeks.
4. Location Permit
Under Minister of Agrarian Affairs/Head of National Land Office Decree No. 5 of 2015
on Location Permits ("Decree No. 5/2015"), a company that has obtained an
investment approval must obtain a location permit from the local government to
obtain the required land to perform the investment plan. But a location permit is not
required in any of the following circumstances:
(a) The land derives from retribution in kind (inbreng) from a shareholder of the
company.
(b) The land is already controlled by another company, and it is being acquired
for the purpose of continuing the investment plan of the other company,
provided that approvals from the relevant authority have been obtained.
(c) The land is located in an industrial area.
(d) The land is from a development authority of a certain region, which is in

accordance with the regional development plan.

(e) The land is required for the expansion of an ongoing business, which
expansion has obtained the required approvals from the relevant authorities,
and where the land is located adjacent to the location of the ongoing
business.
(f) The land is less than 25 Ha (for the agriculture business sector), and not
more that 10,000 m2 (for non-agriculture industries).
(g) The land is already owned by the company as a result of a transfer of rights
from another company, and the location and the use of the land is in
accordance with the zoning plan determined by the government.
A location permit is rarely required in a company-to-company land deal unless the

land certificate requires a land transfer to obtain approval from the land office. (The
approval can be in the form of a location permit or a land transfer approval, and
depends on prior land applications and the local BPN office policy).
A location permit is granted to a company that has obtained an investment approval.

For some business sectors, there are area limitations on the total area of the land
that can be owned by the company and/or group of companies, for example:
(a) housing-residential area : 1 province: 400 Ha
throughout Indonesia: 4,000 Ha
(b) resorts-hotels area : 1 province: 200 Ha
(c) industrial estates : 1 province: 400 Ha
To determine the total area appointed in the Location Permit, the applicant must
submit a statement letter of the total area that is already owned by the applicant
and/or its group of companies.
However, the above provisions are not valid for listed public companies where a
majority of the shares are owned by the public.
5. Options on Acquisition Structure

(a) Purchase existing HGB land (and the building)
This is a straightforward land and building purchase where a company

purchases HGB title land from a legal person or a legal entity. The transfer is
made in a notarial deed in front of a land deed official or PPAT, and further
registered with the relevant BPN office (please see our elaboration on Land
Transfer Process below).
(b) Purchase greenfield land and apply for a new HGB title
This process would only occur if a company applies for a new HGB title for
land that is not yet certified with any titles (like girik/adat, ie, customary un-

certificated land ("Girik")) or land that is administered by the state, or HM

land.
In summary, the procedure is as follows:
(i) Before any application is made to the relevant land office, the
company must acquire the land rights from the existing holders. Girik
or HM land is normally acquired by having the holder relinquish the
title (with a deed of relinquishment or Akta Pelepasan) to the state. At
this stage, it becomes state land. The deed of relinquishment can be
regarded as a sale and purchase deed, under which the buyer pays
an agreed amount as compensation to the original landowner. All
these transactions are made in front of a PPAT.
(ii) The company as the acquirer of the land right, through the PPAT, then
applies to the relevant BPN office for a new title to be granted for that
relinquished land.
(iii) The new title holder will be registered by the BPN office although this
occurs after re-measurement of the land, a set public announcement
process and the payment of fees which can be substantial depending
on the circumstances.
(c) Obtaining HMSRS/strata title over HGB land from a building developer
If a company wants to own office premises rather than build, then the simpler
approach would be to obtain strata-title rights over office premises.
The transfer of strata title for the first time is carried out between the
developer and the company as the purchaser, by entering into a sale and
purchase deed before the PPAT. The deed must be registered at the local
land office, together with, among other things, the strata title certificate
registered under the name of the developer and the rules and regulations of
the residents’ association. Having examined all the required supporting
documents, the local land office will record the transfer of title and annotate
the name of the developer or the name of the company in the strata title
(HMSRS) certificate as the new owner of the strata title.
(d) Build Operate and Transfer (BOT)
A BOT is a contractual lease right to utilize a piece of land and the lessee is
entitled to finance, design, construct and operate a facility on the land for a
specified period, after which the building is transferred with the land back to
the land owner ("BOT Scheme").
A BOT Scheme is a common structure in Indonesia for construction of

commercial buildings where the land owner owns the relevant land ("BOT
Land"). Under a BOT Scheme, the land owner agrees to grant certain rights
over the BOT Land based on an agreement, ie, BOT Agreement or
Cooperation Agreement "BOT Agreement") to another party ("BOT
Grantee"). The BOT Grantee can develop the site, subject to having the
relevant approvals, and then operate the buildings constructed on the land for

the permitted use, for a particular period of time as stipulated in the BOT
Agreement. The following is a typical arrangement:
(i) For the right to utilise the BOT Land, the BOT Grantee pays certain
compensation to the BOT Grantor as stipulated in the BOT
Agreement.
(ii) The period of the BOT Agreement is subject to the parties’ agreement
but commonly ranges from 20 to 30 years and may be extended upon
agreement of the parties (and is dependent on the underlying title, if
leasehold in nature (e.g., HGB), being renewed).
(iii) During the term of the BOT Agreement, the BOT Grantee has full
rights over the BOT Land and buildings as agreed between the
parties, including to operate the buildings, to receive rent from tenants
occupying the building and to appoint parties to conduct activities on
the BOT land and premises such as building managers.
(iv) Upon the expiry of the term of the BOT Agreement, the BOT Grantee
returns the BOT Land together with the improvements without either
party paying any form of compensation to the other.
(v) The land owner cannot sell the land and must renew the land title (if it
is a renewable title), and the BOT Grantee has clear signatory rights
to demonstrate its interest in the land, and the usual obligations in
long term leases.
BOT Agreements are not registered instruments against the land title and are
not reflected in the land title certificate. Consequently, there is a degree of risk
in entering into a BOT Agreement, although Article 1576 of the Indonesian
Civil Code specifically provides that leases run with the land (even if land is
sold).
The BOT Scheme is essentially a contractual arrangement and is governed

by the Indonesian Civil Code. Under Article 1338 of the Indonesian Civil Code
(freedom of contract), the contracting parties can determine the terms of the
BOT Agreement subject to, among other things, the prevailing laws and
regulations, the good faith of the contracting parties, the parties acting
reasonably and public policy principles.
6. Mechanism to Transfer Land Titles

The transfer of land is done through a deed of transfer made before PPAT. There are
certain taxes and duties payable by both the vendor and the purchaser before a land
transfer deed can be executed. Please see further a discussion on tax in Attachment
1.
Following the signing of the land transfer deed, the PPAT, will submit an application
to the relevant BPN office where the property is located, to register the name of the
new owner in the Land Book at the relevant land office as well as on the land
certificate.

The transfer is done in the following sequence:
(a) Where there are certain conditions that need to be fulfilled by either party, the
parties can enter into a Binding Sale and Purchase Agreement first, then after
all conditions are fulfilled, the land transfer deed is signed by the parties.
(b) The purchaser and the seller appoint a PPAT that has the authority to prepare
land transfer deed/documents for the relevant land or property.
(c) The purchaser and the seller deliver all relevant documents to the PPAT. This
usually includes land certificates from the seller as evidence of the seller's title
over the land, or the relevant corporate documents such as articles of
association.
(d) Land transfer taxes/levies are paid. The PPAT usually provides the relevant
Government bank account into which payment will be made.
(e) The purchaser and the seller sign the land transfer deed, in front of the PPAT,
witnessed by at least two qualified persons.
(f) Payment of the purchase consideration for the land (this is usually done on
the same day as the signing of the land transfer deed). The land transfer
deed must state that the full purchase price has been paid.
(g) In general, land transfers are subject to VAT, which needs to be paid on the
date the purchase consideration for the land is paid, unless exempted by the
tax regulations (eg, the land is purchased by individuals who do not have the
authority to collect VAT).
(h) The PPAT registers the purchaser as the new owner of the land at the local
land office. The registration process can sometimes take several months.
The abovementioned procedures are also applicable for the transfer of HMSRS. In
addition, GR 4/1988 provides that the following documents should be attached to the
deed of transfer of HMSRS:
(a) certificate of HMSRS
(b) articles of association and by-laws of the Tenants Association
(c) other documents required for the transfer of a HMSRS (eg, death certificate
and testament, in the event of transfer due to inheritance)
Please see the discussion on other key considerations for land acquisition and construction
in Attachment 2.

F. FOREIGN CITIZENS' OWNERSHIP OF PROPERTY
1. Requirements
Foreign citizens residing in Indonesia (with an appropriate stay permit) ("Resident
Foreigner") may own a house or an apartment with HP title. If the Resident
Foreigner dies, the house or apartment can be inherited as long as the heir is an
Indonesian citizen or a Resident Foreigner.
The house or apartment can either be a new property (in a primary sale) or an
existing residential property. The house or apartment can be transferred to another
party (not only Indonesians) or encumbered under a mortgage (Hak Tanggungan)
subject to the prevailing regulations on mortgage.
Resident Foreigners (except for foreign country representatives or international

agency representatives) can only have one plot of land per person/family and the
maximum land area is 2,000 m2 (which can be increased subject to approval from the
Minister of Agrarian Affairs and Spatial Planning/Head of BPN).
2. Title Conversion
If a house or apartment currently under HM or HGB title is purchased by a Resident
Foreigner, then the conversion of the title (to become HP) will automatically happen,
and if the house or apartment is then transferred to an Indonesian, the title can be re-
converted to a HM and HGB title.
Please note that the concept under the current regulation is technically incorrect
given that the underlying title should have been converted before the sale and
purchase occurs (although we suspect this technicality will be ignored in practice
given this is a work around to remedy prior regulatory inadequacies in opening up
residential property to Resident Foreigners).
3. Underlying Title
If a Resident Foreigner buys a residential property (built on land with HGB title), the
title of the residential property will be deemed to be converted into HP upon the
signing of the sale and purchase document before a PPAT. The PPAT will then
register the transaction at the relevant BPN office so that the BPN office can
manually update the title certificate to reflect the change of the residential property
from HGB to HP.
For strata title apartments/HMSRS, the title of the underlying land will remain HGB
title. So upon a purchase by a Resident Foreigner only that particular unit will be
converted into a HP strata title (in Indonesia known as Hak Pakai Atas Satuan
Rumah Susun or "HPSRS"). Only if all apartment units are owned by Resident
Foreigners can the underlying land be converted to HP title.
4. Minimum Prices
The Government stipulates minimum prices for houses or apartments that can be
purchased by Resident Foreigners depending on the location of the house of
apartment.

For example for Jakarta the price of a house must be IDR 10 billion or more while for
an apartment it must be IDR 3 billion or more. For Banten and Bali provinces, the
price of a house must be IDR 5 billion or more while for an apartment IDR 2 billion or
more.
5. Term of Title
The term for underlying titles owned by Resident Foreigners would depend on the
type of the rights as follows:
Type Rights Term Transfer
Houses A HP which is derived Valid for 30 years, If transferred back

from conversion of a HM and can be to an Indonesian,
extended for 20 the HP can be
years + renewed converted to HM
for 30 years
A HP which is derived Valid for the If transferred back
from conversion of a HGB remaining term of to an Indonesian,
the HGB, and can the HP can be
be extended for 20 converted to a
years + renewed HGB, and the term
for 30 years of the HGB is the
remaining term of
the HP
Apartments New condition/1st sale - A Valid for 30 years, If transferred back
HPSRS which is derived and can be to an Indonesian,
from conversion of a extended for 20 the HPSRS can be
HMSRS years + renewed converted to a
for 30 years HMSRS, and the
term of the HMSRS
Not new condition/2nd Valid for the is the remaining
sale - A HPSRS which is remaining term of term of the HPSRS
derived from conversion of the HPSRS, and
a HMSRS can be extended
for 20 years +
renewed for 30
years
G. SECURITY RIGHT OVER HGB LAND AND HMSRS

OVER LAND WITH HGB TITLE
For corporate entities, HGB land and HMSRS over land with HGB title can be used
as security of a loan by encumbering the HMSRS or HGB land and the building over
it with a security right on land or Hak Tanggungan.
Please refer to our separate brochure on security and enforcement of security in

Indonesia for further discussions on this issue.
*******

ATTACHMENT 1
GENERAL TAX AND DUTY RELATED WITH LAND
1. Sale and Purchase of Land

Based on Law No. 20 of 2000 on Land and Building Acquisition Duty (Bea Perolehan
Hak Atas Tanah dan Bangunan – "BPHTB") and Government Regulation No. 71 of
2008 on the Payment of Income Tax on Income Earned from the Transfer of Land
and or Building Titles (Pajak Pendapatan untuk Pengalihan Hak Atas Tanah dan
Bangunan – "PPHTB"), as amended, the applicable duty and tax in relation to a
transfer of certified land are BPHTB and PPHTB. These duties and taxes are also
applicable for transfers of uncertified land ("tanah girik").
Generally, as a purchaser of land, there are two types of taxes that a company must
be aware of: VAT (Value Added Tax) on the acquisition, and BPHTB.
VAT for a real-estate property acquisition is 10% (note that there might be an
additional 20% Luxury Goods Sales Tax for qualified luxurious property such as
luxurious homes, apartments, condominiums or town houses), based on the sale
price. As a general rule, VAT is payable at the time the purchase consideration is
paid or at the transfer date of the land title, whichever is earlier. The transferor is
obliged to issue tax invoices for VAT purposes to the transferee.
The seller is required to pay PPHTB in the amount of 2.5% of the land value at the
time that the land transfer deed is signed. At the same time the purchaser is required
to pay BPHTB in the amount of 5% (or lower, subject to the prevailing regional
regulations) of the land value.
BPHTB and PPHTB are calculated based on the transaction price or the land value
of the land and/or building as determined by the government (known as NJOP (see
below)), whichever is higher.
Under the Indonesian Tax Law, the transfer of land rights is subject to BPHTB and
PPHTB. The calculation is based on the Taxable Acquisition Value of the Tax Object
(Nilai Perolehan Object Pajak – "NPOP").
Taxable NPOP is determined by subtracting Non Taxable NPOP from NPOP, ie, in
the following formula.
Taxable NPOP = NPOP – Non Taxable NPOP 2
If the NPOP is not available or is lower than the Selling Value of the Tax Object (Nilai
Jual Object Pajak – "NJOP") determined by the government to calculate the
applicable annual Land and Building Tax (Pajak Bumi dan Bangunan – "PBB") in the
area where the land is located, then the calculation of BPHTB will be based on the
NJOP stated in the applicable PBB in the year the land is transferred.
2
Non Taxable NPOP varies in different regions. However, the maximum Non Taxable NPOP for land is IDR 60
million

The formula for the Taxable NPOP is as follows:
Taxable NPOP = NJOP – Non Taxable NPOP
Generally, the current applicable tariff for BPHTB and PPHTB is as follows:
PPHTB = 2.5% x Taxable NPOP
BPHTB = 5% (or lower, subject to the prevailing regional regulations) x Taxable

NPOP
2. Lease of Land
The lease of land will be subject to VAT of 10%. The lessor is obliged to issue a tax
invoice for VAT purposes to the lessee. The rental fee received by the lessor is
considered as taxable income and is subject to 10% final income tax that must be
withheld by the lessee.
3. Luxury and Super Luxury Taxes

The following is a table on taxes that must be paid by the seller of residential
properties with a certain size and/or sale price.
Tax Amount Threshold
(a) VAT on Luxury 20% House or townhouse (non-strata) with a sale

Goods price of IDR 20 billion or more.
Apartment or condominium or townhouse (strata
title) with a sale price of IDR 10 billion or more.
(b) VAT on Super 5% House or townhouse (non-strata) with a sale
Luxury Goods price of more than IDR 5 billion or with a size of
more than 400 m2.
Apartment or condominium or townhouse (strata
title) with a sale price of more than IDR 5 billion
or with a size of more than 150 m2.
4. Other Payments
(a) PPAT Fees
Notarial fees are payable to the notary on any land sale and can be
negotiated. However, the PPAT fees should not exceed 1% of the transaction
price.
(b) Transfer Fees Imposed by Land Office
Based on Government Regulation No. 13 of 2010, the registration fee for the
transfer of land title to an individual or a legal entity is:
(0.1% x Value of Land) + IDR 50,000

Value of Land refers to market value determined by the relevant land office, or
NJOP in the absence of the determined market value.
(c) Other Fees
The BPN office also imposes fees, calculated based on a formula, for
providing public services related to land, for example:
(i) fees to convert land from HM to HGB title
(ii) fees to split or merge a land title certificate
(iii) fees to conduct re measurement
(iv) fees for the issuance of new land title certificates if the existing
certificate is damaged etc.

ATTACHMENT 2
OTHER KEY CONSIDERATIONS FOR LAND ACQUISITION

AND CONSTRUCTION
1. Zoning (Spatial Planning)

(a) Indonesia's Spatial Planning in Brief
The use of space within Indonesia’s territory is stipulated under Law No. 26
of 2007 on Spatial Planning ("Spatial Law"). Spatial Law governs how
Indonesia’s territory is utilized (land, water and air) at a national, provincial
and regional level. The Spatial Law sets out the concepts and guidelines for
the preparation, enactment and monitoring of Spatial Planning within
Indonesia’s territory.
In brief, the Spatial Law, in terms of authority, is structured as follows:
(i) Central Government: Determines the spatial planning at the National

Level ("National Spatial Planning"). The National Spatial Planning
determination is led by the minister who has the authority to oversee
spatial planning, ie, Ministry of Public Works. The National Spatial
Planning is enacted by way of a government regulation signed by the
president.
(ii) Provincial Government: Determines the spatial planning at the

Provincial Level ("Provincial Spatial Planning"). The Provincial
Spatial Planning determination is led by the governor of a province.
The Provincial Spatial Planning is enacted by way of a provincial
regulation (Peraturan Daerah Propinsi) issued by the governor of a
province after obtaining approval from the provincial parliament
(Dewan Perwakilan Rakyat Daerah Propinsi – "Provincial DPRD").
Provincial Spatial Planning is designed for 20 years, and will be
reviewed/revised every five years.
(iii) Regional Government (City or Regent Level): Determines the spatial

planning at the regional level, ie, city and regent level ("Regional
Spatial Planning). The Regional Spatial Planning determination is led
by the mayor or regent of a city or regency respectively, as the case
may be. The Regional Spatial Planning is enacted by way of a
regional regulation (Peraturan Daerah Kota/Kabupaten) issued by the
mayor or regent of a city or regency (as the case may be) after
obtaining approval from the city/regency parliament (Dewan
Perwakilan Rakyat Daerah Kota/Kabupaten – "Regional DPRD"). A
Regional Spatial Planning is designed for 20 years, and will be
reviewed/revised every five years.
The regulations on Spatial Planning are subject to the hierarchy of

regulations, with the Spatial Law as the highest in the hierarchy, and the
Regional Spatial Planning being the lowest in the chain. The idea is that the

regulations on Spatial Planning must be harmonious at each level, including
related laws and regulations such as forestry or agriculture. However, if there
is any controversy between the Spatial Planning regulations, then the higher
regulation will prevail.
(b) Checking Local Spatial Planning Before Acquiring Land
Before conducting any land acquisition, it is important to confirm that the

target area can be used for the proposed activities. In theory, information on
an area's spatial planning can be obtained from the local planning (planology)
office or the local city planning office, although in practice it is hard to obtain
copies of documents or maps of the target area on a no-name basis.
Although possible, changing a Provincial Spatial Planning or a Regional

Spatial Planning is a very long process. The process involves getting approval
from the local parliament, and several local governments have taken a firm
position not to amend Regional Spatial Planning to accommodate certain
activities, despite such a plan having been formulated for a period of 20 years.
The Jakarta Provincial Government recently issued a new regional regulation

on Detailed Spatial Planning and Zoning for Jakarta which includes very
detailed provisions on the above subjects (which is intended to be a
benchmark for other regions) with the intention of leaving very little room (or
even none) for government policy and discretion including, among other
things, on building requirements and licensing related matters.
2. Obligation to Obtain SP3L and SIPPT for Acquisition of More

Than 5,000 m2 of Land in Jakarta
If a company plans to acquire more than 5,000 m2 of land in Jakarta, the local
government regulations require the issuance of a Permit Letter for the Appointment
of Land Usage ("SIPPT").
Before obtaining an SIPPT, the company must first obtain a principle approval. In
summary, the main documents required to obtain a SIPPT are:
(a) a Principle Approval for Land Acquisition ("SP3L"). The required documents
to obtain an SP3L are:
(i) application form
(ii) situation map with a scale of 1:5000
(iii) copy of the deed of establishment of the company
(iv) pre-proposal of the project/pre-design, construction idea over the land
(v) statement/recommendation letter from a government bank or foreign

exchange bank regarding the availability of funds for the land
acquisition and physical construction
(vi) statement letter of willingness to prepare and develop cheap

apartments with an area of 20% of the effective usage total area, for

those who are subject to Decree of the Governor of DKI Jakarta No.
540 of 1990/Decree of the Governor of DKI Jakarta No. 640 of 1992.
(Note: this is applicable for residential projects (eg, apartments)).
(b) application form
(c) a copy of land letters (documents)
(d) a copy of the land rights relinquishment letters (documents)
(e) a copy of the deed of establishment of the company/ identity card
(f) situation map measured by Planning Office Sub-Services or Suku Dinas Tata
Kota of Jakarta
(g) statement of City Plan/Explanation from Planning Office Sub-Services of

Jakarta
(h) design proposal in 3D
(i) recommendation from the Regional Land Office (Note: This is a technical
recommendation over the land from the Land Office)
(j) photograph of the location – minimum 3 photos from different angles
(k) City Planning Stipulation
In practice, the BPN office will not register the transfer of land if the company has not
obtained the relevant SIPPT. For building establishment in Jakarta, SIPPT is also a
requirement to obtain a Building Construction License or Ijin Mendirikan Bangunan.
3. Obligations to Construct Public Apartments and Low-Cost

Housing
(a) Housing
A large scale area housing development must implement a balanced housing

environment (ie, low-cost, medium and luxury housing) within one area.
Low cost housing is defined as housing constructed on areas of between 60

m2 and 200 m2 with a minimum building area of 36 m2, and with a price as
determined by the government.
Medium housing is defined as commercial housing with a higher sale value of

1 to 4 times the sale value of low-cost housing.
Luxury housing is defined as commercial housing with a higher sale value of

more than 4 times the sale value of low-cost housing.
The ratio of low-cost, medium, and luxury housing must be 3:2:1. The total
area of low-cost housing must be at least 25% of the total housing areas
being constructed, and the number of units of low cost housing constructed
must be at least equivalent to the total number of units of medium and luxury
housing constructed.

If there is not enough land area to build the required number of units of low-
cost housing, subject to approval from the Government, the developer may
replace it by constructing public apartments (defined as apartments
constructed for low-income earners). The locations of the low-cost, medium,
and luxury housing can be in different areas; however, the location must still
be within the same regency/city.
The government has approved alternative arrangements such as developing

low-cost housing in cooperation with other developers within the same
regency/city.
Sanctions for non-compliance can be in the form of written warnings, fines,

temporary suspension of construction, temporary suspension of permits, and
revocation of permits and land title. There are no criminal sanctions stipulated
in the regulations for non-compliance.
(b) Apartments:
A commercial apartment developer must likewise develop public apartments

with an area of at least 20% of the total area of the commercial apartments
constructed. A commercial apartment is defined as an apartment constructed
to obtain high profit (also known as luxury apartments/condominium).
The location of the public apartments can be in a different area from the
commercial apartment although it must still be within the same regency/city.
The government has approved alternative arrangements such as developing

low cost housing in cooperation with other developers within the same
regency/city.
Sanctions for non-compliance can be in the form of written warnings, fines,

temporary suspension of construction, temporary suspension of permits, and
revocation of permits and land title. There are also criminal sanctions in the
form of imprisonment for a maximum two years and a fine of IDR 20 billion
(approximately US$1.5 million at current exchange rates).
4. Building Construction
Construction of buildings is regulated in Law No. 28 of 2002 on Building which is
implemented by Government Regulation No. 36 of 2005 on Implementation of Law
No. 28 of 2002 on Building ("GR 36"). However, in practice regional laws may apply
additional requirements for the construction of buildings (eg, an SIPPT is a
prerequisite for a building construction permit application in Jakarta).
Under GR 36 anyone who wishes to construct a building must obtain a building

construction permit ("IMB"). The regional government must provide the relevant
regency/city planning information letter for the relevant location to applicants for IMB.
The information letter contains stipulation on, among other things:
(a) permitted building functions
(b) maximum building heights

(c) permitted basement floors
(d) maximum or minimum building perimeters (eg, building floor coefficient and
building ground coefficient)
(e) city utilities network
The following information or documents must be provided for the purposes of an IMB
application:
(a) evidence of land ownership or land use agreement
(b) data on the building owner
(c) technical specification of the building
(d) environmental impact analysis for the building construction
5. Green Building Requirements in Jakarta

The Jakarta local government issued Governor Regulation of DKI No. 38 of 2012 on
Green Buildings ("DKI Regulation No. 38/2012"). DKI Regulation No. 38/2012 is
intended to provide the first national benchmark on the requirements of green
buildings, which is applicable to newly constructed and existing buildings.
The following types and sizes of buildings must comply with DKI Regulation No.
38/2012:
(a) multi function apartments, offices, shopping centers and buildings with a floor
area above 50,000 m2
(b) hotels and healthcare facilities with a floor area above 20,000 m2
(c) education facilities with a floor area above 10,000 m2
The requirements cover among other things (i) energy efficiency, (ii) water efficiency,
(iii) indoor air quality, (iv) waste management, and (v) construction procedures.
Failure to comply with the requirements under DKI Regulation No. 38/2012 may
result in the Building Construction Permit (IMB) or Occupation Permit (SLF) not being
issued.
6. Amdal/UKL – UPL
A company must obtain the Analysis on Environmental Impact License/Analisa
Mengenai Dampak Lingkungan ("Amdal") which is used to analyze the impact of a
structure on its surroundings.
A building may require an Amdal, as provided under Government Regulation No. 27

of 1999 dated 7 May 1999 on Analysis of Environmental Impacts. However, in
practice, if the building is not used to carry out industry activities, a study on
environmental impact or UKL – UPL would be sufficient. Obtaining Amdal or UKL –
UPL can take months because of the lengthy process and procedures that must be
fulfilled.

7. Building Function Worthiness Certificate/Sertifikat Kelaikan
Fungsi Gedung ("SLF")
The purpose of an SLF is to see whether or not a building has been properly
constructed. Its issuance is part of the government's building construction supervision
implementation.
Under GR 36 an SLF must be obtained after a person or company has completed the
building construction and the building has fulfilled its functional worthiness
requirements (eg, the building's functional appropriateness, structure requirements,
safety, health and security).
An SLF for a residential complex is valid for 20 years while for a building complex it is
valid for five years.
8. Building Use Permit/Izin Penggunaan Bangunan ("IPB") in

Jakarta
After a building is deemed worthy from a technical perspective, an IPB must be
obtained before the building can be used. The following documents are required to
obtain an IPB:
(a) minutes of meeting of building inspection by the Jakarta Urban Planning

Office (this task is usually delegated to the head sub district's
office/kecamatan)
(b) approved IMB
(c) detailed site plans
(d) detailed architectural design of the building
(e) minutes of meeting of installation examination by the Jakarta Urban Planning

Office
(f) the environmental analysis documents (post construction of the building)
For Jakarta, it may take between 4 and 6 months until an IPB is issued. It can take
longer if the building structure is a high-rise building.
9. Building Usage Worthiness /Kelayakan Menggunakan

Bangunan ("KMB") in Jakarta
A KMB is a permit to confirm the usage worthiness of a building after the condition
and usage of the building is deemed worthy by the Jakarta overnment before the
issuance of an extension to an SLF.
10. Nuisance Permit (HO)

A nuisance permit is required for a company that intends to construct a building that
may cause danger, loss or nuisance to the environment (generally any business that
is not located in an industrial estate must have a HO).

Under the Hinder Ordonantie, dated 13 June 1926, Staatsblad 1926 No. 226 (the
Nuisance Law), the owner, user or manager of the relevant construction/facilities will
be responsible for violation of any requirements stipulated in the nuisance permit
issued by the regional government. The permit would normally require the owner of
the relevant construction/facilities to comply with certain environmental and public
need requirements (regardless of whether the construction/facilities are operated by
a third party).
Any violation of these requirements would result in imprisonment for not more than
two weeks or a fine of not more than IDR 250 for the responsible party. As the
amount of the monetary penalty is no longer adequate to compensate for any loss or
damage, the court normally has the discretion to determine the amount of
compensation that the responsible party has to pay.

www.hhp.co.id
Hadiputranto, Hadinoto & Partners
The Indonesia Stock Exchange Building Tower II, 21st Floor
Sudirman Central Business District Jl. Jend. Sundirman Kav. 52-53
Jakarta 12190, Indonesia
Tel: +62 21 2960 8888 | Fax: +62 21 2960 8999
DISCLAIMER
It should be noted that the material in this book is designated to provide general information only. It is not offered as advice on any
particular matter, whether it be legal, procedural or other, and should not be taken as such. The authors expressly disclaim all liability to
any person in respect of the consequences of anything done or omitted to be done wholly or partially in reliance upon the whole or any
part of the content of this book. No reader should act or refrain from acting on the basis of any matter contained in it without seeking
specific professional advice on the particular facts a circumstances at issue.
© 2017 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member firm of Baker & McKenzie
International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional
service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an
“office” means office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

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Indonesia

Real Estate Guide

A. REAL ESTATE IN INDONESIA 1

Hadiputranto, Hadinoto & Partners | i

Hadiputranto, Hadinoto & Partners | ii

A. REAL ESTATE IN INDONESIA

2. Practice and Procedures

3. Foreign Investment in Real Estate

(a) Property agent/brokerage, closed for foreign investment

(b) Property management, only permitted if the entire property is owned or

Hadiputranto, Hadinoto & Partners | 1

2. Types of Land Titles

(a) Right to Own/Hak Milik ("HM")

Only Indonesian citizens (individuals) and some legal entities determined by

A HM can be transferred to a third party. However, land with HM cannot be

Hadiputranto, Hadinoto & Partners | 2

HM can be encumbered for security purposes.

HM ceases to exist if either of the following occurs:

(i) The land is controlled by the government as a result of revocation of

(ii) The land ceases to exist.

(b) Right to Cultivate/Hak Guna Usaha ("HGU")

HGU title can be transferred to a third party. Further, GR 40/1996 permits

HGU title may be granted only to:

(i) Indonesian citizens

(ii) Indonesian legal entities domiciled in Indonesia

HGU title ceases to exist if (among other things):

(i) Its validity period expires.

(iv) It is revoked and the land is used for public purposes.

(v) The land is abandoned.

Hadiputranto, Hadinoto & Partners | 3

Under GR 40/1996, for investment purposes, the extension and renewal of

(iii) The HGU holder still qualifies as a holder of HGU title.

(c) Right to Build/Hak Guna Bangunan ("HGB")

Similar to a HGU title, GR 40/1996 permits a HGB title to be encumbered for

HGB title may be granted to:

(i) Indonesian citizens

(ii) Indonesian legal entities established under Indonesian law and

Hadiputranto, Hadinoto & Partners | 4

HGB title ceases to exist if (among other things):

(ii) For HGB title on HPL or HM land, it is cancelled by the competent

(iv) It is revoked and the land is used for public purposes.

(v) The land is abandoned.

(vi) The land ceases to exist.

Under GR 40/1996, the holder of a HGB title can apply for an

(iii) The HGB holder still qualifies as a holder of HGB title.

(d) Right to Use/Hak Pakai ("HP")

Hadiputranto, Hadinoto & Partners | 5

HP title may be owned by:

(i) Indonesian citizens

(ii) Foreign citizens residing in Indonesia

(iii) Indonesian legal entities domiciled in Indonesia

(iv) Foreign corporate bodies with representatives in Indonesia

(v) Departments, non-departmental government bodies and regional

(vi) Foreign country representatives and international organization

(vii) Religious and social institutions

GR 40/1996 permits a HP title to be encumbered for security purposes. HP

HP title ceases to exist if (among other things):

(ii) For HP title on HPL title or HM land, it is cancelled by the competent

(iii) It is voluntarily relinquished by the holder of the HP title before its

(iv) It is revoked and the land is used for public purposes.

(v) The land is abandoned.

(vi) The land ceases to exist.

Hadiputranto, Hadinoto & Partners | 6

If a foreign citizen residing in Indonesia acquires a property which is built over