Bali Property Ownership: Hak Pakai vs HGB

For those of you who own property in Indonesia, you definitely understand that land certificates are divided into three types, namely Freehold Certificate (SHM/Hak Milik), Right to Build (HGB), and Right of Use Certificate (Hak Pakai).

The differences between a Hak Pakai and an HGB title can be seen from the party receiving the certificate. The Hak Pakai can be granted to a foreign citizen, either an individual or a legal entity, while the HGB cannot

Speaking of land certificates, do you know, what is the difference between a HGB and Hak Pakai? Well, for those of you who do not know yet, here is a simple explanation:

Right of Use Certificate (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.

Hak Pakai has a validity period and may be extended in accordance with applicable regulations.

Hak Pakai can be issued to:

• Indonesian citizens
• Foreigners domiciled in Indonesia
• A foreign legal entity that has a representative in Indonesia
• A legal entity established under Indonesian law and domiciled in Indonesia
• Departments, Non-Departmental Government Agencies, and Local Governments
• Religious and social bodies
• Representatives of foreign countries and representatives of international bodies.

Hak Pakai Validity Period

Hak Pakai also has a usage time limit, in accordance with Government Regulation (PP) Number 103 of 2015 stating that a Hak Pakai has a validity period of not more than 30 (thirty) years. However, it can be renewed for 20 (twenty) years and then renewable for 30 (thirty) years as agreed with the holder of the land certificate.

Right to Build (HGB)

Right to Build (HGB) is a type of certificate in which the certificate holder is allowed to establish and own buildings on land which is state owned or freehold, with a maximum period of 30 years and can be extended for a maximum period of 20 years. The land can be owned by the state or an individual (Hak Milik).

Just like Hak Pakai, HGB also has a usage time limit, but the difference is, this certificate can be mortgaged for credit applications to financial institutions.

HGB can be issued to:

• Indonesian citizens
• A legal entity established under Indonesian law and domiciled in Indonesia

Applicability Period of HGB

Based on Government Regulation (PP) of the Republic of Indonesia Number 40 Year 1996, the validity period of an HGB certificate is 30 years and can be extended for a maximum period of 20 years.

The application for renewal of the Hak Guna Bangunan should be filed no later than two years before the expiration of the the HGB.

Land Status As a Result Of Expired HGB

After the HGB validity period is over, the status of the land is transferred back to the party entitled as the legal owner of the land, either to the State or to the holder of the Hak Milik certificate.

Conclusion

The differences between a Hak Pakai and an HGB title can be seen from the party receiving the certificate. The Hak Pakai can be granted to a foreign citizen, either an individual or a legal entity, while the HGB cannot.

There is also a difference in the validity period of the certificates. A Hak Pakai certificate can be extended for up to 80 years, whilst an HGB is only for 50 years. In addition, the HGB certificate can be mortgaged for credit applications while the Hak Pakai cannot.

Disclaimer:

As we are not qualified legal advisers, we can only provide a general information. For those wanting full legal advice, one needs to get qualified legal advice.

If you wish further information, we recommend that you contact a Lawyer/legal adviser or speak with a notary, who can help to answer any legal questions which you may have.