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Hak Sewa or the leasehold title gives the holder the right of use for an empty plot of land or the building(s) on someone else’s land for a fixed period of time. A Leasehold Right title can be granted over land currently held under a Freehold title (Hak Milik), Right to Build title (HGB) or Right to Use title (Hak Pakai). Indonesian individuals, Indonesian legal entities and foreign individuals and legal entities may acquire Leasehold (Hak Sewa) properties. The period of lease is generally between 1 to 25 years and usually there is an option to extend the lease, which is specified in the agreement between the land owner (Lessor) and the who rents the property (Lessee)

Hak Sewa cannot be used in the form of a mortgage, nor can it be registered with the National Land Agency. Subject to the conditions of a lease contract (lease deed), a foreigner may lease an empty plot of land, build permanent buildings on the land and resell the remaining balance of the lease term to any third party by way of a sub-lease or transfer of Leasehold Right.

Commercial leases of office space, factory buildings, restaurants, hotels, shops and the lease of residential premises are all examples of Hak Sewa titles. Residential properties can include apartments, condominiums, villas and houses.

Hak Sewa or the leasehold title gives the holder the right of use for an empty plot of land or the building(s) on someone else’s land for a fixed period of time. A Leasehold Right title can be granted over land currently held under a Freehold title (Hak Milik), Right to Build title (HGB) or Right to Use title (Hak Pakai). Indonesian individuals, Indonesian legal entities and foreign individuals and legal entities may acquire Leasehold (Hak Sewa) properties. The period of lease is generally between 1 to 25 years and usually there is an option to extend the lease, which is specified in the agreement between the land owner (Lessor) and the who rents the property (Lessee)

Hak Sewa cannot be used in the form of a mortgage, nor can it be registered with the National Land Agency. Subject to the conditions of a lease contract (lease deed), a foreigner may lease an empty plot of land, build permanent buildings on the land and resell the remaining balance of the lease term to any third party by way of a sub-lease or transfer of Leasehold Right.

Commercial leases of office space, factory buildings, restaurants, hotels, shops and the lease of residential premises are all examples of Hak Sewa titles. Residential properties can include apartments, condominiums, villas and houses.

Hak Milik or Freehold is the strongest form of land title ownership in Indonesia. Only individuals of Indonesian Nationality can own land under the Hak Milik title. Consequently, neither limited liability companies (PT/Perusahaan Terbatas) nor foreign individuals may obtain land with a Hak Milik title. Subject to zoning restrictions, the Hak Milik title owner can use the land for any purpose, although it does not entitle the owner to exploit the natural resources found on or under the land. The title has no limit and may be sold, gifted, exchanged, handed down by a will and may also be used in the form of a mortgage.

Foreigners may, however, acquire land under a Hak Milik title in another form of entitlement called Hak Pakai or Right of use.

Hak Guna Bangunan (The right to build) or HGB title allows the holder to construct and own buildings or other structures on state-owned land (Tanah Milik Negara), freehold land (Hak Milik) and HPL (Hak Pengelolaan) land. This is the most common title for residential, commercial and industrial properties.

An HGB title can be owned by individuals of Indonesian Nationality, Indonesian legal entities, including Foreign Capital Investment Companies (Penanaman Modal Asing/PMA), or Domestic Capital Investment Companies (Penanaman Modal Dalam Negeri/PMDN). Thus, any legal entity such as limited liability companies (Perusahaan Terbatas/PT) which are established under Indonesian Law, with domicile in Indonesia, may obtain a property with HGB title. However, the HGB title is not available for foreign individuals.

The title is granted for an initial period of up to 30 years and can generally be extended for an additional period of 20 years. Subsequent extensions are at the discretion of the state and may be renewed for another 30 years. An approved capital investment company (i.e., PMA or PMDN company), may obtain HGB rights for a period of 80 years (i.e., 30-year initial term, plus 20 year extension term, plus 30 year renewal term).

HGB title over Freehold (Hak Milik) land is valid for a period of 30 years only. Any extensions beyond 30 years would be subject to a new agreement with the landowner and registration of a new HGB/Right to Build title over the privately-owned land.

An HGB/Right to Build title can be sold, gifted, exchanged or handed down and/or encumbered by a mortgage.

Hak Pakai or the Right of Use is a title over Freehold land that allows the holder to use the land, including (subject to permitting requirements) the right to construct buildings. A Hak Pakai title may be held by foreign individuals and foreign representative offices as well as Indonesian citizens and legal entities established under Indonesian law. For foreigners to acquire a Hak Pakai title, they must be a resident or domiciled in Indonesia and therefore must hold a limited stay permit (KITAS) or a permanent stay permit (KITAP).

According to the Government Regulation (PP) no. 103 Year 2015, the term of granting rights to foreigners is specified to having one single property with a maximum land size of 3000 m2. Foreigners can acquire usage rights for 30 years. If the period has expired, it can be extended for another 20 years, then after a span of 50 years, the foreign national may renew his usage rights for a period of 30 years. In total, the given Right of Use period can reach 80 years.

Under current laws, a Hak Pakai title is the only registered form of entitlement over land that can be granted to a foreign individual which can be evidenced by a land certificate reflecting the name of the foreigner and the term on the certificate which serves as formal evidence of this form of ownership right.

In accordance with Indonesian law, this title can be sold, gifted, exchanged and/or passed down, unless the deed of conveyance specifies otherwise, but under a Hak Milik title, it cannot be used in the form of a mortgage.

For a Freehold property transaction (Hak Milik)

The buyer: Land and building acquisition duty (BPHTB) = 5% of NJOP value (government assessment)

The seller: PPh income tax = 2.5% of NJOP (government assessment)

For a Leasehold property transaction (Hak Sewa)

The buyer: no Tax implications

The seller: final income tax of 10% (Indonesian nationals or KITAS / KITAP holders) and

20% (foreigners without KITAS / KITAP)

Yes, the safest way for a foreign national to invest in property in Lombok is to do it through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) certificate. A PT PMA is a foreign limited liability company in Indonesia.

A foreign company is recognized by the Indonesian government as a legal entity, the foreign investors can purchase either of the two types of land titles, Right to Build (Hak Guna Bangunan), that is valid for 30 years and can be extended for 20 years and another 30 years, and/or Right to Use (Hak Guna Usaha), which is valid for 25 years and can be extended for 25 years and a further extension of 35 years can be granted.