Understanding HGB : Hak Guna Bangunan Land Ownership
When foreigners consider purchasing land in Lombok, Indonesia, they encounter a variety of land ownership titles and options due to the restrictions imposed by Indonesian law.
“HGB is often seen as one of the best and safest legal structures for acquiring land in Indonesia.”
The main options available for foreigners include Hak Pakai (Right to Use), lease agreements, using a nominee system, forming a Foreign Investment Company (PMA), and Hak Guna Bangunan (HGB, or Right to Build).
Each option comes with specific pros and cons, but for many business-oriented investors, HGB is often seen as one of the best and safest legal structures for acquiring land in Indonesia. Here’s why:
Understanding Hak Guna Bangunan (HGB)
Hak Guna Bangunan (HGB) is a land title that allows the title holder the right to construct buildings on the land. It is generally issued for an initial period of up to 30 years and can be extended for an additional 20 years, with a possibility for a further extension of up to 30 years upon expiration.
Why HGB is a preferred option
1. Legal Framework for Businesses
HGB is specifically designed to support business activities, making it ideal for foreign investors who want to develop commercial projects, such as hotels, factories, or residential complexes.
The HGB title aligns well with the commercial intent of many foreign investments.
2. Direct Control Through a PMA
Foreigners can control HGB land through a PMA (Penanaman Modal Asing), which is a foreign-owned company registered in Indonesia.
The PMA structure not only allows the holding of HGB titles but also provides a clear legal entity for conducting other business operations in Indonesia.
This is particularly advantageous for those seeking to engage in extensive business activities beyond mere land ownership.
3. Renewability and Stability
Unlike Hak Pakai, which is typically used for residential purposes, HGB can be renewed before the end of its term, offering longer-term stability for investment projects that require a considerable amount of time to yield returns.
4. Property Development
Investors with HGB titles have the right to develop the land as per their business needs (subject to local zoning and planning laws).
This is crucial for investors looking to customize their property developments to suit specific market needs.
5. Marketability
Properties held under HGB titles are easier to mortgage, sell, or transfer (within the confines of the law), provided that the buyer is also a PMA or an eligible domestic investor.
This makes HGB a more liquid asset compared to properties under Hak Pakai, which are typically more challenging to transfer.
“HGB is particularly advantageous for those seeking to engage in extensive business activities beyond mere land ownership.”
Considerations
1. Risk Management
It’s important to remember that while HGB offers many advantages, it is tied to the legal existence of the PMA. Thus, maintaining compliance with Indonesian corporate laws and investment regulations is crucial.
2. Long-term Planning
Extensions of the HGB title require foresight and timely administrative action to ensure continuity of ownership and use rights.
For foreign investors, particularly those interested in commercial ventures on Lombok, Hak Guna Bangunan (HGB) offers a structured, renewable, and business-friendly option.
It allows not only the development and utilization of land in line with business goals but also provides a certain degree of flexibility and security in property rights — crucial factors for long-term investments in Indonesia’s dynamic market environment.
However, it is always advisable to consult with legal and real estate professionals in Indonesia to navigate the complexities of land acquisition and ensure compliance with all relevant laws.
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