SHM, HGB and Hak Pakai: Land Rights in Indonesia

SHM, HGB and Hak Pakai: why the registered right matters

A Bali villa listing may say “freehold”, yet the buyer is offered a long lease when the paperwork arrives. Both descriptions can appear alongside a genuine land certificate. The trouble begins when the marketing label is treated as evidence of what the overseas buyer will own.

Indonesian law recognises distinct interests in land. Hak Milik is an ownership right, typically evidenced by an SHM certificate. HGB, or Hak Guna Bangunan, is a right to build and hold buildings on qualifying land. Hak Pakai is a statutory right of use. A private villa lease is another arrangement again. These concepts answer different legal questions; none is an interchangeable English word for ownership.

There are also three separate documents or events to keep in mind: the underlying land right, the certificate or registry entry that evidences it, and the proposed transaction. The holder named in the register may be an Indonesian individual or a company, while the foreign purchaser may be entitled to acquire something quite different. Paying the purchase price does not resolve that gap.

Bali follows Indonesia's national land law. Local sales language cannot expand the class of people who may hold a particular right. A useful reading of any offer begins with the current registered holder, the land beneath the title, the expiry where relevant, and the precise right the transaction is meant to create or transfer.

Hak Milik and SHM: who can own the underlying land

An SHM document is evidence of Hak Milik, the broad land ownership right set out in Article 20 of Indonesia's Basic Agrarian Law. Unlike a time-limited building right, Hak Milik ordinarily has no fixed expiry date. That feature is valuable to its lawful holder, but it says nothing about a foreign purchaser's eligibility to become the next holder.

Article 21 reserves Hak Milik principally for Indonesian citizens. The law permits narrowly designated Indonesian legal entities under specific conditions; this is not a general exemption for foreign investors or every Indonesian-incorporated company. A foreign individual cannot obtain ordinary SHM title merely by using an Indonesian address, paying cash or signing before a notary. Special circumstances in which a foreign person acquires Hak Milik temporarily, including some inheritance situations, trigger statutory disposal obligations.

Consider an offer where the original SHM stays in a local person's name and the investor receives a power of attorney, a loan agreement and an assurance that they control the property. Those papers may create disputes or contractual claims, but they do not put the investor's name in the land register as the Hak Milik holder. The weakness is structural: the title and the money sit with different people. Calling the arrangement a nominee purchase does not fix that.

The existence of SHM can nevertheless support a lawful, differently structured transaction. An Indonesian owner might grant a lease or, where the legal conditions are met, establish a separate qualifying land right. The buyer must assess the actual instrument being offered. A seller's strong title is a useful fact; it is not a transferable personal SHM entitlement for a foreign citizen.

HGB in Indonesia: building rights and eligible holders

“HGB held by the company” is often presented as a simple ownership solution for an international investor. Legally it describes a specific registered interest: Hak Guna Bangunan allows an eligible person or entity to construct and own buildings on land it does not hold as Hak Milik. The accompanying certificate is commonly called SHGB. HGB expires unless the applicable processes for extension or renewal are satisfied.

Under Articles 35–36 of Law 5/1960 and Government Regulation 18/2021, eligible holders are Indonesian citizens and qualifying legal entities established under Indonesian law and domiciled in Indonesia. A foreign citizen acting personally is not an ordinary HGB holder. The right may rest on state land, land subject to Hak Pengelolaan (HPL), or another person's Hak Milik. Each foundation changes the supporting paperwork and the position at expiry.

A PT PMA is an Indonesian-incorporated foreign-investment company. It may be capable of holding HGB if the company and proposed use meet the relevant requirements. Incorporation alone proves neither that a particular HGB is registered to it nor that its planned business can lawfully operate there. Corporate status, land title, permitted activity and building use must be established separately.

A share acquisition illustrates the distinction. If an investor buys into a PT PMA whose asset is an HGB plot, the registry continues to show the company as land-right holder; the investor holds shares in that company. They also acquire exposure to its governance, liabilities and compliance history. A share transfer is not a personal conveyance of HGB, and the legal documents should never describe it as one.

This matters especially where the sales pitch includes nightly rentals or hospitality income. Land-right eligibility does not confer a hotel licence, demonstrate compliance with zoning, or replace the building approvals. The attractive feature of an HGB structure is irrelevant if the underlying company or intended activity fails a separate legal test.

Hak Pakai for foreigners: a registered right of use

Hak Pakai may offer an individual foreign buyer a lawful registered land-use interest in qualifying residential property. It is a statutory right created and recorded under land law, not a promise that the buyer will own an Indonesian freehold. For the right property and eligible holder, that distinction makes it materially different from purchasing shares in a company or signing a private rental agreement.

Government Regulation 18/2021 provides for fixed-term Hak Pakai that can be held by foreigners who satisfy the applicable criteria. There is also a separate form tied to continued use by designated public or institutional holders; it should not be marketed as a perpetual option for a private overseas buyer. Residential eligibility involves appropriate immigration documents as well as property-specific limits, including use and other prescribed thresholds. Immigration status on its own is never the full test.

The land beneath the proposed right shapes its legal construction. A grant over state land has one documentary route; land under HPL adds the position of its management-right holder. Where Hak Pakai is granted over someone's Hak Milik, the landowner's deed and registration become central. The right shown to a purchaser should match the supporting instruments, the named holder and the relevant parcel.

A villa advertised as “30-year leasehold” therefore needs a second look. It could simply be a lease made with the SHM owner. Such a contract is not transformed into registered Hak Pakai because it lasts decades or because an agent calls it ownership. The protections, transfer rights and expiry arrangements have to be read in the actual documents.

Qualifying for a residential land-use right also does not settle how the building may be operated. Short-stay rentals and commercial accommodation raise separate licensing and land-use questions, even when the Hak Pakai itself is valid.

HGB and Hak Pakai terms: why 30+20+30 is not 80 years secured

An “80-year title” sounds like one long asset. Under Government Regulation 18/2021, the familiar 30 + 20 + 30 formula describes possible stages of certain HGB and fixed-term Hak Pakai rights over state land or HPL land. It does not describe 80 years entered in the register on the day a buyer signs.

An initial grant may run for up to 30 years. The framework then contemplates an extension of up to 20 years and a renewal of up to 30 years, subject to the applicable legal requirements. Both the word “up to” and the distinction between extension and renewal matter. The existing holder must remain eligible and satisfy conditions relating to use and the underlying land. HPL may involve consent from the management-right holder as well.

A further complication is often missed in brochures: HGB and Hak Pakai created over another person's Hak Milik are governed by a different term mechanism. A grant can last up to 30 years, with subsequent rights requiring the relevant new deed and registration. For Hak Pakai over Hak Milik, renewal rests on agreement with the landowner and a PPAT deed. The future interest cannot be assumed merely because the original grant was valid.

Imagine two certificates bearing the same legal abbreviation. One is newly issued; the other is approaching the end of its current grant. Their remaining registered terms are not equal, despite identical marketing claims about a maximum statutory lifespan. A sale agreement may outline responsibilities for a future application, but it cannot pre-approve a land-office decision decades ahead.

The post-2025 administrative rules add a further reason to avoid copied conversion instructions. The 2021 ministerial procedure has been partially revoked, while the 2025 regulations changed the delegation of registration powers. A reliable transaction description states the actual expiry today, identifies the land category and explains later stages as conditional, not prepaid or guaranteed rights.

Read the certificate and the land right beneath the villa

The land certificate is not a complete legal file for a villa. HGB and Hak Pakai may be established over state land, land subject to Hak Pengelolaan (HPL), or privately held Hak Milik. The top-level label can remain unchanged while the documents, parties and expiry position beneath it differ substantially.

Over state land, the relevant right is granted through the applicable government process. An HPL layer introduces a management-right holder and may involve separate agreements or consents. Where HGB or Hak Pakai sits over an owner's Hak Milik, that underlying ownership remains distinct from the right granted to someone else. This is why asking only “Who owns the villa?” can produce an answer that is too vague to use.

Certificates and deeds play different roles. SHM evidences Hak Milik, SHGB evidences HGB, and a registered Hak Pakai has its own legal basis and certificate. For rights founded on someone else's Hak Milik, the grant deed and land-office entry help establish what was created and how it binds other parties. A photocopy of the first certificate page cannot tell the whole story.

A typical example is a property listed as “SHM land with a leasehold villa sale”. The SHM may be perfectly genuine. Yet the prospective buyer's asset is ordinarily a lease against the owner, with rights shaped by the lease agreement and relevant law. They have not acquired the owner's SHM, and the contract should not be described as a registered Hak Pakai unless that right really exists and will be lawfully transferred or granted.

One last distinction prevents false comfort: land-right documents do not certify planning compliance. Building approvals, legal access, zoning and short-stay use each require their own evidence. A valid title answers an essential question, but not every question needed to decide whether the building fits the intended purpose.

What foreign buyers actually receive in three Bali listing scenarios

Three Bali sales pitches can look equally convincing in a brochure while proposing three entirely different assets. The first is “SHM freehold in your personal name”. For an individual foreign citizen, that claim conflicts with the ordinary eligibility rules for Hak Milik. The landowner's certificate may be authentic, but an arrangement that leaves title with a local nominee still leaves the foreign buyer outside the SHM register. A side agreement cannot be assumed to bridge the gap.

A second proposal is “HGB through a PT PMA”. This can involve a genuine Indonesian company that qualifies as the HGB holder. The foreign investor, however, receives a corporate interest, and that comes with the company's existing liabilities, governance and business obligations. An investor buying shares should not mistake the company's land certificate for a deed granting them personal HGB. A separate review of the corporate records is part of understanding what is actually being sold.

The third offer is “a Hak Pakai villa for foreign ownership”. Here a qualifying foreign buyer may be able to hold a registered statutory right of use. But the result turns on the buyer's documents, residential property restrictions, the underlying land and the proposed legal instrument. A seller showing an existing Hak Pakai faces a different transfer question from someone promising to create a new one. If all that exists is a private lease, the package must say lease, however long the advertised term.

The most useful sentence in a property offer is rarely the one in the headline. It should identify the present right holder, the legal interest the purchaser will acquire, its documented expiry and any third-party rights that remain. A deposit before those facts agree across the register and contracts exposes the buyer to a dispute about the very subject of the sale.

These distinctions do not amount to a legal opinion on any particular villa. Nationality, immigration documents, corporate structure, title records and the contract must be assessed on the transaction date by an independent PPAT or Indonesian land lawyer. A sound land-right structure still needs separate confirmation of building permits, access, zoning and permission for any short-term accommodation use.