Building Rights on Land for foreigners - HGB

The Hak Guna Bangunan (HGB), or Right to Build, is the most popular and secure methods for foreign investors to control and develop property in Indonesia.

Key Facts about HGB for Foreign Investors

• Ownership Structure: HGB title cannot be owned by a foreign individual. It can only be owned by an Indonesian legal entity, most commonly a Foreign-Owned Company (PT PMA). A PT PMA can be 100% owned by foreign shareholders.

• What it Grants: The PT PMA holds the HGB title, granting it the legal right to construct and possess buildings on the designated land for the duration of the right. This structure provides a foreign investor with direct legal and operational control over the company and the assets on the land.

• Duration and Extensions: The duration of the HGB is officially granted for a maximum of 30 years, and is subject to extensions:

  • Initial Term: Up to 30 years.

  • First Extension: Up to 20 years.

  • Renewal: Up to 30 years.

  • Total Maximum: 80 years (30 + 20 + 30), provided the company meets all requirements for extension and renewal, and the land use remains appropriate.

PT PMA Establishment Process

• Registration: While some initial setup steps can be delegated, establishing a PT PMA requires a formal process and is typically done through a local consultant or lawyer. It is generally not possible for a foreigner to simply send a "letter of attorney" to have the company set up in their name without being physically or digitally involved in the notarization process (or providing specific, verified Power of Attorney) and subsequent licensing steps.

• Price and Duration: The approximate price and duration you mentioned are highly variable and often underestimated:

  • Duration: The establishment of a fully licensed PT PMA, including the corporate documents (Akte Pendirian), Ministry of Law and Human Rights approval (SK Kemenkumham), Tax ID (NPWP), and Business Identification Number (NIB), generally takes 1 to 3 months.

  • Cost: The cost for establishing the corporate entity can vary significantly based on the service provider, the type of business license, and the required minimum capital. The stated price of $7,000 is an estimate for services and may or may not include mandatory capital deposits, which can be substantial depending on the business activities (KBLI) chosen.

Summary of Modifications

1. Clarified that the HGB is held by the PT PMA (an Indonesian entity), not the foreigner directly.

2. Corrected the duration split to reflect the legal terms: 30 years (initial) + 20 years (extension) + 30 years (renewal).

3. Revised the registration process: While delegation is possible, simply sending a letter to have it done on their name is an oversimplification of the legal requirements.

4. Noted that the price and duration are highly variable and the price estimate is for services only.