Land Tenure for Foreign-Owned Companies (PMA) in Indonesia

1. A Foreign Investment Company (PMA) is legally classified as an Indonesian legal entity under Indonesian law.
2. A PMA cannot own Freehold Title .
3. The most secure and commonly used land right for PMA business activities is the Right to Build (Hak Guna Bangunan – HGB) .
4. HGB may be granted for:
   • 30 years (initial term),
   • 20 years (extension),
   • 30 years (renewal),
     with a maximum cumulative tenure of 80 years , subject to approval.
5. Extensions and renewals are not automatic and must comply with administrative and spatial planning requirements.
6. If the HGB expires without extension:
   • The land right is legally extinguished;
   • The land reverts to the State or original rights holder;
   • The PMA loses all rights over both the land and the buildings.
7. Failure to extend HGB may result in total loss of business assets and investment value .
8. Proper monitoring and timely extension of HGB is a critical legal and strategic obligation for PMA shareholders and management.

INVESTOR-ORIENTED LEGAL NOTE

Key Risks and Protections for Foreign Investors

Key Legal Protections

• HGB grants strong, transferable, mortgageable rights , suitable for:
  • Commercial developments,
  • Industrial projects,
  • Hospitality and mixed-use investments.
• HGB may be:
  • Sold,
  • Assigned,
  • Used as bank collateral,
  • Contributed as capital (inbreng),
    subject to legal compliance.

Key Legal Risks

• HGB is a time-limited right .
• Expiry without extension results in:
  • Automatic termination of land rights;
  • Potential loss of buildings without compensation;
  • Exposure to bank enforcement and investor claims.

Best Practice for Investors

• Conduct land tenure due diligence before acquisition.
• Monitor remaining HGB validity throughout the investment lifecycle.
• Submit extension applications 2–5 years prior to expiry .
• Align land use with zoning and licensing to avoid renewal rejection.

CONCLUSION FOR FOREIGN INVESTORS

HGB is not ownership of land, but it is the strongest and most reliable legal instrument available to foreign investors in Indonesia.
Its value depends entirely on compliance, timing, and proper legal management .