Hak Guna Bangunan (HGB)

HGB as the Foundation of Resort Land Tenure

For any foreign-associated entity developing a resort in Indonesia, the question of land tenure — who owns what right over the land, for how long, and under what conditions — is not a background legal detail but a central element of the investment thesis. Equity investors model returns over a defined hold period; lenders require security over a bankable land right; operators require tenure certainty sufficient to justify investment in brand establishment and guest acquisition. HGB provides all three of these requirements within the existing Indonesian legal framework.

The appropriate starting point is to understand what HGB is and is not. HGB — Hak Guna Bangunan, or Right to Build — is a registered property right under the Indonesian Basic Agrarian Law (Law 5/1960) and its implementing regulations, most recently consolidated in Government Regulation 18/2021 . It is not a lease in the sense used in common law systems: it is a right that is registered on the national land certificate, enforceable against third parties (erga omnes), and capable of serving as mortgage security (jaminan hak tanggungan). The holder of an HGB certificate has a right to the land that is substantially more robust than a contractual lease, even though it is time-limited in a way that freehold Hak Milik is not.

The 30-20-30 Term Structure

Under Government Regulation 18/2021, the HGB term operates as follows:

Initial term: 30 years. The HGB is registered at BPN with a 30-year term from the date of certificate issuance. This is the primary planning horizon for the resort development programme: the initial 30-year period covers the construction period, the initial operating period, and the typical institutional investment hold period of 7 to 15 years with room for subsequent resale to a long-term holder.

First extension: 20 years. Before the initial 30-year term expires, the HGB holder may apply to BPN for an extension of 20 years. This application must be made while the HGB is still current — an expired HGB cannot be extended. The extension is granted when the holder can demonstrate that the land is being used productively for the registered purpose, that all land taxes (PBB) are current, and that the applicable extension fee has been paid . A properly managed resort holding HGB will have no difficulty satisfying these conditions.

Second renewal: 30 years. Upon expiry of the 20-year extension, the holder may apply for a further renewal of the HGB for 30 years. This renewal is the last in the cycle contemplated by the current regulation; after the second renewal expires, the land right reverts to the State unless additional regulatory provisions create a further extension pathway. The practical implication of the renewal structure is that an HGB registered today provides a theoretical tenure horizon of 80 years — a timeframe within which resort investment returns, financing amortisation, and asset life cycle depreciation all comfortably resolve.

Regulatory change risk. The 30-20-30 structure is established by Government Regulation, not constitutional provision, and is therefore subject to change by executive action. Indonesian land tenure law has been amended several times since 1960, generally in the direction of strengthening rather than reducing existing rights. Institutional investors modelling over a 30-year hold period should treat regulatory change as a background risk rather than a material probability, but should track legal developments in Indonesian land tenure policy through their legal counsel.

HGB for PMA: Eligibility and Restrictions

A PT PMA is eligible to hold HGB as a matter of Indonesian law. The Agrarian Law framework and Government Regulation 18/2021 specify that Indonesian legal entities — including those with foreign shareholding — may hold HGB for purposes consistent with their registered business activity. For a PT PMA registered for resort development and hospitality operations, HGB held over the resort land is the expected and standard title structure.

The restriction on PMA land rights is that the PMA cannot hold Hak Milik (freehold). Hak Milik is reserved for Indonesian citizens and, in limited circumstances, certain Indonesian legal entities established for specific purposes. This restriction means that when a PMA acquires land currently registered as Hak Milik — the most common situation in Sidemen, where agricultural parcels are typically held by Balinese landowners as Hak Milik — the acquisition involves a conversion of the title from Hak Milik to HGB as part of the transaction.

Conversion from Hak Milik

The conversion process is administratively routine and follows a standard pathway:

The Hak Milik holder and the PT PMA, through their appointed PPAT (Land Deed Official/Notary), execute a deed of land right release (Surat Pelepasan Hak) by the Hak Milik holder in favour of the State, simultaneous with an application to BPN for the issuance of a new HGB certificate over the same parcel in the name of the PT PMA. The transaction documentation includes the deed of release, the existing Hak Milik certificate, evidence of the PT PMA’s legal standing (NIB, deed of establishment, latest ratification), and payment of the applicable government fees and BPHTB (land acquisition tax at 5 percent of the transaction value).

BPN processes the conversion and issues the new HGB certificate in the name of the PT PMA. The processing time at the Karangasem BPN office is typically 3 to 9 months from complete document submission . The certificate is the definitive document of title and should be held in secure custody — replacement of a lost or damaged HGB certificate requires a separate process at BPN.

HGB as Collateral Security

For resort developments using project finance or construction lending, HGB is the primary collateral instrument. Indonesian commercial banks and, through their Indonesian security trustees, international lenders accept HGB as security through registration of a Hak Tanggungan (mortgage) at BPN. The mortgage is registered at the same BPN office as the underlying HGB certificate, against the certificate itself, and is reflected in the BPN land registry record.

The practical implication for finance structuring is that HGB land held by the PT PMA can support a construction loan secured by the land and the building right, which then converts to a term loan secured by the operational resort and the HGB. This security structure is well-understood by Indonesian lenders and is used as a matter of course in resort and commercial real estate financing in Bali.

Comparison: HGB, Hak Pakai, and Hak Sewa

HGB vs Hak Pakai. For a PT PMA operating a commercial resort, HGB is the correct instrument. Hak Pakai is available to Indonesian citizens and to foreign individuals (not companies) as a residential right — it is the instrument through which, for example, a foreign retiree might hold a registered property right in a villa unit under a Hak Pakai structure layered above the PMA’s HGB. Hak Pakai does not provide collateral security as robustly as HGB and is not the appropriate instrument for a PMA development entity.

HGB vs Hak Sewa. Hak Sewa is a contractual lease, not a registered property right. It provides the lessee with a right to use land owned by another party for an agreed term, but it does not appear on the BPN title register, cannot be registered as collateral security in the standard Hak Tanggungan framework, and provides weaker protection against third-party claims than HGB. Hak Sewa structures are used in smaller-scale development contexts — a boutique villa operator leasing land from a Balinese landowner for 25 years, for example — but are not appropriate as the primary land tenure structure for an institutional-scale resort development requiring project finance.