In brief

President Joko Widodo enacted Law No. 11 of 2020 on Job Creation ("Omnibus Law") on 2 November 2020, which took effect on the same day.

Clients may see our remarks on the real estate sector client alert of the Omnibus Law here.

Although there are numerous government regulations issued in the field of real estate, this client alert covers the following new government regulations:

  • Government Regulation No. 18 of 2021 on Right to Manage, Right over Land, Strata Titles and Land Registration issued on 2 February 2021 (Hak Pengelolaan, Hak atas Tanah, Satuan Rumah Susun dan Pendaftaran Tanah) ("GR 18/21").
  • Government Regulation No. 20 of 2021 on the Implementing Regulation of Control of Abandoned Area and Land issued on 2 February 2021 (Penertiban Kawasan dan Tanah Terlantar) ("GR 20/21").

Both GR 18/21 and GR 20/21 are effective as of 2 February 2021.


Contents

  1. New Provisions Revoking GR 40/96 (Land Rights)
    1. Right to Use
  2. Changes to Land Registration
    1. Affirmation on the Use of Electronic Documents
  3. Changes to GR 103/15 (Foreigners to Own Strata Titles)
    1. Right of Foreigners to Own a Right to Own Strata Title of an Apartment
    2. Strata Title on Top of a Right to Build land title
    3. Ownership Limit and Time Period
  4. Land Titles Over Underground and Above Ground Space
    1. Object of Land Titles
    2. Issuance of Land Titles
    3. Interference of Land Titles
  5. Affirmation of the Right to Manage
    1. Object of Right to Manage Land Titles
    2. Subject of Right to Manage Land Titles
  6. New Government Regulation on Abandoned Land
    1. Introduction of Abandoned Area
    2. Further Regulation on Abandoned Area and Abandoned Land

These Implementing Government Regulations amend a number of existing government regulations, including Government Regulation No. 24 of 1997 on Land Registration ("GR 24/97") and Government Regulation No. 11 of 2010 on Control and Utilization of Abandoned Land ("GR 11/10"). It also revokes Government Regulation No. 40 of 1996 on Right to Cultivate, Right to Build and Right to Use ("GR 40/96") and Government Regulation No. 103 of 2015 on Ownership of Residential Houses by Foreigners Domiciled in Indonesia ("GR 103/15") entirely.

New Provisions Revoking GR 40/96 (Land Rights)

GR 18/21 sets out new regulations on, among other things, Right to Build (Hak Guna Bangunan) and Right to Use (Hak Pakai) in Indonesia.

Right to Use

GR 18/21 divides Right to Use into Right to Use land title for a certain period of time and Right to Use land title for an unspecified period of time.

  • Right to Use land title for a certain period of time can be given to Indonesian citizens, legal entities established under Indonesian laws and domiciled in Indonesia, foreigners domiciled in Indonesia and foreign legal entities with representatives in Indonesia. This Right to Use land title can be granted over state land, Right to Own (Hak Milik) land title or Right to Manage land title.
  • The Right to Use land title for an unspecified period of time can be given to central government agencies, regional governments, local governments, religious and social institutions and representatives of foreign countries and representatives of international agencies. This Right to Use land title can be granted over state land or Right to Manage land title.

Under GR 40/96, Right to Use land title over state land or over Right to Manage land title is granted for a maximum of 25 years and can be extended by 20 years or another period of time as long as the land continues to be used for a specific purpose. Right to Manage title over Right to Own land can be granted only for a maximum of 25 years and cannot be extended.

On the other hand, GR 18/21 stipulates a Right to Use land title can be granted for a maximum of 30 years, which can be extended by 20 years. After the term of the extension expires, the Right to Use land title can be renewed for a maximum of 30 years.

Priority for Ex-Land Title Holder

After the period of grant, extension or renewal ends, the minister of Agrarian and Spatial Planning has the authority to reorganize the utilization and ownership of the land. Ex-holders of Right to Build, Right to Use and Right to Cultivate land titles have a priority to utilize the land if the ex-land titleholder is still eligible to own and utilize the land.

Extension and Renewal of Land Titles

Based on GR 40/96, the application for extension or renewal of land title must be filed at the latest two years before the expiration date of the land title.

GR 18/21 amends the provisions in relation to the extension and renewal of the land titles (i.e., Right to Cultivate, Right to Build and Right to Use). Applications for extension of Right to Build and Right to Use can be submitted after the land has been utilized in accordance with the purpose or before the expiration date of the land title. 

Meanwhile, the application for extension of a Right to Cultivate can be submitted after the business carried out on the land is effective.

As for the renewal of land titles, GR 18/21 states that applications for renewal of Right to Cultivate, Right to Build and Right to Use can be submitted at the latest two years after the expiration date of the land title.

GR 18/21 also specifies that the application for extension and renewal of Right to Manage (Hak Pengelolaan) land title granted over Right to Cultivate and Right to Build can be submitted after the land has been utilized in accordance with the purpose. To prove the utilization of this type of land title, the relevant parties can provide the right to cultivate land certificate and the valid plantation business license from the practical stand point.

In the context of a land transaction, it is advisable adding a specific undertaking in the land sale and purchase agreement in order to protect the buyer's interests on the land utilization.

Changes to Land Registration

Affirmation on the Use of Electronic Documents

GR 18/21 affirms that electronic documents can be used for land certificates, land notarial deeds, land registration and encumbrance. Previously, the use of electronic documents as valid evidence was excluded for authentic deeds made by public officials (i.e., land notaries).

This approach may be beneficial for clients to (i) put security over the land (i.e., Hak Tanggungan) and (ii) close land sale and purchase transactions sooner.

With GR 18/21, all land services will be gradually implemented electronically as it adapts the land registration system in GR 24/97, which implements an electronic system with an output of electronic documents. Clients may read our previous client alert on the electronic land registration and electronic land certificates here.

Changes to GR 103/15 (Foreigners to Own Strata Titles)

Right of Foreigners to Own a Right to Own Strata Title of an Apartment

GR 18/21 allows (i) foreign citizens with the relevant permit, (ii) foreign legal entities with a representative office in Indonesia, (iii) representatives of foreign countries and (iv) international institutions to own strata title right of ownership of apartment units or SHMSRS - sertifikat hak milik atas satuan rumah susun.

Strata Title on Top of a Right to Build land title

Under GR 103/15, foreigners (with stay permits) were only able to own land under Right to Use land title and strata title right to use apartment units or SHPSRS. Sertifikat hak pakai atas satuan rumah susun or SHPSRS is an ownership of strata title on top of common land with a Right to Use (Hak Pakai) title where the apartments were constructed).

With GR 18/21, foreigners with stay permits can also own strata title right of ownership of apartment units or SHMSRS - sertifikat hak milik atas satuan rumah susun. SHMSRS is ownership of strata title on top of a Right to Build title of the common land where the apartments are constructed. Foreigners can also now own Right to Use land title given on top of Right to Manage land title.

The strata title on top of a Right to Build or Right to Use (SHMSRS) can only be owned by foreigners if the strata titles are built in (i) specific economic zones, (ii) free trade and free port zones, (iii) industrial zones and (iv) other economic zones.

Foreigners can be granted the strata title on top of a Right to Build or SHMSRS and strata title right to use apartment units or SHPSRS.

Ownership Limit and Time Period

Ownership of residential housing for foreigners is granted with limitations on (i) price (a minimum price applies), (ii) land area, (iii) number of land parcels or strata titles and (iv) its designation for residential purposes.

A ministry of Agrarian and Spatial Planning regulation will be issued to further regulate this matter.

Land Titles Over Underground and Above Ground Space

Object of Land Titles

GR 18/21 introduces vertical land development in the form of underground and above ground space. The underlying land title, the land title over underground space and land title over above ground space can now be owned by separate entities.

Land titles in the form of Right to Build (Hak Guna Bangunan), Right to Use (Hak Pakai) and Right to Manage (Hak Pengelolaan) can now be granted over underground and above ground space.

The limit of land ownership will be given according to the depth of use (batas kedalaman pemanfaatan), floor ratio (koefisien dasar bangunan), plot ratio (koefisien lantai bangunan), and spatial plan of the relevant development based on the applicable laws. The limit for depth of use is 30 meters from the ground level or based on a spatial plan.

GR 18/21 differentiates between shallow underground space and deep underground space. Shallow underground space is underground space down to a certain limited depth (i.e., up to 30 meters from the ground level), while deep underground space is underground space with a separate structure and/or function from the land rights holder. 

Under and above ground space with a separate structure and/or function from that of the underlying land title will be directly controlled by the State. In the event that there is potential exploitation of oil, gas, mineral or coal resources underground, land title over underground space cannot be granted.

Issuance of Land Titles

Land titles given to under and above ground space can only be granted after obtaining Suitability of Space Utilization Activities (Kesesuaian Kegiatan Pemanfaatan Ruang) which will be issued by the minister.

Issuance of land titles over under and above ground space will be in the form of a land certificate and the land titles will be registered at the land office.

Interference of Land Titles

Above Ground Space

If the utilization of above ground space interferes with the public interests, approval from the central or local government is required. If it interferes with the interests of the holder of the underlying land title, approval from the holder of the underlying land title is required. Aside from approval, compensation is also required for any interference of the holder of the underlying land title.

Underground Space

For shallow underground space, if the utilization interferes with the public interest or the holder of the underlying land title, approval from the holder of the underlying land title is required. Compensation to the holder of the underlying land title is also required for any interference.

Affirmation of the Right to Manage

The previous implementing regulations did not regulate Right to Manage (Hak Pengelolaan) in detail and only regulated the procedures for obtaining Right to Manage land title.

Object of Right to Manage Land Titles

Right to Manage land title can be granted over state land and customary land (tanah ulayat). This includes abandoned land and land resulting from reclamation. Other land titles in the form of Right to Build (Hak Guna Bangunan), Right to Use (Hak Pakai) and Right to Cultivate (Hak Guna Usaha) can be granted on top of Right to Manage title.

Land titles granted on top of Right to Manage title can be granted to either the holder of Right to Manage or a third party through a land use agreement. Third parties using land on top of Right to Manage land title will be obliged to pay a mandatory annual rate that will be based on certain characteristics of the designation or utilization.

Right to Manage land title will be granted in the form of a minister's decree. Issuance of Right to Manage land title will be in the form of a land certificate and the title will be registered at the land office.

Subject of Right to Manage Land Titles

Previously, the Right to Manage land title was only granted to state-owned companies and government agencies. GR 18/21 broadens the potential holders of Right to Manage titles to also include legal entities appointed by the central government.

New Government Regulation on Abandoned Land

Introduction of Abandoned Area

GR 20/21 introduces the term of abandoned area and differentiates between the definitions of abandoned area and abandoned land. Abandoned area was never mentioned in GR 11/10.

  • Abandoned Area is a non-forest area over which land rights have not been granted but a license, concession, or business permit has already been granted to the owner, and which is deliberately not cultivated or utilized.

The objects of abandoned areas are mining areas, plantation areas, industrial areas, tourism areas, large-scale/integrated housing/settlement areas and other areas the exploitation and use of which are based on a license, concession, or business permit related to land and space utilization.

  • Abandoned Land is land under land right title, Right to Manage land title and land acquired on the basis of land control, which is deliberately not cultivated, utilized, and/or maintained.

Abandoned land is land under Right to Own, Right to Build, Right to Cultivate, Right to Use and Right to Manage, and land acquired on the basis of land control.

Further Regulation on Abandoned Area and Abandoned Land

GR 20/21 regulates several provisions that were not regulated under GR 11/10.

Requirement to Report

GR 20/21 requires the holder of a license, concession or business permit to cultivate, utilize, and/or maintain the controlled area and periodically report it to the head of agency (e.g., head of state institutions, ministries, non-ministerial government agencies that issue the license, concession, or business permit). 

GR 20/21 also requires the holder of land rights, land under Right to Manage and land acquired on the basis of land control to cultivate, utilize and/or maintain the controlled area and periodically report it to the land office.

Affirmation on Objects of Abandoned Land

GR 20/21 regulates that land rights can be deemed as abandoned land in the following circumstances.

  • If the land under Right to Own is not cultivated, utilized, and/or maintained until (i) the land is controlled by the community and becomes part of a village, (ii) the land is controlled by other parties continuously for 20 years without a legal relationship with the right holder or (iii) the social function of the land is not fulfilled. Social function is cultivation, utilization, and/or maintenance of the land for the welfare of the community and the environment.
  • If lands under Right to Build, Right to Cultivate, Right to Use, and Right to Manage and lands acquired on the basis of land control are deliberately not cultivated, utilized, and/or maintained within two years after the issuance date.

Affirmation on Stages

GR 20/21 introduces inventory containing a list of plots of land indicated as abandoned area or land. For abandoned land, the inventory will be implemented by the land office, and for abandoned area, it will be implemented by the head of agency (e.g., head of state institutions, ministries).

GR 20/21 also affirms the three stages in determining abandoned areas and abandoned land. First, the areas or lands indicated as abandoned are evaluated. Second, the status of the abandoned area or land is notified to the owner of the land or the holder of a license, concession, or business permit for the area or land. Third, the land or area is determined as abandoned.

Areas determined as abandoned area can either be transferred to another party or designated as a Land Bank asset. Land determined as abandoned land will become an asset of either the Land Bank or directly controlled by the state.