Understanding property rights in Indonesia: hak milik, hak pakai, HGB and hak sewa for investing in Bali

Buying property in Bali appeals to many French-speaking investors who want to diversify their assets or settle in the tropics. The Indonesian setting, however, imposes specific rules on land ownership and rights of use. The Western model cannot be reproduced here: several types of property rights exist, each with its own conditions, and each one shapes any investment project in Bali. What exactly do hak milik, hak pakai, hak guna bangunan (HGB) and hak sewa (leasehold) cover? What are their usual uses and their limits, and what role does a PT PMA play in these structures? This article aims to clarify those questions and to guide every foreign investor through this complex legal framework.

What are the main property rights recognised in Indonesia?

The Indonesian system distinguishes several forms of rights attached to land or a building. The framework for the terms of HGB and hak pakai is Government Regulation No. 18 of 2021, cited later in this article. Full ownership of the land is not open to foreigners. This framework was designed to protect the local social fabric while allowing investment within set limits.

These are the four main types of land rights to know:

• Hak milik (perpetual right of ownership)
• Hak pakai (right of use)
• Hak guna bangunan (HGB) (right to build on land)
• Hak sewa, or leasehold (long-term right to lease)

Each option has its own features and offers distinct advantages depending on the buyer's profile and nationality.

Hak milik in focus: land ownership reserved for Indonesians

Hak milik is the most complete form of property ownership in Indonesia, equivalent to full ownership. This right, however, remains strictly reserved for Indonesian citizens and for certain entities recognised by local law.

The main features of hak milik are:

• Unlimited duration: it can pass from one generation to the next
• Power to transfer: sale, gift, inheritance or pledge is possible, only between eligible persons
• Free use, apart from the restrictions set by planning legislation

A foreign investor is therefore not allowed to acquire a hak milik directly. A nominee arrangement is not a step in a purchase, nor a recognised way to hold this title. The structure may be unenforceable against third parties. Nullity or loss of the property is not automatic: it depends on the facts and must be confirmed with a lawyer. Other frameworks exist and should be examined according to the project.

What ownership options are there for foreigners in Bali?

For non-Indonesians, the law provides different ways to hold or operate real estate. These arrangements strictly regulate the relationship between foreign investors and land assets in Bali.

Hak pakai: what is specific about this right of use for foreign residents?

Hak pakai is a right of use. The eligibility conditions for a foreigner, whether an individual or a company, are set out in the regulation in force and should be confirmed with a lawyer. It does not give access to hak milik.

On state land or a management right, a fixed-term hak pakai follows the ceilings in Government Regulation No. 18 of 2021: 30 years, then a 20-year extension, then a 30-year renewal. On hak milik land, the initial term is at most 30 years and renewal is by deed. Each stage must be applied for separately. Commercial use is not opened by the title alone. Transfer remains subject to the controls provided for in the regulations. Text of the regulation: PDF of regulation No. 18 of 2021

HGB, or hak guna bangunan: investing through a PT PMA

An HGB is held by a legal entity, not by a foreigner in their own name. A PT PMA can be that legal entity if the activity and the regulation allow it. It does not secure the project by itself and does not, on its own, authorise a tourism operation. It is neither hak milik nor a hak sewa.

Granted for up to 30 years, an HGB on state land may then be extended for up to 20 years, then renewed for up to 30 years, under the same Regulation No. 18 of 2021. These stages do not form a single 80-year title. The right is transferable between eligible legal entities. The company's compliance is checked on an ongoing basis.

Hak sewa (leasehold): long-term lease rights

Hak sewa, often called a leasehold, is a contract entered into with the holder of the land. Its term is the one that is negotiated and written down. It is not a statutory average of 20 to 50 years. Renewal is negotiated. It is not already secured.

This contract does not confer ownership of the land. It gives the use provided for during its term. It does not stand in place of a tourism operating licence. Its scope depends on how it is drafted, on its registration, and on the framework that applies to the project.

A comparison of the different property rights in Bali

How do you choose the best structure for your investor profile? Here is a summary table for comparing the main features of each option.

Each solution has its strengths and constraints. A private individual will often favour hak pakai, while a hotel operator will opt for a PT PMA with an HGB in order to secure the investment.

Support from experts in the Balinese market is essential in order to avoid any risk of incompatibility with Indonesian regulations, which change regularly.

FAQ: answers to common questions on property rights in Indonesia

Can a foreigner buy a villa in Bali?

Buying directly under hak milik is not available to non-Indonesians. The most common solutions are hak pakai or a long-term lease (hak sewa, leasehold) signed with the owner.

Some investors choose the PT PMA route in order to obtain an HGB and carry out commercial operations in the Balinese market.

Does a PT PMA guarantee complete security when buying property in Bali?

Setting up a PT PMA gives access to certain rights, such as hak guna bangunan, but it requires close monitoring of the regulations. Tax obligations and compliance with local shareholding quotas call for constant attention if the structure is to last.

An immediate purchase does not mean a perpetual right: only careful management of renewals, and compliance with legal changes, will consolidate a property investment in Bali.

What checks should be made before any property investment in Bali?

Before any signature, it is advisable to check:

• The authenticity of the seller's land title
• Whether the right on offer matches your status (individual or company, foreigner or resident)
• The tax position of the property and the absence of any ongoing dispute
• Registration of the contract with the competent authorities

A full legal audit carried out by a notary specialised in Indonesian law is an essential precaution if unpleasant surprises are to be avoided. This step also helps avoid confusion between leasehold and freehold.

What is the outlook for land ownership rights in Bali?

The Indonesian government regularly adapts its legislation to meet economic challenges, while preserving national control over land. Investing in Bali therefore requires staying informed about regulatory changes and adjusting one's asset strategy accordingly.

With that in mind, following the news and emerging practice makes it possible to identify lawful opportunities, and even to anticipate possible future openings in the framework for foreign ownership.