Freehold Title (SHM or Sertifikat Milik, Article 20-27)
Freehold title is the strongest and fullest title that can be obtained. However such rights are not absolute as the UUPA (Undang Undang Pokok Agraria) recognises the "social functions" of land, however infers a right of "peaceful occupation" of land by the titleholder. Freehold title may only be held by Indonesian citizens, or by Indonesian legal entities that are stipulated by government. It is therefore impossible for a foreign individual to have direct freehold ownership of land in Indonesia.
All Indonesian companies, no matter if they are PMA (foreign investment companies) or not, cannot possess freehold title over land and are compelled to use other titles such as Hak Guna Usaha and Hak Guna Bangunan.
According to the UUPA, land that is titled Hak Milik can be used as security for debt. However, foreign companies and individuals must take care in accepting freehold land as security, and should consult with competent advisors beforehand.
Land Cultivation Rights Title (HGU or Hak Guna Usaha, Article 28-34)
The Land Cultivation Title (HGU) gives the right to use a state-owned land for the purpose of agriculture, in particular plantations, fishing or cattle-raising. Such title is granted for periods of 25 or 35 years, and may be extended for another 25 years if the land is deemed to be managed and utilised properly. This title of right is given to Indonesian citizens or legal entities (including PMA companies). A HGU title can be used as collateral, or, with the approval of the government, transferred to a third party.
Building Rights Title (HGB or Hak Guna Bangunan, Article 35-40)
A Building Rights Title (HGB) gives the right to construct and own buildings on a piece of land that someone else owns. Such title is granted for a maximum period of 30 years, and can be extended for another 20 years. HGB title is granted to Indonesian citizens or legal entities (including PMA companies), and can also be used as collateral or transferred to a third party.
Right to Use Title (HP or Hak Pakai, Article 41-43)
The Right of Use on Land (HP) is the right to use land for any purpose for a period of 25 years, and can be extended for another 20 years. This type of title should not be confused with a lease contract or sharecropping agreement.
Foreign residents of Indonesia and Indonesian legal entities (including PMA companies) may hold HP titles. HP title has no collateral value to the owners and is not transferable.
SHM is relevant to rental properties, because as a tenant, one needs to know whether the property one rents belongs to the right owner. Before tenants sign the contract, they need to make sure that the owner has SHM or at least HGB to avoid any possible future problem.