Hak Guna Bangunan (HGB), or the Right to Build, is a land title governed primarily by the Basic Agrarian Law (Law No. 5 of 1960, hereafter “UUPA”) and further detailed in Government Regulation No. 18 of 2021 concerning Right to Manage, Land Rights, Flat Units, and Land Registration. Article 35, Paragraph (1) of the UUPA defines HGB as:

“Hak untuk mendirikan dan mempunyai bangunan-bangunan atas tanah yang bukan miliknya sendiri, dengan jangka waktu paling lama 30 tahun.” (The right to establish and possess buildings on land that is not one’s own, for a maximum period of 30 years.)

The eligibility to hold HGB is strictly limited by Article 36, Paragraph (1) of the UUPA and Article 34, Paragraph (1) of Government Regulation No. 18 of 2021. The authorized subjects are:

  1. Indonesian citizens (Warga Negara Indonesia).
  2. Legal entities established under Indonesian law and domiciled in Indonesia (Badan hukum yang didirikan menurut hukum Indonesia dan berkedudukan di Indonesia).

If a holder no longer meets these criteria—for instance, an Indonesian citizen losing their citizenship or a legal entity dissolving—they are required to release or transfer the HGB to an eligible party within one year. Failure to do so results in the right being void by law, as stipulated in Article 36, Paragraph (2) of the UUPA.

Objects and Origins of HGB

HGB can be granted over three categories of land as defined in Article 35 of Government Regulation No. 18 of 2021:

  1. State Land (Tanah Negara): Granted by a decision from the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency (BPN).
  2. Right to Manage Land (Tanah Hak Pengelolaan / HPL): Granted by a ministerial decision based on the approval of the HPL holder.
  3. Right of Ownership Land (Tanah Hak Milik): Created through a notarized agreement between the land owner and the HGB seeker, which must be registered at the local Land Office (Kantor Pertanahan).

Duration, Extension, and Renewal

The temporal framework for HGB was significantly clarified by the Job Creation Law (Law No. 11 of 2020) and its implementing regulation, Government Regulation No. 18 of 2021. Under Article 37, the durations are categorized as follows:

  • Initial Term: Maximum 30 years.
  • Extension: Maximum 20 years.
  • Renewal: Maximum 30 years.

For HGB on State Land and HPL land, the extension and renewal can be processed simultaneously after the building has been utilized according to the purpose of the grant. Article 40 of Government Regulation No. 18 of 2021 specifies that applications for extension must be submitted no later than two years after the initial term expires, though administrative practices typically encourage filing prior to expiration to ensure continuity.

For HGB over Hak Milik land, the maximum duration is 30 years. It may be renewed by a registered agreement between the HGB holder and the Hak Milik owner, but it does not follow the automatic 20-year extension/30-year renewal cycle applicable to State Land.

Rights and Obligations of the Holder

According to Article 38 of Government Regulation No. 18 of 2021, an HGB holder is entitled to:

  1. Use and utilize the land to establish and possess buildings.
  2. Transfer the right to another party during the term of the grant.
  3. Encumber the right with a Mortgage (Hak Tanggungan).

Conversely, Article 39 mandates that the holder must:

  1. Pay the state revenue (BPHTB and non-tax state revenue/PNBP) or the compensation agreed upon with the landowner.
  2. Use the land in accordance with its intended purpose and spatial planning regulations (Rencana Tata Ruang).
  3. Maintain the land and the environment, including the preservation of land fertility and prevention of damage.
  4. Return the land to the State, the HPL holder, or the Hak Milik owner upon the expiration of the right.

Encumbrance and Transfer

HGB is a transferable asset. Under Article 39 of the UUPA, HGB can be transferred through sale, exchange, capital participation (inbreng), gift, or inheritance. Furthermore, HGB is a valid object of a Mortgage (Hak Tanggungan) as regulated by Law No. 4 of 1996. This allows HGB holders to use the land title as collateral for bank financing. The mortgage must be registered at the Land Office to be legally binding and to grant the creditor a preferred position.

Termination of HGB

The Right to Build terminates due to the following conditions specified in Article 46 of Government Regulation No. 18 of 2021:

  1. Expiration of the term as stipulated in the grant or agreement.
  2. Cancellation of the right by the Minister before the term expires due to non-compliance with obligations or legal defects in the granting process.
  3. Voluntary relinquishment by the holder.
  4. Revocation for public interest (governed by separate land acquisition laws).
  5. Abandonment of the land (Tanah Terlantar).
  6. Destruction of the land (e.g., due to natural disasters).
  7. The holder no longer meets the legal subject requirements.

Upon termination on State Land, the land reverts to the State. If the HGB was on HPL land, it reverts to the HPL holder. If it was on Hak Milik land, the land returns to the original owner. Any buildings remaining on the land after the HGB expires generally become the property of the landowner unless otherwise specified in the original agreement (Article 48, PP 18/2021).

Conversion and Changes in Status

While Hak Milik (Right of Ownership) is the strongest title, it is restricted to Indonesian individuals. Consequently, when an Indonesian citizen sells a property to an Indonesian legal entity, the Hak Milik must be “downgraded” or converted to HGB, as legal entities cannot hold Hak Milik. This process is regulated by Minister of Agrarian Affairs/Head of BPN Regulation No. 18 of 2021 regarding Procedures for Establishing Land Rights.

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