Indonesia is a very unique tropical country. There are thousands of islands that each has its own beauty. Bali is if not the most popular, then one of the most popular island in the country. The culture, mountain, beaches, temple, land type and its people, have become the centre of attraction for millions of people coming from all over the world. Those have successfully appealed investors to acquire the land in Bali to start the business. Resorts, hotels, villas, and restaurants are the most common one.
However, Indonesia has a very unique land types that you may not even know. New investors have to be able differentiate & understand the function of each land type in order to avoid and minimize the risk of “not having a good investment” in Bali or Indonesia, generally.
Geographical Condition In Indonesia
As a tropical country, Indonesia is one of most beautiful country you can ever visit. In trade of that, the country is also placed in the ring of fire that can trigger the natural disaster more often than other subtropical country. Acquiring land / property in Indonesia, is not as easy as picking the fruits. You have to calculate the natural disaster causes, such as the volcano mountains & beaches.
Making business (resorts, hotel, villas, & restaurant) should accommodate the adjustment of the building construction to be resilient from the natural disaster. Knowing the precise information about the local geographical condition is very important in order to move the business forward.
Is the place frequently getting the flood from the river nearby? How many often the mountain get erupted? Those questions are the common one. This is where you find the property agent can be very helpful. The basic knowledge of local smart should accommodate these information. So then, you can get assistant from your selected property agent about which location is the best for particular businesses that you want to build.
Land Type (Indonesia)
Based on Badan Pertanahan Nasional (BPN), Indonesian Government Institution that regulates the land in the country, there are several land types that you need to understand. Those land types will be distinguished based on ownership, utility, and registration status.
Why is it important to understand the difference of land types?
It is needed to minimize the risk of unfunctional land. Besides, it will waste the effort since you cannot optimize the land you acquired. Business wise, it is not profitable to have land that you cannot utilize and get the benefits from. Rather than that, even though your land cannot fully function or not even having a capital gain from that, you still have to pay annual tax for the property. Or even the worst, you might end up buying land that the government don’t even give the permission to or under the dispute. This is where the presence of property agent become the life-saver.
However, understanding the different land types is the skill you need to have, if you are the new investor in property / real estate business.
Let’s dive in!
Based On Ownership
- Hak Milik (Right of Ownership)
This land type allows you to own the land as a whole. You can utilize the land to build the building above it. You have 100% of ownership. In this phase, you might recognized this as a freehold. So then, there are no time limitation of ownership. You can passed it by to your children.
- Hak Guna Usaha (Cultivation Rights)
This land type allows you to run the registered business on the land. In example, you want to build a commercial villa. You need to pay business taxes. Also, you should consider the time limitation. Because you don’t fully own the land. It depends on the contract and the registration to the government side of view.
- Hak Guna Bangunan (Building Rights)
This land type allows you to build a building on the land. However, you are not allowed to use it as a commercial building. This land type has time limitation. You need and require to renew the permission periodically, based on the timeframe on the contract. If you want buy apartment, you might see HGB often.
- Hak Pakai (Usage Rights)
This land type allows you to use / live in the property. However, you cannot make changes in term of the building itself, including the color of the building. Usually, this type of rights used in the “protected” building, or historical building. Time limitation also needs to be considered.
- Hak Pengelolaan (Management Rights)
In real estate business, this type of rights is very common. You might often see this in hotel & resort industry. The owner of the property is Mr. “A”, but the hotel management is different party. It also has time limitation, and it can be extended if needed.
- Tanah Wakaf (Waqf Land)
More than 200 million people in Indonesia is Muslim a.k.a Islam believer. Waqf Land is basically the Islamic value that migrate property from the private ownership to the community ownership for public usage. So, be careful of this land type. It can lead you to the dispute between you and the community. You need to remember that Indonesia is a communal country. This has no time limitation. Once the waqf land has been registered,
- Tanah Adat (Customary Land)
This land type is owned by community. So, no one has ever privately claimed the land. Usually, regions or places that have strong culture like Bali, there will be so many customary lands. Mostly, it opens for public and be used as holy place for the community. This has no time limitation. As long as, the culture still remain the same, then the land will stand still. As investors, you should be sensitive enough to respect the customary land. Because, there were a lot of projects have failed because of the dispute between the community and the disrespectful investors.
Based On Utility
Beside ownership, BPN also divides the land type based on utility. So, investors can understand which places can be used for which businesses. It is because not all lands can be suitable for all type of usage. The list below will represent the utility that BPN has been regulated:
- Forest (Hutan)
- Others (Lain-lain)
- Field (Padang)
- Land waters (Perairan darat)
- Seasonal Dry Agricultural Land (Pertanian Tanah Kering Semusim)
- Industrial land (Tanah Industri)
- Land of Services (Tanah Jasa)
- Garden Land (Tanah Kebun)
- Non-urban Land (Tanah non-urban)
- Village Land (Tanah Perkampungan)
- Rice Fields (Tanah Persawahan)
- Mining Land (Tanah Pertambangan)
- Residential Land (Tanah Perumahan)
- Company Land (Tanah Perusahaan)
- Open Ground (Tanah Terbuka)
- No Building Land (Tanah Tidak Ada Bangunan)
- Empty (Kosong)
From investor point of view, this utility-based land type is very important to ensure that the business and the land can support each other. It will not synergize if you have a plan to build a business without supporting area. Besides, it will be harder to request business permission on the area that is not intended for. Mostly, residential developers have issue with this. The land that they use is not the residential land. So, legally, they do not have rights to build residential building on the land. As result, a lot of customers feel cheated. This pain can be reduced if you collaborate with property agent to ensure the legality of the property, right?
Based On Registration Status
The last thing you should know before buying land in Indonesia, you need to check whether the land has been registered or not. This is important in order to validate the legality of the land. Scammers can use this and make a self-proclaim that the land is theirs. However, they don’t even register it to the authorities. The ownership of the land is vague. If you want to put such a big amount of money, you don’t want to face these kind of situation, right?
See? Finding property is not that easy. You need to know the different land types within Indonesia to ensure that your investment is not wasted. No worries! If you have difficulties ensuring the legality and stuff, Furo Property Bali will always one call away! Contact us, Now!