Understanding HGB Title in Bali: A Complete Guide to Building Ownership Rights for Foreigners and Investors

When it comes to owning property in Bali, understanding the different land titles is essential. One of the most commonly discussed titles in Indonesian property law is HGB (Hak Guna Bangunan), or the Right to Build. This title plays a major role for both foreign investors and Indonesian citizens who wish to develop properties on land without holding full ownership of it.

At The Bali Lawyer, we specialize in providing clear legal guidance for property ownership in Indonesia. This article will explain what HGB is, its rights and limitations, how it differs from other land titles such as Hak Milik (SHM) and Hak Pakai, and what you need to know before investing in a property with an HGB title in Bali.

What is HGB in Indonesia?

HGB (Hak Guna Bangunan) translates to Right to Build, a legal title that gives the holder the right to construct and own buildings or structures on land owned by someone else — usually the state or a private individual who holds a Hak Milik (Freehold) title.

The HGB title is a long-term lease right, typically granted for 30 years and extendable for additional periods, allowing the holder to build, occupy, or use the property during that period. Once the term ends, the land and all improvements revert to the landowner unless renewed or extended through proper legal procedures.

This type of title is especially relevant in Bali, where many foreign investors and businesses wish to build villas, resorts, or commercial properties without being able to own land outright due to Indonesian property ownership restrictions.

Who Can Hold an HGB Title?

Unlike Hak Milik (Freehold) land, which can only be owned by Indonesian citizens, HGB titles can be held by:

• Indonesian individuals

• Indonesian legal entities, including local companies (PT)

• Foreign-owned companies (PT PMA) registered under Indonesian law

This means that foreigners cannot directly own land in Bali, but they can legally control a property through a company structure such as a PT PMA holding an HGB title.

For foreign investors, HGB is the most practical and legally secure method to acquire rights to use and develop land in Bali.

Duration and Renewal of HGB

An HGB title is granted for up to 30 years and can be extended for 20 years, with the possibility of renewal for another 30 years afterward. This gives a potential total of 80 years of legal use if all extensions and renewals are properly managed.

To renew or extend an HGB title, the holder must apply before the initial term expires, ensuring that:

1. The land remains used for the purpose stated in the original HGB deed (e.g., residential, commercial).

2. The holder maintains compliance with Indonesian land regulations.

3. The landowner (if privately held) agrees to the renewal terms.

Failure to renew before expiration could result in the loss of rights, and ownership of the building would revert to the landowner or the state.

Rights Granted by HGB

HGB title holders enjoy a range of legal rights during the validity of the title, including:

• The right to build and own structures on the land.

• The right to lease, mortgage, or transfer the building to another party (with permission).

• The right to use the land for business or residential purposes, depending on the land zoning.

• The right to inherit or sell the HGB right, as long as the transfer follows Indonesian law.

In essence, HGB gives holders a strong and legally recognized position similar to ownership for the duration of the title period.

Obligations of an HGB Holder

Alongside rights, HGB holders have specific legal responsibilities:

• Pay annual land and building taxes (PBB).

• Comply with local land-use and zoning regulations.

• Maintain the property and land according to the purpose stated in the deed.

• Renew the title before the expiration date to avoid forfeiture.

These obligations ensure that the land and property are used responsibly and align with Indonesian law.

HGB vs. SHM (Hak Milik) vs. Hak Pakai

To understand where HGB stands in Indonesia’s land system, it’s important to compare it with other major land titles:

While SHM provides permanent ownership, HGB and Hak Pakai are limited in duration but can be legally renewed. HGB offers more flexibility for commercial activities compared to Hak Pakai, which is more suitable for residential use.

Advantages of Holding an HGB Title in Bali

1. Legal Security for Foreign Investors
   HGB is recognized under Indonesian law and provides a safe, structured way for foreigners to invest in property through a legal entity.

2. Ability to Build and Own Structures
   While foreigners cannot own the land, HGB allows full ownership of buildings during the title’s validity.

3. Suitable for Commercial Use
   HGB is ideal for businesses, hotels, restaurants, and commercial real estate developments.

4. Renewable Rights
   The title can be extended and renewed, ensuring long-term use and investment protection.

5. Mortgage and Transfer Rights
   HGB properties can be mortgaged or transferred, adding flexibility for financing or resale.

How to Obtain an HGB Title in Bali

Acquiring an HGB title involves several legal and administrative steps. Here’s a simplified overview of the process:

1. Determine Land Ownership
   Ensure the land is either state-owned or privately owned with a Hak Milik title and that the land can legally be granted an HGB.

2. Company Formation (If Foreign-Owned)
   For foreign investors, set up a PT PMA (foreign-owned company) registered under Indonesian law. This entity will hold the HGB title.

3. Apply to the National Land Agency (BPN)
   Submit the required documents, including land certificates, zoning information, and company registration documents, to the BPN for approval.

4. Issuance of the HGB Certificate
   Once approved, the HGB title is officially issued, granting the right to build and use the property according to the stated purpose.

The process requires professional legal assistance to ensure compliance and prevent disputes.

Common Uses of HGB Property in Bali

HGB land is commonly used for:

• Resorts, villas, and hotels built by foreign investors.

• Commercial buildings, such as offices, restaurants, and retail spaces.

• Residential developments under company ownership structures.

• Investment properties leased or sold under corporate ownership.

Given Bali’s booming property market, HGB titles play a crucial role in allowing sustainable foreign participation in the island’s development.

Risks and Considerations of HGB Ownership

While HGB offers many advantages, there are key factors to consider:

• Limited Duration – The title is not permanent and must be extended to maintain rights.

• Land Reversion – If the title is not renewed, land and structures revert to the owner or state.

• Regulatory Compliance – Misuse of the land (e.g., commercial use in a residential zone) can result in penalties or revocation.

• Complex Legal Procedures – Proper documentation and renewal processes are essential to avoid legal disputes.

That’s why having an experienced legal team is essential for managing property titles and ensuring compliance with all Indonesian land laws.

How The Bali Lawyer Can Help

At The Bali Lawyer, we provide expert legal support for individuals, investors, and companies dealing with property ownership and land titles in Bali. Our services include:

• Advising on property title options (HGB, Hak Pakai, SHM)

• Setting up PT PMA companies for foreign ownership

• Managing land lease agreements and renewals

• Conducting due diligence on land and title validity

• Handling legal documentation for transfers and extensions

We help you navigate Indonesia’s property laws safely and ensure your investment in Bali remains fully compliant and protected.

The HGB title (Hak Guna Bangunan) is a vital legal instrument for property development and investment in Bali. It offers foreigners and Indonesian entities the right to build and own structures on land, providing flexibility and security under Indonesian law.

While it does not grant full land ownership like Hak Milik (SHM), it is the most practical and legal route for foreigners to invest in Bali’s thriving real estate sector.

Whether you’re building a villa, opening a business, or developing a resort, understanding HGB is key to ensuring your investment stands on solid legal ground.

For professional legal assistance in property ownership, company formation, or land title matters in Bali, contact The Bali Lawyer today. Our experienced legal team is here to help you make informed decisions and secure your property investments in Indonesia.