Understanding SHM and HGB in Indonesia: The Key Differences in Property Ownership Explained by The Bali Lawyer
When it comes to property ownership in Indonesia, understanding the legal terms Sertifikat Hak Milik (SHM) and Hak Guna Bangunan (HGB) is essential—especially for those looking to invest or settle in Bali. These certificates define who owns a property, how long ownership lasts, and what rights the holder has. Knowing the difference between SHM and HGB can help avoid legal issues and ensure that your investment is safe and fully compliant with Indonesian law.
At The Bali Lawyer, we specialize in property law, helping locals, expats, and investors navigate the complexities of ownership regulations in Indonesia. In this guide, we’ll explain what an SHM certificate is, how it differs from an HGB title, and which option might be right for you depending on your situation.
What Is SHM (Sertifikat Hak Milik)?
Sertifikat Hak Milik, commonly known as SHM, translates to Certificate of Ownership and represents the highest and most complete form of land ownership in Indonesia. Holders of SHM have full ownership rights over the land, without any time limit.
An SHM gives the owner the exclusive right to possess, use, and transfer the property as they wish. It is considered permanent ownership, recognized under Indonesian law, and applies only to Indonesian citizens.
Main Features of SHM:
Full ownership: The land belongs entirely to the owner.
No time limitation: The ownership is permanent.
Transferable: The owner can sell, gift, or bequeath the land.
Highest legal status: It provides the strongest form of property protection under Indonesian law.
Who Can Hold an SHM?
Only Indonesian citizens can legally hold SHM land titles. Foreigners are not permitted to own land under SHM, even if married to an Indonesian citizen, unless the land is registered as joint marital property under specific legal arrangements.
What Is HGB (Hak Guna Bangunan)?
Hak Guna Bangunan (HGB) translates to Right to Build, and it allows the holder to build and own structures on a piece of land that they do not fully own. This is a lease-based ownership arrangement recognized under Indonesian law and is often used by foreign investors, companies, or developers.
With an HGB title, you have the right to build and use the land for a specific duration, typically 30 years, which can be extended for up to 20 more years or renewed after that period.
Main Features of HGB:
Temporary right: Ownership typically lasts 30 years with the possibility of extension.
Allows construction: The holder may build, own, and use structures on the land.
Renewable: The right can be extended or renewed through legal procedures.
Applicable to companies and foreigners: Foreign entities and legal companies can hold HGB land through proper registration.
Key Differences Between SHM and HGB
Understanding the distinctions between SHM and HGB is crucial before purchasing or leasing property in Bali or anywhere in Indonesia. Below is a breakdown of their major differences:
| Aspect | SHM (Sertifikat Hak Milik) | HGB (Hak Guna Bangunan) |
|---|---|---|
| Ownership Type | Full ownership | Leasehold right to build |
| Eligibility | Only for Indonesian citizens | Foreigners and companies can hold through legal entities |
| Duration | Permanent | 30 years, extendable to 50+ years |
| Transferability | Fully transferable | Transferable during validity period |
| Applicable To | Land only | Land and buildings |
| Legal Strength | Strongest form of ownership | Limited duration and subject to renewal |
| Landowner | The holder of the certificate | The state or a private SHM landowner |
| Example Use | Residential ownership | Commercial or investment projects |
Can Foreigners Own Property in Indonesia?
Foreigners cannot directly own land under SHM titles, as land ownership is reserved for Indonesian nationals. However, foreign nationals still have several legal alternatives to invest in property:
HGB Title: Foreigners can own a building under an HGB certificate through a foreign-owned company (PT PMA).
Lease Agreement (Hak Sewa): Foreigners can lease land from an Indonesian citizen for a specified period, usually up to 25 years.
Right of Use (Hak Pakai): In some cases, foreigners with valid residence permits can hold property under a Hak Pakai title for residential use.
At The Bali Lawyer, we assist clients in determining the safest and most compliant structure for foreign property ownership. Our team ensures all legal documents are accurately drafted and registered under Indonesian law.
How to Convert HGB to SHM
In certain situations, an HGB land title can be converted to SHM. This is possible only if the landholder is an Indonesian citizen and the land meets specific legal and zoning requirements.
The process generally includes:
Verifying land eligibility under zoning laws.
Submitting an application to the local land office (BPN).
Providing ownership documents, identity verification, and proof of land use.
Paying government fees for registration and conversion.
Foreigners, however, cannot convert HGB land to SHM, as SHM titles are exclusively for Indonesian nationals.
Legal Importance of SHM and HGB
Both SHM and HGB play vital roles in Indonesia’s property system, and understanding which one applies to your situation can protect you from future legal complications.
For Indonesian buyers: SHM provides absolute ownership security and is ideal for personal residences or inheritance purposes.
For foreign investors and companies: HGB is the most practical and legally compliant way to own and develop property.
Our experienced team at The Bali Lawyer provides in-depth legal consultations, reviews land titles, and verifies property ownership status before any transaction takes place.
The Process of Verifying a Property Certificate in Indonesia
Before buying or leasing property in Bali, verifying the authenticity of the certificate is essential. Property fraud, fake titles, or unclear ownership status are common issues that can be avoided through professional legal checks.
Our verification process at The Bali Lawyer includes:
Checking with BPN (National Land Agency) to confirm the certificate’s validity.
Reviewing ownership history to ensure no disputes or overlapping claims exist.
Confirming the land’s zoning status (residential, commercial, tourism).
Ensuring no encumbrances such as mortgages or legal restrictions exist.
This thorough verification protects buyers, investors, and developers from potential risks.
Why Understanding SHM and HGB Matters for Property Buyers
Whether you are purchasing a villa in Bali, investing in a resort, or leasing commercial property, knowing the type of certificate attached to the land can make or break your investment.
An SHM title offers peace of mind through complete ownership rights, while an HGB title provides flexibility for long-term use and development opportunities. Misunderstanding the difference could lead to legal disputes, ownership loss, or non-renewable leases.
By partnering with The Bali Lawyer, you gain a trusted advisor with extensive experience in Indonesian property law. We help clients understand the implications of each certificate type, handle documentation, and ensure every transaction complies with national regulations.
How The Bali Lawyer Can Help
At The Bali Lawyer, we specialize in property law, land verification, and ownership documentation. Whether you are an individual buyer, a business, or a foreign investor, we provide professional guidance through every stage of your property transaction.
Our services include:
Legal consultation on SHM, HGB, and Hak Pakai titles.
Land title verification and due diligence.
Drafting and reviewing sale and lease agreements.
Assistance with land registration and ownership transfer.
Guidance for foreign property ownership structures.
We ensure that every step of your investment or purchase process is legally sound, transparent, and secure.
Understanding the difference between SHM (Sertifikat Hak Milik) and HGB (Hak Guna Bangunan) is vital for anyone looking to buy, lease, or develop property in Indonesia. These certificates define the scope of ownership and determine who has the right to possess, use, or transfer land.
For Indonesians, SHM represents full ownership with no expiration. For foreigners or companies, HGB provides a flexible, legal means to develop property without violating local ownership laws.
At The Bali Lawyer, our goal is to help you make informed, legally compliant property decisions. Whether you’re investing in Bali real estate, starting a business, or purchasing a new home, we guide you through every legal aspect to ensure your ownership rights are fully protected.
Contact The Bali Lawyer today to schedule a consultation and get expert legal advice on SHM, HGB, or any property law matter in Indonesia. Your trusted partner for secure property transactions in Bali.