SHM vs HGB in Bali: What Each Land Certificate Gives You
Last reviewed: September 2026
SHM (Hak Milik) is freehold ownership open only to Indonesian citizens. HGB (Hak Guna Bangunan) is a time-limited right to build, available to Indonesian citizens and to Indonesian-incorporated companies, including a PT PMA. The core of the shm vs hgb question is this: SHM never expires and foreigners cannot hold it under any structure. HGB runs in cycles of 30 plus 20 plus 30 years and is the certificate most foreign-owned villa and business land in Bali actually sits under, held through a company rather than an individual.
Table of Contents
- What is SHM in Indonesia
- SHGB certificate: what HGB actually gives you
- SHM vs HGB vs Hak Pakai: side by side
- Land title in Bali for foreigners
- Converting SHM to HGB: the unsettled part
- Real costs on a Bali land transfer
- Checking a land certificate before you buy
- FAQ
What is SHM in Indonesia
SHM stands for Sertifikat Hak Milik, the certificate of freehold ownership under Article 21 of the Basic Agrarian Law (UU No. 5/1960). It is perpetual, inheritable, and mortgageable, and it is the strongest title Indonesian law recognises. It is also closed to foreigners with no exceptions worth relying on. Article 21(3) covers a foreigner who inherits Hak Milik or acquires it through commingled marital property. That person has one year to divest the land to an eligible holder. Miss the deadline and the right lapses automatically, and the land reverts to the state. Dual nationals are treated the same as foreigners here, which surprises a lot of people who assume their Indonesian passport settles the question.
Companies cannot hold SHM either. The narrow exceptions are set by government regulation and cover state banks, agricultural cooperatives, and specific religious and social bodies. No commercial company qualifies, and a PT PMA can never hold Hak Milik, full stop.
SHGB certificate: what HGB actually gives you
An SHGB certificate (Sertifikat Hak Guna Bangunan) gives the holder the right to build and own structures on land they do not own outright. The land underneath can be state land, HPL land, or someone else's Hak Milik. This is the certificate you will see on most PT PMA-owned land in Canggu, Berawa, Pererenan, and increasingly in Umalas and Uluwatu, where villa operations are structured through a company.
The often-quoted "80-year HGB" is misleading. It does not run 80 years from day one. It is granted for an initial 30 years, then an extension of up to 20 years, then a renewal of up to 30 years, with conditions checked at each gate. A general provision that once allowed the full 80 years to be granted up front was struck down by the Constitutional Court in 2008 (Decision No. 21-22/PUU-V/2007). If a listing agent shows you an "80-year HGB" as a single grant, ask which article they are relying on. In our experience in Badung, most cannot answer.
Extension must be applied for once the land is in productive use, and at the latest before the 30-year term expires. Renewal must be applied for within two years after expiry, not before land use resumes, after expiry. Miss that window and the right is gone, no exceptions. At the end of the full cycle the land reverts to state land, and the former holder only gets a discretionary priority to reapply. That is not a renewal right, it is a preference the Badung or Gianyar land office is not obliged to honour.
Where HGB sits over someone else's private Hak Milik rather than state land, the rules are stricter still. The maximum term is 30 years with no statutory extension, and renewal happens through a fresh PPAT deed granted by the freehold owner. Your ability to renew depends entirely on that owner's cooperation decades later. That is a commercial risk you are pricing into the deal, not a legal guarantee.
An HGB holder also has to build on or use the land within two years of grant and cannot abandon it. A holder who stops qualifying, for instance a company that dissolves, has one year to transfer or release the right before it lapses automatically.
SHM vs HGB vs Hak Pakai: side by side
| Feature | SHM (Hak Milik) | HGB (Hak Guna Bangunan) | Hak Pakai |
|---|---|---|---|
| What it is | Freehold ownership | Right to build | Right to use |
| Duration | Perpetual | 30 + 20 + 30 years | Typically 30 + 20 years |
| Foreign individual | No | No | Yes, in own name |
| Indonesian company (PT PMA) | No | Yes | Yes, in some cases |
| Indonesian citizen | Yes | Yes | Yes |
| Inheritable | Yes | Yes, within remaining term | Yes, within remaining term |
| Mortgageable | Yes | Yes | Yes, in most banks |
| Ends how | Does not expire | Reverts to state land | Reverts or must be renewed |
Land title in Bali for foreigners
If you are a foreign individual, SHM and standard HGB are both off the table. Your realistic routes are Hak Pakai (right to use) in your own name, a leasehold contract with the landowner, or a strata title in an eligible development. A leasehold is worth stating plainly: it is a contract, not a land title, and its strength depends entirely on how well the lease deed is drafted and registered. We see leasehold disputes in Canggu and Pererenan almost every month, usually because the original lease was never registered with the Badung land office and the heirs of the landowner later dispute its terms.
If you are setting up a PT PMA to hold land through a company, HGB is the legitimate route for a genuine operating business, whether that is a villa rental operation in Seminyak or a restaurant group in Sanur. One thing to check before you structure around this: Bali closed 64 business classifications to foreign investment companies in May 2026, including owned and leased real estate activities. Confirm your intended business classification (KBLI code) is still open to foreign capital before you commit to a PT PMA structure for property. This is exactly the kind of detail worth checking with a lawyer before incorporation, not after.
Indonesian citizens buying in Badung, Gianyar or Tabanan should generally hold SHM unless there is a specific reason, such as a company purchase, to use HGB instead.
Converting SHM to HGB: the unsettled part
Converting an SHM certificate to HGB is the route usually described when a PT PMA buys land that is currently freehold, since the company cannot hold SHM itself. This is currently the least settled area of Indonesian property law, and anyone who tells you confidently that nothing has changed has probably not read the latest regulation.
Permen ATR/BPN No. 2 of 2025, in force since 21 March 2025, contains a transitional clause stating that the conversion of Hak Milik into HGB or Hak Pakai under the previous Permen 18/2021 procedure is revoked and no longer in force, except for auction purposes. There are at least two competing readings of that clause: either standard conversion outside of auctions is no longer available at all, or only the delegation of authority to approve it has been withdrawn and now sits with the Minister directly. We have not seen this resolved definitively, and the delegation arrangements have shifted at least twice more since the regulation took effect.
Separately, and apparently unaffected by this change, Article 38(3) of PP 18/2021 allows HGB to be created over Hak Milik land through a PPAT deed granted directly by the freehold owner. That is a different legal mechanism from converting the existing certificate, and it may still be usable even if the conversion route is genuinely closed. Do not structure a purchase on the assumption that conversion works as it did two years ago. Verify the current position with a Bali PPAT before any deposit changes hands.
Real costs on a Bali land transfer
| Cost | Who pays | Rate |
|---|---|---|
| Acquisition duty (BPHTB) | Buyer | 5% above the local threshold |
| Final income tax on transfer | Seller | 2.5% of gross transaction value |
| PPAT fee | By agreement | Capped on a descending scale, from 1% down to 0.25% above Rp 2.5 billion |
| Annual land and building tax | Holder | Roughly 0.1% to 0.2% in Denpasar and Badung, confirm locally |
The PPAT fee is a descending scale set by Permen ATR/BPN No. 33/2021, not a flat 1% regardless of price. On an 8 billion rupiah transaction, the gap between the lawful capped fee and a lazily quoted "typical 1%" is around 60 million rupiah. We walk clients through this exact calculation regularly, and it is worth asking your notary for the breakdown in writing before signing anything.
The most expensive mistake we see: buyers who accept a certificate's stated term at face value without checking how much of the HGB cycle is actually used. An HGB with 26 years remaining and one with 4 years remaining can carry the same asking price from an agent, but they are not close to the same asset. Always check the expiry date and remaining term directly at the Badung or Gianyar land office (Kantor Pertanahan) before agreeing a price, not after.
Checking a land certificate before you buy
Most problems we see in Bali land deals are visible on the certificate itself, if someone knows what to look for. Common issues: a term shorter than the buyer was verbally told, an undisclosed mortgage or charge registered against the land, boundaries on paper that do not match the physical site, or a registered holder who is not the person actually signing the sale documents.
Before relying on any SHM or HGB certificate in Bali:
- Verify the registered holder, boundaries, remaining term and any registered charge directly at the Badung or Gianyar BPN land office
- On an HGB certificate, confirm the expiry date and how much of the current cycle has already been used
- Check zoning status and whether the land falls in a green belt or agricultural zone, since this affects building permit eligibility before you ever apply for a PBG
- Get spousal consent in writing where the seller is married, which Indonesian law requires for a valid transfer
- Confirm whether the land is customary (adat) or inherited land, and identify every party whose consent is legally required
All of this is checkable before money changes hands. It is far cheaper to pay for proper property due diligence in Bali than to discover a problem after signing.
FAQ
What is the difference between SHM and HGB?
SHM is perpetual freehold ownership restricted to Indonesian citizens. HGB is a time-limited right to build, running 30 years plus a possible 20-year extension plus a possible 30-year renewal, and it is available to Indonesian citizens and to Indonesian-incorporated companies, including a foreign-owned PT PMA.
Can a foreigner hold SHM or HGB in Bali?
No, not as an individual, in Bali or anywhere in Indonesia. Article 21(1) of the Basic Agrarian Law restricts Hak Milik to Indonesian citizens, and standard HGB is limited to citizens and Indonesian-incorporated legal entities. A foreigner can hold Hak Pakai directly in their own name, or hold land indirectly through HGB granted to their PT PMA.
Does HGB really last 80 years?
No. HGB runs 30 years, then an extension of up to 20 years, then a renewal of up to 30 years, each subject to conditions being met. The general provision that once allowed 80 years to be granted upfront was struck down by Indonesia's Constitutional Court in 2008. Any listing advertising a flat "80-year HGB" grant should be questioned.
What happens when an HGB certificate expires?
The land reverts to state land. The former holder only receives a discretionary priority to reapply for a new grant, subject to eligibility criteria, which is not the same as an automatic right of renewal. Renewal must be formally applied for within two years after the expiry date, or the priority is lost.
Can SHM be converted to HGB for a company purchase in Bali?
This is currently uncertain. Permen ATR/BPN No. 2 of 2025 revoked the standard SHM to HGB conversion procedure except for auction sales, and there are competing legal readings of what that revocation actually covers. A separate mechanism under Article 38(3) of PP 18/2021 allows HGB to be created over Hak Milik land by PPAT deed. Verify the current position with a Bali PPAT before committing funds.
What is an SHGB certificate?
SHGB (Sertifikat Hak Guna Bangunan) is the formal name for the HGB land certificate itself, the document a Badung or Gianyar land office issues confirming the right to build on and use a specific plot for a defined term. It states the term length, the registered holder, and any registered charges, and should always be checked in person at the land office before a purchase.
If you have a certificate in hand and want a straight answer on what it actually gives you, send the details on WhatsApp at +62 877-9626-0478 or through our contact page. The first consultation is free, and if you are buying through a company we can also walk you through what a PT PMA setup in Bali costs, or connect you directly with our notary and PPAT team for the transfer itself.