PMA, or Penanaman Modal Asing, is a form of legal entity that can be used by foreign investors to own a company in Indonesia. In addition to its corporate function, PT PMA is also said to be the safest way for foreigners to own property in Indonesia.
PT PMA allows foreign companies to acquire land and property at a relatively high value, and to hold the title in the company’s name with a Hak Guna Bangunan (HGB) certificate.
The HGB certificate that a PT PMA is authorised to hold has a validity period of 80 years. With this period of time, this method of property ownership by establishing a legal entity is the closest to the ownership of a Certificate of Ownership (SHM) in Indonesia.
This article will discuss legal entity rights to property land and buildings in Indonesia, conditions, how to obtain them.
Hak Guna Bangunan (HGB): its function and differences with other certificates
Hak Guna Bangunan (HGB) is the right to construct and own buildings on land that is not one’s own, for a certain period of time.
A foreign company with PT PMA status is listed on the HGB as the owner of the property and is given full rights to manage and transfer the property as long as the HGB is still active. Apart from HGB, there are two other certificates that allow foreigners to own property in Indonesia, namely Hak Sewa and Hak Pakai.
Right of Lease is the right to use and/or utilise land owned by another person for a certain period of time.
Rental rights are usually used for short-term developments such as kiosks and rented houses. Meanwhile, Hak Pakai is the right to use and/or utilise state land for a certain period of time. Hak pakai is usually used for social development such as schools, hospitals, and places of worship.
The following is a comparison table of Hak Guna Bangunan (HGB), Hak Sewa, and Hak Pakai for PT PMA:
| Aspect | Hak Guna Bangunan (HGB) (Building Leasehold) | Right of Lease | Hak Pakai (Usufructuary Right) |
|---|---|---|---|
| Time Period | 80 years (extendable by 20 years) | 25 years (extendable by 20 years) | 25 years (extendable by 20 years) |
| Usage | Buildings and/or land for residences, offices, trade, and/or industry | Buildings and/or land for residences, offices, trade, and/or industry | Buildings and/or land for social, educational, health, religious, and/or cultural purposes |
| Land Rights | Hak Milik (Freehold) | Right of Lease | Management Rights |
| Advantages | Long term, legal certainty | Flexible term | Affordable cost |
| Disadvantages | High cost, complicated licensing process | Shorter term, potential for eviction | Weaker land rights |
The advantage of owning land with an HGB certificate is the possibility to change the ownership of the land and property back to Hak Milik if the land changes hands to an Indonesian citizen (WNI), thus providing better flexibility in terms of property sales.
Hak Guna Bangunan (HGB) is more appropriate for business or commercial purposes, while Hak Milik (HM) is more suitable for private use. In the real estate industry, HGB is generally chosen by property developers who build large projects with the intention of reselling the properties, although HGB can also be used to acquire individual properties.
You can purchase any land or property by forming a Foreign Investment Limited Liability Company (PT PMA), without being affected by certain zones. However, it is important to take the land zones into account so that you can obtain the necessary business permits for the property you intend to build.
How to Set Up a PT PMA with LMI Consultancy
If you are interested in owning property using a PT PMA (Foreign Investment Company), the process is actually quite easy. Firstly, you need to register a new PT PMA or acquire an existing one.
You can set up a PT PMA that is wholly owned by a foreigner or by acquiring a local company, according to the category for which the scheme is suitable for your business.
Once the company’s articles of association are approved and the company tax card is issued, which usually takes about 2-3 weeks, you can acquire property in the name of your PT PMA.
An important thing to note is the minimum capital requirement in accordance with the Head of Investment Coordinating Board (BKPM) Regulation Number 4 of 2021. Companies classified as foreign investment activities or PMA must have a minimum issued/deposited capital of IDR10,000,000,000,- (ten billion Rupiah), unless otherwise specified by law.
Once you have reached an agreement to purchase a property, the next step is the signing of the agreement and transfer of title. A Sales and Purchase Agreement (PPJB) will be drawn up in the name of your PT PMA, then both parties will sign the agreement. The Land Office will then change the land certificate from Hak Milik to HGB, and the deal is finalised by signing the Sale and Purchase Agreement (AJB) and paying the taxes for the transaction.
Interested in owning a commercial property in Indonesia? Register a PMA and start investing with LMI Consultancy.
Investing in a PT PMA does require considerable time and capital, but it also brings significant long-term benefits.
This not only allows you to acquire freehold property (which is otherwise off-limits to foreign individuals), but also provides protection for your investment as well as greater flexibility in reselling the property later.
In this case, working with a trusted agent and legal consultant like LMI Consultancy is key to a safe and successful investment.
Feel free to contact LMI Consultancy to obtain expert advice on real estate-related issues and the process of setting up a PT PMA.
