Hak Pakai vs Hak Milik Explained: The Real Legal Difference That Can Make or Break Your Property Rights in Indonesia

Table of Contents

The Main Legal Question

What is the real legal difference between Hak Pakai and Hak Milik in Indonesia, and why does it matter so much?

Short answer: Hak Milik is full ownership reserved exclusively for Indonesian citizens, while Hak Pakai is a limited but legally protected right to use property that can be held by foreigners and certain legal entities. Choosing the wrong one—or misunderstanding the difference—can lead to loss of property, invalid agreements, or serious legal disputes.

This is one of the most misunderstood issues in Indonesian property law, especially for foreign investors, expatriates, mixed-marriage couples, and even Indonesian citizens buying property with foreign funding.

Legal Explanation

Why Property Rights in Indonesia Are Different

Indonesia does not follow a Western-style freehold land ownership system. Instead, it uses a state-controlled land regime, where all land is ultimately controlled by the state and granted to individuals or entities through specific legal rights.

These rights are not interchangeable. Each comes with:

• Different holders
• Different durations
• Different transferability rules
• Different legal risks

Among all land rights, Hak Milik and Hak Pakai are the two most commonly misunderstood—and misused.

What Is Hak Milik?

Hak Milik is the strongest and most complete land right recognized under Indonesian law. It is often translated as “freehold,” but that translation can be misleading.

In practice, Hak Milik means:

• Perpetual ownership
• Full control over land
• The right to sell, inherit, mortgage, or transfer
• No fixed expiration date

However, Hak Milik is strictly limited to Indonesian citizens.

What Is Hak Pakai?

Hak Pakai means Right of Use. It allows the holder to legally use and benefit from land or property owned by the state or another rights holder.

In practice, Hak Pakai means:

• Long-term, legally protected use
• Registered with the Land Office (BPN)
• Renewable and extendable
• Often used for residential purposes by foreigners

Hak Pakai is not ownership, but when structured properly, it provides real, enforceable legal security.

Why the Difference Matters in Real Life

Confusing Hak Pakai and Hak Milik leads to:

• Invalid nominee arrangements
• Unenforceable contracts
• Loss of property upon death or divorce
• Property seizure or forced sale

Understanding this difference is not academic—it is the foundation of safe property ownership in Indonesia.

Legal Basis

This section explains the exact laws governing Hak Pakai and Hak Milik, with clear explanations of what they mean in practice.

1. Basic Agrarian Law

Law No. 5 of 1960 on Basic Agrarian Principles
This is the backbone of Indonesian land law.

Hak Milik Provisions

• Article 20(1):

Hak Milik is a hereditary, strongest, and fullest right over land.

Practical Meaning:
Hak Milik provides lifelong ownership that can be inherited and transferred freely—but only by Indonesians.

• Article 21(1):

Only Indonesian citizens may hold Hak Milik.

Practical Meaning:
Foreigners are legally prohibited from owning freehold land.

• Article 26(2):

Any transfer of Hak Milik to a foreigner is null and void by law.

Practical Meaning:
Nominee arrangements are illegal and unenforceable.

Hak Pakai Provisions

• Article 41(1):

Hak Pakai grants the right to use and/or collect benefits from land controlled by the state or another party.

Practical Meaning:
Hak Pakai allows lawful use without ownership.

• Article 42:

Hak Pakai may be granted to:

o Indonesian citizens
o Foreigners domiciled in Indonesia
o Indonesian legal entities
o Foreign legal entities with a presence in Indonesia

Practical Meaning:
Hak Pakai is the primary legal pathway for foreign property use.

2. Government Regulation on Land Rights

Government Regulation No. 18 of 2021 on Management Rights, Land Rights, Apartment Units, and Land Registration

This regulation modernized and clarified land rights under the Omnibus Law framework.

• Article 67:

Hak Pakai may be granted over land or apartment units.

• Article 71:

Hak Pakai may be extended and renewed after expiration.

Practical Meaning:
Hak Pakai is not temporary in practice—it can last decades if properly renewed.

3. Government Regulation on Residential Property for Foreigners

Government Regulation No. 103 of 2015 on Ownership of Residential Houses or Occupancy by Foreigners

• Article 1:

Foreigners with valid stay permits may own residential property under Hak Pakai.

• Article 2:

Property must be used as a residence, not for speculation.

Practical Meaning:
Foreigners can legally own houses or apartments under Hak Pakai, subject to conditions.

4. Minister of Agrarian Affairs Regulation

Minister of Agrarian Affairs and Spatial Planning Regulation No. 18 of 2021

• Sets minimum property prices for foreign ownership
• Regulates strata-title apartments for foreigners

Practical Meaning:
Not all properties qualify—low-cost housing is excluded.

5. Marriage and Property Law Impact

Law No. 1 of 1974 on Marriage, as amended by Law No. 16 of 2019

• Article 35:

Property acquired during marriage becomes joint marital property unless otherwise agreed.

Practical Meaning:
Indonesians married to foreigners must have a prenuptial or postnuptial agreement to retain Hak Milik rights.

Key Differences Between Hak Pakai and Hak Milik

1. Ownership
Hak Milik provides full and complete ownership of land, giving the holder the strongest legal control recognized under Indonesian law.

Hak Pakai does not grant ownership; it only grants the legal right to use and benefit from land owned by the state or another rights holder.

2. Eligible Holders
Hak Milik can only be held by Indonesian citizens, with no exceptions for foreigners.

Hak Pakai may be held by foreigners, Indonesian citizens, Indonesian legal entities, and certain foreign legal entities with a lawful presence in Indonesia.

3. Duration of Rights
Hak Milik has no expiration date and exists indefinitely as long as legal requirements are met.

Hak Pakai is granted for a fixed period, but it is extendable and renewable, allowing long-term use when properly maintained.

4. Inheritance Rights
Hak Milik can be freely inherited by heirs who are eligible under Indonesian law.

Hak Pakai has limited inheritance rights, and heirs may be required to transfer, renew, or divest the right depending on their legal status.

5. Mortgage and Financing
Hak Milik can be fully mortgaged and is widely accepted by Indonesian banks as collateral.

Hak Pakai can be mortgaged only in limited circumstances and is generally less attractive to lenders.

6. Legal Risk Level
Hak Milik carries a low legal risk when held by an eligible Indonesian citizen.

Hak Pakai carries a moderate legal risk if misused, particularly when immigration status, zoning rules, or usage restrictions are violated.

Risks and Legal Consequences

1. Using Hak Milik Illegally
If a foreigner controls Hak Milik through a nominee:

• Agreements are void
• No court protection
• Property can be seized

Legal Basis:
Law No. 5 of 1960, Article 26(2)

2. Loss of Hak Pakai Due to Immigration Issues
If a foreigner loses legal stay status:

• Hak Pakai may need to be transferred or sold
• Failure may result in forced divestment

3. Inheritance Problems
Foreign heirs cannot hold Hak Milik.

• Hak Pakai may expire if not properly transferred.

4. Zoning Violations
Using Hak Pakai residential property for business:

• Violates spatial planning laws
• May result in fines or permit revocation

Case Examples

Case 1: Indonesian Citizen Buying a Home
Andi buys land under Hak Milik. He can sell, mortgage, or inherit it freely.

Outcome: Full legal protection.

Case 2: Foreigner Buying a Villa Properly
Michael, a U.S. citizen with a KITAS, acquires a villa under Hak Pakai.

Outcome: Legal, registered, renewable use rights.

Case 3: Mixed Marriage Without Prenup
An Indonesian woman married to a foreigner buys land under Hak Milik without a prenuptial agreement.

Outcome: Hak Milik status is invalidated.

Case 4: Nominee Agreement Collapse
A foreign investor uses a local nominee to hold Hak Milik. The nominee sells the land.

Outcome: Foreign investor loses everything.

What Can Be Done (Practical Solutions)

For Indonesian Citizens

• Use Hak Milik where eligible
• Maintain compliance with marriage property rules

For Foreigners

• Use Hak Pakai or strata-title apartments
• Maintain valid immigration status
• Avoid nominee arrangements entirely

For Mixed Marriages

• Execute a prenuptial or postnuptial agreement
• Clearly separate property ownership

For Investors

• Use PT PMA structures for business property
• Conduct full legal due diligence

Legal Due Diligence Checklist

• Land certificate verification
• Zoning and spatial use review
• Tax compliance check
• Notarial deed review

Conclusion

Hak Milik and Hak Pakai are not just different labels—they represent completely different legal realities. Hak Milik offers full ownership but is strictly limited to Indonesian citizens. Hak Pakai offers lawful, renewable, and court-recognized rights for foreigners and certain entities.

Choosing the correct property right—and structuring it properly—can mean the difference between long-term security and total loss.

FAQ: Hak Pakai vs Hak Milik

Can Hak Pakai be converted into Hak Milik?
No. Foreigners cannot convert Hak Pakai into Hak Milik.

Is Hak Pakai safe long-term?
Yes, if properly registered and renewed.

Can Hak Milik be inherited by foreigners?
No. It must be divested or downgraded.

Can a foreigner mortgage Hak Pakai?
Only in limited circumstances and usually not preferred by banks.

Which is better for foreigners—Hak Pakai or lease?
Hak Pakai provides stronger legal protection than a lease.

Is Hak Pakai recognized by Indonesian courts?
Yes, when properly registered.

Professional Legal Assistance
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