There are two primary types of property ownership certificates in Indonesia: SHM and HGB. For first-time homebuyers unfamiliar with these terms, understanding the difference between SHM and HGB is essential.

Without proper knowledge, buyers may end up facing unexpected realities that don't align with their expectations. If you're still unsure about the distinction between SHM and HGB, here's a comprehensive guide to help you make an informed decision.

What Is SHM?

Under Indonesia's Basic Agrarian Law (Law No. 5 of 1960), Sertifikat Hak Milik (SHM), or Freehold Title Certificate, represents the strongest and most complete form of land ownership.

This means SHM has no expiration date and does not require periodic renewal fees. The land can be passed down to future generations indefinitely.

Legally, SHM is regulated under Articles 20 and 21 of Law No. 5 of 1960. It can only be granted to Indonesian citizens and certain legal entities, such as state-owned banks, agricultural cooperatives, or religious foundations with government approval.

Whenever ownership is transferred—whether through sale, inheritance, or gifting—the transfer must be registered with the National Land Agency (BPN) in accordance with Article 23 paragraph (1) of the law. This ensures full legal recognition of the ownership rights.

What Is HGB?

Hak Guna Bangunan (HGB), or Right to Build, is the right to construct and occupy a building on land that is not owned by the holder, as stated in Article 35 paragraph (1) of Law No. 5 of 1960.

Simply put, you own the building, but not the land beneath it.

HGB is often a practical option for those who want to own property in premium locations without bearing the higher cost of purchasing land outright.

According to Government Regulation No. 18 of 2021, HGB is granted for an initial period of 30 years, extendable for another 20 years, and renewable for an additional 30 years. In total, HGB can provide rights for up to 80 years.

As long as taxes are paid and the land is used according to its designated purpose, HGB holders can enjoy long-term occupancy with peace of mind. HGB rights can also be sold, inherited, and used as collateral for bank financing.

Like SHM, HGB can only be held by Indonesian citizens or Indonesian legal entities such as corporations, cooperatives, and foundations.

What Are the Differences Between SHM and HGB?

Now that we've covered the basics, let's compare SHM and HGB across several key aspects.

1. Land Ownership Status

The most significant difference lies in land ownership.

With SHM, you have full ownership of both the land and the building. No other party has ownership rights over the property.

With HGB, you fully own the building, but not the land. The land belongs to another party, such as the government or a developer. Your right is limited to using the land and occupying the building during the HGB period.

2. Duration of Ownership

SHM does not expire. As long as ownership remains within your family or legal ownership chain, no renewal is required.

HGB, on the other hand, is time-limited. If renewal procedures are neglected, the right may eventually lapse.

3. Resale Value

From an investment perspective, SHM generally commands higher market value.

Since SHM represents the highest form of land ownership, properties with SHM tend to be more expensive and retain their value better over time.

Banks also prefer SHM properties as mortgage collateral because ownership is straightforward and legally robust.

Although HGB remains legally valid throughout its term, HGB properties typically have lower market values than comparable SHM properties in the same location.

Banks may also apply additional scrutiny when accepting HGB properties as collateral.

4. Possibility of Upgrading Ownership Status

One advantage of HGB is that it can potentially be converted into SHM under certain conditions.

Requirements generally include:

• The property must be used as a residential home, not for commercial purposes.

• The owner must be an Indonesian citizen.

• The land must be state-owned land eligible for conversion.

  
  

Applications for status upgrades can be submitted to the National Land Agency (BPN).

SHM, however, is already the highest ownership status and cannot be upgraded further.

5. Inheritance and Ownership Transfer

Passing down SHM to future generations is relatively straightforward. Upon inheritance, heirs receive full ownership rights without time limitations.

SHM properties can also be sold freely, just like any privately owned asset.

HGB can likewise be inherited and transferred through sale. However, ownership transfers must include the transfer of HGB rights, and the new owner will continue to hold the property under HGB status.

Since HGB has a fixed duration, it's important to check the remaining validity period before inheriting or purchasing such a property.

6. Long-Term Costs

One of SHM's biggest advantages is the absence of renewal fees. Once acquired, ownership remains valid indefinitely.

HGB holders, however, must pay extension or renewal fees every few decades.

The exact cost depends on land value and local National Land Agency regulations, but fees can reach tens of millions of rupiah.

Pros and Cons of SHM and HGB

Beyond understanding their differences, it's important to evaluate the advantages and disadvantages of each ownership type.

SHM: Pros and Cons

Advantages

• Full ownership rights

• No expiration date

• No renewal fees

• Strong resale value

• Easier mortgage approval

• Ideal for inheritance planning

Disadvantages

• Higher purchase prices

• Larger initial capital requirements

SHM is ideal if you're purchasing a family home intended for long-term ownership and future inheritance.

HGB: Pros and Cons

Advantages

• Lower purchase prices

• Access to premium locations

• Eligible for conversion to SHM under certain conditions

• Suitable for investment properties

Disadvantages

• Limited ownership period

• Renewal fees required

• Risk of losing rights if renewals are neglected

  
  

HGB may be a suitable option if you're investing in premium locations with a more affordable initial budget, or if you plan to generate rental income from apartments, boarding houses, or commercial properties over the next few decades.

JGC: A Reliable Choice for Property Ownership in East Jakarta

If you're looking for property ownership with clear legal certainty in East Jakarta, Jakarta Garden City offers an excellent option.

Within the township, you'll find commercial units and certain land plots under HGB status, while other residential plots already hold SHM certificates. Every development within JGC complies with all government regulations and licensing requirements, ensuring strong legal protection for property owners.

Beyond legal certainty, residents benefit from a fully integrated self-sustaining township ecosystem. Spanning 370 hectares, Jakarta Garden City features shopping centers, culinary destinations, schools, healthcare facilities, and various lifestyle amenities designed to support everyday living.

The township also enjoys convenient access to the Cakung Timur Toll Gate, providing seamless connectivity to Jakarta's city center.

Now that you understand the differences between SHM and HGB, you can make a more informed decision when choosing the ideal property for your family. Contact us today if you'd like to visit our show units and explore your options firsthand.