Law 6/2023 (UU Cipta Kerja, the Omnibus Law): what it changed for property

The law behind “as amended by Law 6/2023” on many of the regulations on this site — what it is, why it replaced Law 11/2020, and the land rules it wrote itself.

Law 6/2023, the articles a property buyer meets

Law 6/2023 is short: it enacts Perppu 2/2022 as a law and attaches it as an inseparable part (Law 6/2023 art. 1), and it took effect on 31 March 2023, in force the day it was promulgated (Law 6/2023 art. 2 and signature block). Everything of substance is in the attachment — the Perppu — which is why articles are cited as “Law 6/2023 (Perppu 2/2022) art. …” on this site.

Why there are two Job Creation Laws

The President set Perppu 2/2022 on 30 December 2022 (Law 6/2023, consideration (h)). One of the reasons the enacting law gives is to implement Constitutional Court decision 91/PUU-XVIII/2020 by replacing Law 11/2020 (Law 6/2023, consideration (f)). With the Perppu in force, Law 11/2020 was revoked and declared no longer in force (Law 6/2023 (Perppu 2/2022) art. 185).

Two transitional rules keep the old layer working. Licenses and certificates issued under Law 11/2020, and approvals issued before it, remain valid until they expire (Law 6/2023 (Perppu 2/2022) art. 182(a)-(b)). And the implementing regulations of the amended laws and of Law 11/2020 remain in force so far as they do not conflict with it (Law 6/2023 (Perppu 2/2022) art. 184). That is why PP 18/2021 and PP 16/2021 — both made under Law 11/2020 — are still the regulations a buyer reads.

The method is stated in the considerations: amending many sector laws in one law, by the omnibus method (Law 6/2023, consideration (e)). The scope runs across the investment and business ecosystem, manpower, cooperatives and small business, ease of doing business, research and innovation, land procurement, economic zones, central-government investment and national strategic projects, government administration, and sanctions (Law 6/2023 (Perppu 2/2022) art. 4). Most of it has nothing to do with property; the parts that do are below.

The laws it rewrote that a property buyer meets

Each of these is now read with the Law 6/2023 wording in place of the old article:

The land provisions it wrote itself

Chapter VIII does more than amend. Its land part (articles 125–147) creates rules that sit in the Job Creation Law itself.

The land bank

The central government forms a land bank: a special body that manages land, whose assets are separated state assets (Law 6/2023 (Perppu 2/2022) art. 125(1)-(3)), whose functions are planning, acquiring, procuring, managing, using and distributing land (Law 6/2023 (Perppu 2/2022) art. 125(4)). For agrarian reform it must keep at least 30% of the state land allocated to it (Law 6/2023 (Perppu 2/2022) art. 126(2)). Land it manages is given hak pengelolaan, over which HGU, HGB and hak pakai may be granted (Law 6/2023 (Perppu 2/2022) art. 129(1)-(2)). And unused land feeds it: rights, permits or concessions deliberately not worked, or abandoned, within at most two years of the grant are revoked and returned to the State (Law 6/2023 (Perppu 2/2022) art. 180(1)), and may be designated land bank assets. PP 64/2021 on the land bank · abandoned land.

Hak pengelolaan

Hak pengelolaan (HPL) is the State's right of control, part of whose exercise is delegated to the holder (Law 6/2023 (Perppu 2/2022) art. 136). It may be given to central and regional government agencies, the land bank, state- and region-owned enterprises, state or regional legal entities, or a legal entity the central government appoints (Law 6/2023 (Perppu 2/2022) art. 137(1)) — a list with no private individuals in it. Part of HPL land reaches a third party through a land-use agreement (Law 6/2023 (Perppu 2/2022) art. 138(1)), over which HGB or hak pakai can be granted, and an HGB there may be extended and renewed once the land is used for the purpose of the grant (Law 6/2023 (Perppu 2/2022) arts. 129(3), 138(3)). When that right ends, the land reverts to hak pengelolaan land (Law 6/2023 (Perppu 2/2022) art. 138(5)). A hak milik carved out of HPL land is only for public housing and transmigration (Law 6/2023 (Perppu 2/2022) art. 140(2)). HPL explained.

Strata title, and where a foreigner may hold it

Strata title may be held by Indonesian citizens and legal entities, foreign citizens holding the required permit, foreign legal entities with a representative office, and foreign-state and international representations (Law 6/2023 (Perppu 2/2022) art. 144(1)). It may be transferred, and charged with hak tanggungan (Law 6/2023 (Perppu 2/2022) art. 144(2)-(3)), and the building may stand on HGB or hak pakai over state land or over hak pengelolaan land (Law 6/2023 (Perppu 2/2022) art. 145(1)).

The foreign limb has a condition the article itself does not show. The elucidation says foreign ownership is given only in special economic zones, free-trade zones and free ports, industrial estates, and other economic zones (Law 6/2023 (Perppu 2/2022), elucidation to art. 144(1)(c)). PP 18/2021 puts the same limit in the operative text: a foreigner’s unit on hak pakai or HGB land is one of the units built in special economic zones, free-trade zones and free ports, industrial estates, and other economic zones (PP 18/2021 art. 71(2)), and “other economic zones” means urban and urban-support areas, tourism areas, or areas that support vertical housing and benefit the local economy (PP 18/2021, elucidation to art. 71(2)). On our reading, that definition reaches much of Bali’s urban and tourism land — but whether a particular complex is in such an area is a zoning fact to check, not an assumption. Strata title in Bali.

Space above and below ground, and electronic title

Land or space formed above or below ground and used for a particular activity can carry HGB, hak pakai or hak pengelolaan (Law 6/2023 (Perppu 2/2022) art. 146(1)); an owner’s land upward is bounded by the building coverage ratio, the floor-area ratio and the spatial plan (Law 6/2023 (Perppu 2/2022) art. 146(2)). And proof of title — certificates, strata certificates, HPL, mortgages, and the deeds that transfer or charge them — may be electronic (Law 6/2023 (Perppu 2/2022) art. 147). The electronic certificate.

What it did not change

It did not open hak milik to foreigners. The Basic Agrarian Law still reserves it to Indonesian citizens only (UUPA (Law 5/1960) art. 21(1)), and a nominee arrangement is still void by operation of law (UUPA (Law 5/1960) art. 26(2)). A foreigner’s house is still held as hak pakai, a lease, a strata unit, or through a company. What a foreigner can own.

This is commentary on the official text, not legal advice. Article numbers follow the Perppu attached to Law 6/2023.

Questions on this page