A certificate of freehold land ownership can only issued by the Land Department (BPN), in the name of an Indonesian citizen. A freehold certificate of ownership is called sertifikat hak milik (SHM). Less than freehold, is a renewable land ownership certificate called hak guna bunganan (HGB) which is literally, a right to build conferred on the recorded owner by the Government. It is renewable every 20 years for around US$2,000, without limitation. As between the HGB owner and the rest of the world, the rights are equal to freehold. HGB certificate land is freely transferrable and “bankable” for institutional borrowing purposes. Only Indonesian citizens and companies (a Pt.) can be recorded as owners on an HGB certificate. There are extremely few cases where HGB ownership has ever been disturbed; only where fraud or some other serious violation of law had occurred.

For overseas investors in acquisition and development of Indonesian land, there are solid ways and means to secure a return on investment.

They include:

1. Mortgagee status. This technique involves an Indonesian facilitator of your land acquisition by holding the property in his/her name. A demand note is executed by you and the local party, signified by a deposit into his/her dual signature account and all or part of the loan amount is used to purchase or lease the land in his/her name. A mortgage is put in-place with the borrower as mortgagor and you, the lender as mortgagee. Your name is actually recorded on the SHM or HGB certificate as mortgagee. You, as the recorded mortgagee, hold the original official certificate. The mortgage is discharged by your calling the note, which need not ever actually occur. During the interim, the property cannot be utilized, sold, leased or further mortgaged without your prior written consent which can be withheld for any reason or no reason at all. If the borrower dies, the debt obligation, being recorded with the mortgage, runs-with-the-land, and is thus fully binding upon his/her successors-in-interest.
2. Long-term Leasehold. A renewable 80 year lease, is executed before a notaris. Either you or your Indonesian limited liability company could be the lessee. Also featured is a tight right-of-first refusal clause which guarantees lessee the right to buy the property before it could be sold to a third party purchaser.
3. Corporate Ownership. By the simple expedient of forming an Indonesian corporation (Pt.), and effectively owning and controlling the entity. You could either form a foreign investment PMA Pt., administered by the Indonesian Foreign Investment Control Board (BKPM) or a domestic Pt. You could own all of the shares of a PMA entity outright. But they are relatively expensive to create and maintain. To use a domestic Pt. you would need to work with two Indonesians to be the initial shareholders and officers, who would then execute stock proxies and comprehensive Powers of Attorney to you which among other things, authorize you to replicate their signatures on any papers relating to company business. They also execute pre-signed resignation letters and share transfers.
4. Hak Pakai Villa Ownership. This is not freehold ownership. It is not “bankable”. It is a renewable use right. In July 1996, Government Regulation No’s. 40 and 41 (GR 40/96 and GR41/96) were passed, allowing resident foreigners to hold Rights of Exclusive Use (Hak Pakai) over Indonesian real property. With issuance of Minister of Agraria Regulation No. 7 of 1996 (RMA7/96), in effect, any foreigner may hold Hak Pakai. Article 1 (1) of RMA7/96 says that a foreigner whose presence in Indonesia gives opportunity for national development may own a Lombok villa under hak pakai and Article 1(2) characterizes such a foreigner as one who has and maintains an economic interest in Indonesia by implementing an investment in the ownership of that villa. The most favourable interpretation is that any foreigner who buys a Lombok villa is contributing to the national development, and therefore is entitled to hold hak pakai

Hak pakai can be granted for 25 years, with a prepaid 20 year extension and a prepaid 25 year renewal, at the time of the initial grant, adding up to an effective duration of 70 years. The amount of these payments are unspecified and will most probably be determined at the point of sale, by your notaris. 

To conclude:

When all is said and done, spare no expense to securely document your Villa acquisition. For example, a combination of mortgage and lease instruments, affords you double protection. Also highly recommended is the formation of a domestic Pt. which you effectively own and control.

Source: Bali Safe Harbour, Ltd. - Investment, Regulatory & Acquisition Advisors, http://www.balisafeharbor.com 

*All advice given here is strictly informational in nature and should not be considered serious legal advice. Before attempting to purchase property as a foreign national, always consider you options and gain advice from a licensed legal professional.