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Firms want direct 95-year land rights in Nusantara as uncertainty persists
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An aerial view of the construction site of Indonesia's new capital city Nusantara in East Kalimantan on Aug. 22, 2023. (Antara/M Risyal Hidayat)
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usinesses have requested the government grant direct approval of nearly a century in land rights for investments made in the country’s future capital city, Nusantara, which experts perceived as a sign of the private sector’s reluctance to invest in such a high-risk project.
The 2023 National Capital City (IKN) Law allows 95-year land rights in the form of the right to cultivate (HGU) but to be obtained in stages, with the first only granted for 35 years then extended for another 25 years and another 35 years separately. Each renewal requires firms to pass evaluations by the government.
Akin to the HGU, these renewal stages also apply to right-to-build (HGB) permits, which could span for 80 years.
The law also makes it possible for both HGU and HGB permits to be extendable by the same period, granting land rights up to 190 years and 180 years, respectively.
Sanny Iskandar, vice chairman of the Indonesian Employers Association (Apindo) put forward the idea that granting a direct leasehold for 80 straight years would not only offer greater legal certainty to prospective investors, but also make financing the project “more appealing” and “more bankable”.
“We hope [permits] can be granted straightaway once businesspeople demonstrate their willingness to materialize development investments within a certain period of time,” Sanny told reporters in a press conference in Jakarta on Oct. 12.
At an estimated overall cost of Rp 466 trillion (US$30 billion), the success of the Nusantara megaproject development hinges on 80 percent private sector funding, with the state shouldering just 20 percent of the cost.
