Incentives and Land Rights in IKN Following Presidential Regulation No. 75 of 2024

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Authors

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Development of Capital City of Nusantara (“IKN”)

The Government of Indonesia issued a Presidential Regulation No. 75 of 2024 on the Expedition of the Development of Capital City of Nusantara (“PR 75/2024”), which has been in force since 11 July 2024. The PR 75/2024 aims to accelerate the development of IKN in order to establish a habitable city ecosystem, particularly within the central core government area (Kawasan Inti Pusat Pemerintahan – “KIPP”). In regard to that, the facilities referred in KIPP includes management of basic and/or social services as well as commercial facilities, which are specified in the following ^[1] :

Basic and/or Social Services	Commercial Facilities
a. houses;	a. hotels;
b. health;	b. shopping centers, retails, and shops;
c. education;	c. restaurants; and
d. social and culture;	d. recreation and entertainment center.
e. energy and electricity;
f. telecommunication and digitization;
g. transportation;
h. drinking water;
i. sanitation and waste management;
j. emergency facilities;
k. public cemeteries;
l. green open space;
m. sports facilities;
n. religious facilities;
o. office facilities; and
p. public order and tranquility.

In order to accelerate the development of the Capital City of Nusantara, the government will grant business licensing incentives and facilities sourced from State Revenue and Expenditure Budget (Anggaran Pendapatan dan Belanja Negara – “APBN”) and other legitimate sources ^[2] which will be conducted through procurement via direct appointment of business actors.^[3]

Pioneering Business Actors Incentives

Incentives and facilities can be granted to business entities engaged in the development, delivery, and management of basic services, social services, and commercial facilities. These incentives and facilities will be provided by the IKN Authority, relevant Ministries/Agencies, and/or Regional Government.^[4]
In this context, the Head of the IKN Authority is also designate pioneering business actors to facilitate investment from other legitimate sources, in accordance with applicable laws and regulations, to further accelerate the development of IKN. This designation shall be conducted in coordination with the Ministry of Investment/Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal or BKPM), who is responsible for government affairs in the investment sector. PR 75/2024 further clarifies the pioneer business entities as business entities who have demonstrated interest by signing a letter of intent (LOI) with the IKN Authority and have committed to initiating development in the new capital, Nusantara, within five years of the enactment of Law No. 21 of 2023, which amended Law No. 3 of 2022 on the Capital City.^[5] Such business entities are entitled receive contributions in relation to the management of any assets that are under the control of the IKN Authority (Aset Dalam Penguasaan – “ADP”) in the form of:(i) tariffs of Rp0 (zero Rupiah); or (ii) payment in installments.

Land Valuation

The value of the land for IKN is determined by the Head of the IKN Authority, based on the land value calculation by a public appraiser (“Land Valuation Zone”) for the purpose of: (i) the management of ADP; and (ii) facilitating of investment in the IKN.^[6] The said land value will serve as a reference by the Ministry of Agrarian Affairs/National Land Agency when establishing of Land Valuation Zone and will also be disclosed for other related purposes.

Possession of ADP Land by Community

With respect to the development of IKN, the government will handle the issue of possession of ADP land by the community in the form of: ^[7]

1. possession and utilization of land deriving from the physical release of forest areas shall be conducted for at least a period of 10 (ten) years continuously; and
2. possession and utilization of land deriving from the physical release of forest areas shall be conducted in good faith as proven by the history of its possession and utilization in accordance with the provisions of laws and regulations on land.

Compensation for land issues may take the form of cash, replacement land, resettlement, or other mutually agreed-upon forms. The said compensation will be calculated by taking into account the components of:

1. land;
2. above ground space and below ground space;
3. buildings;
4. plants;
5. land-related objects; and/or
6. other components that may be appraised.

To oversee community possession of ADP land, the Head of the IKN Authority will determine the list of eligible community recipients and the amount of compensation, based on an appraisal. All measures related to the handling of community possession of ADP land will be funded by the state revenue and expenditure budget.

Extended Land Rights Periods

PR 75/2024 introduces extended land rights periods for businesses, differing from the limits set under Government Regulation No. 18 of 2021 on the Right to Manage. Land Rights, Multistory Housing Units and Land Registrations, which previously ranged from 30 to 35 years for the first cycle and 20 to 25 years for the possible extension. The new limits set by Regulation 75/2024 are as follows:

1. Right to Cultivate (Hak Guna Usaha or HGU), up to 95 years for the first cycle, with a possible extension for another 95 years.
2. Right to Build (Hak Guna Bangunan or HGB), up to 80 years for the first cycle, with a possible extension for another 80 years.
3. Right to Manage (Hak Pengelolaan or HPL), up to 80 years for the first cycle, with a possible extension for another 80 years.

Following the granting of these land rights, the IKN Authority will conduct an evaluation five years after the initial cycle to ensure the following conditions are met:

1. the land is still actively used for business and utilized properly in accordance with the conditions, nature, and objectives of the granting of rights;
2. the holder of the right continues to meet the eligibility criteria for holding such rights;
3. the requirements for the granting of rights are maintained by the rights holder;
4. the use of the land is still in accordance with the spatial plan; and
5. the land is not classified abandoned.

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1. Explanation for Article 2 of Regulation 75/2024. ↩︎

2. Explanation for Article 4 paragraph (1) of Regulation 75/2024. ↩︎

3. Explanation for Article 4 paragraph (3) of Regulation 75/2024. ↩︎

4. Explanation for Article 3 of Regulation 75/2024. ↩︎

5. Explanation for Article 5 paragraph (2) of Regulation 75/2024. ↩︎

6. Explanation for Article 6 of Regulation 75/2024. ↩︎

7. Explanation for Article 8 paragraph (2) of Regulation 75/2024. ↩︎

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Development of Capital City of Nusantara (“IKN”)
2. Pioneering Business Actors Incentives
3. Land Valuation
4. Possession of ADP Land by Community
5. Extended Land Rights Periods

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