When purchasing property, it’s crucial to understand the legal documents you will acquire. Two of the most important ones are the Certificate of Ownership (Sertifikat Hak Milik or SHM) and Right to Build (Hak Guna Bangunan or HGB). Despite being well-known, some people still don’t grasp the distinction between HGB and SHM. However, both types of certificates are crucial, especially in real estate transactions.
These certificates determine how you can use the property you own. Depending on the certificate you possess, you can make short-term or long-term investments. They also establish limitations on physical investments in terms of land and/or buildings.
Both SHM (Certificate of Ownership) and HGB (Right to Build) have their respective advantages and disadvantages. The primary difference lies in their legal status, where SHM holds a higher status. Explore the following explanations to gain a more comprehensive understanding of the SHM and HGB comparison.
Certificate Authority
The Certificate of Ownership (Sertifikat Hak Milik or SHM) holds authority over both land and buildings you possess, while the Right to Build (Hak Guna Bangunan or HGB) only has authority over the buildings. This power comparison is a crucial factor to consider when purchasing property. Due to its authority, SHM is considered the highest status among other property legal documents. If you intend to make long-term investments or acquire a residence that can endure, choosing property with an ownership certificate is necessary. You also have the flexibility to modify SHM-status properties as you wish.
Validity Period
If you own a property with a Certificate of Ownership, you can use it for a lifetime as long as the certificate is valid and remains in your possession. However, if you only have an HGB, you can use the property for 30 years, and beyond that, additional fees will apply. Therefore, if you aim for long-term property investment, ensure you choose SHM.
Certificate Usage
Due to its higher authority, SHM has more flexible functions compared to HGB. SHM can be used as collateral or security, unlike HGB, which risks becoming an Encumbrance. With collateral, SHM can be sold, mortgaged, used as bank collateral, rented out, or even designated as a waqf (Islamic endowment). The flexibility of SHM is suitable for both business and lifelong residence.
Conclusion
With SHM, you have many options for your property compared to HGB. If you seek long-term property investment with the strongest guarantee and legality, purchasing property with SHM status is essential. The same applies if you desire a comfortable lifelong residence that you can pass on. Therefore, the Certificate of Ownership is the ideal choice for both inhabiting and investing in property.
Property ownership, SHM vs HGB, Legal status