Indonesia’s New Agrarian Reform Framework: Key Implications for Landholders and Businesses

Introduction

On 22 September 2026, the House of Representatives passed the Draft Bill on Agrarian Reform (the “Agrarian Reform Bill”), marking an important development in Indonesia’s land governance framework. The Bill is intended to complement, rather than replace, Law No. 5 of 1960 on Basic Agrarian Principles and seeks to address a number of agrarian issues that have not been fully accommodated under the existing regulatory framework. 

The proposed framework introduces substantial changes to the institutional and substantive aspects of agrarian reform. Among its principal measures are the establishment of a dedicated Agrarian Reform Agency, an expansion of the categories of land that may become subject to agrarian reform, a new framework for resolving agrarian conflicts and restoring land rights, restrictions on land ownership and control, and a mandatory allocation relating to 20% of land held under Right to Cultivate (Hak Guna Usaha or “HGU”). 

These developments are particularly relevant for businesses that hold HGU titles, operate under land-based concessions, control substantial areas of land, or operate in areas where overlapping community claims or agrarian conflicts may arise. If enacted in its current form, the Bill may require businesses to reassess not only the formal validity of their land rights but also the broader historical and social circumstances surrounding the control and utilization of their land.

A New Agrarian Reform Agency

A central feature of the Bill is the proposed establishment of a dedicated Agrarian Reform Agency (Lembaga Penyelenggara Reforma Agraria) as the principal authority responsible for implementing agrarian reform at the national level. This represents a shift from the existing inter-agency coordination model under Presidential Regulation No. 62 of 2023 toward a more centralized institutional framework. 

The Agency would be granted broad authority over the implementation of agrarian reform. Its powers would include designating Priority Agrarian Reform Areas (Lokasi Prioritas Reforma Agraria), conducting verification and validation of Agrarian Reform Objects and Subjects, and issuing binding decisions concerning agrarian conflict resolution, restoration of land rights, land redistribution, and the empowerment of agrarian reform beneficiaries. I

Importantly, the Agency would also have the authority to temporarily suspend certain land administration processes where the relevant land is subject to an agrarian conflict. Such processes may include the issuance, transfer, expansion, or registration of land rights, as well as business licensing and the determination of Agrarian Reform Objects. This may have practical implications for transactions, corporate restructuring, financing, expansion projects, and other business activities involving land that becomes subject to an agrarian conflict. 

The Bill further requires ministries and government agencies currently exercising agrarian reform functions to delegate their respective authority to the Agency within one year after the law becomes effective. This proposed consolidation of authority may therefore significantly change how businesses interact with government institutions in matters involving agrarian reform and land disputes. 

Broader Scope of Land Subject to Agrarian Reform

The Bill significantly expands the categories of land and agrarian resources that may qualify as Agrarian Reform Objects (Objek Reforma Agraria). The proposed scope extends beyond conventional state or abandoned land and includes community land overlapping with or subject to conflicts involving HGU, Right to Build (Hak Guna Bangunan or “HGB”), Right to Use (Hak Pakai), Right of Management (Hak Pengelolaan or “HPL”), forestry areas, business licences, and concessions. 

The scope may also cover certain community land affected by conflicts involving State Property, Regional Property, assets of State-Owned Enterprises and Regional-Owned Enterprises, as well as land exceeding applicable landholding or concession limits. Other categories include land derived from the mandatory HGU allocation, abandoned land, absentee land, transmigration land subject to overlap or conflict, and other agrarian resources. 

At the same time, the Bill broadens the categories of persons and communities that may qualify as Agrarian Reform Subjects. These include indigenous peoples, landless and smallholder farmers, urban poor communities, small-scale fisheries actors, and persons who have lost access to land or livelihoods due to natural disasters or environmental degradation. 

For businesses, the expanded scope is significant because land supported by an existing title, licence, or concession may nevertheless fall within the agrarian reform framework where overlapping community claims or other circumstances specified by the Bill are present. This increases the importance of understanding not only the formal documentation relating to a landholding, but also whether there are unresolved historical claims, occupation, boundary issues, or community interests affecting the relevant area.

New Approach to Agrarian Conflict Resolution

The Bill introduces a broader approach to agrarian conflict resolution. Rather than focusing primarily on determining the formal legal status of disputed land, the proposed mechanism integrates conflict resolution with corrective measures, restoration of land rights, land redistribution, and empowerment programs for agrarian reform beneficiaries. 

The Agency would have jurisdiction over agrarian conflicts involving overlapping claims between community or village land and existing land rights, forestry areas, business licences, or concessions. The mechanism would also cover conflicts arising from inequalities in the control, ownership, use, and utilization of land and other agrarian resources between communities and business entities or government institutions. 

Following an assessment and verification process, the Agency may issue an Agrarian Conflict Resolution Decision together with corrective policies that must be implemented by the relevant parties. Such corrective measures may include administrative rectification, reduction of land area, boundary adjustments, changes to the function or status of land, and revocation of administrative decisions. 

The proposed mechanism therefore has the potential to affect existing land arrangements beyond the resolution of competing claims. Depending on the circumstances, an agrarian conflict may result in adjustments to the administrative or legal framework governing the relevant land.

The Bill also strengthens the enforceability of these decisions. Where ministries, regional governments, business entities, or other parties fail to implement corrective policies, the Agency may report the non-compliance to the President and, within the scope of its authority, directly implement corrective measures. Where the relevant authorities fail to implement the Agency’s decision within the prescribed period, the decision may become fully effective by operation of law. 

However, the current Draft Bill does not expressly regulate objection procedures or legal remedies available to parties affected by such decisions or corrective policies. Further regulation may therefore be necessary to clarify how the Agency’s authority will interact with existing administrative law review and dispute-resolution mechanisms. 

Restoration of Land Rights

Another important element is the introduction of a specific mechanism for Restoration of Land Rights (Pemulihan Hak atas Tanah). This mechanism may apply where the rights of communities, community groups, indigenous peoples, villages, or other legally entitled parties have been lost, transferred, controlled, or utilized by other parties as a consequence of agrarian conflicts, government policies, administrative actions, or other circumstances considered contrary to law or agrarian justice. 

Following identification and verification of the relevant claims and supporting evidence, the Agency may determine both the eligible beneficiary and the appropriate form of restoration. Restoration may take the form of returning the original land, allocating replacement land, or providing another equivalent form of restoration where returning the original land is not feasible. The mechanism may also include assistance and empowerment programs intended to enable beneficiaries to effectively utilize the restored land. 

20% HGU Allocation Requirement

One of the most significant provisions for businesses is the proposed requirement for HGU holders to allocate at least 20% of the state land area granted under an HGU as a source of Agrarian Reform Objects. The obligation would apply in connection with the granting, amendment, and extension of HGU titles. 

The proposed framework is also relevant to existing HGU holders. Existing holders that have not previously complied with the 20% land allocation requirement would be required to fulfill the obligation within one year following the establishment of the Agrarian Reform Agency. Accordingly, the provision is not limited to future HGU grants and may require existing landholders to review whether their current arrangements satisfy the proposed requirements. 

The Bill also provides an alternative mechanism where physical allocation of the required 20% land area is not implemented within the prescribed period. In such circumstances, HGU holders would be required to provide surrounding communities, through the Agrarian Reform Agency, with economic benefits equivalent to 20% of profits derived from the utilization of the relevant HGU land. 

This alternative mechanism is particularly noteworthy because the proposed agrarian reform obligation is not limited to physical redistribution of land. It may also create an economic benefit-sharing obligation where physical allocation cannot be implemented, which could have financial and operational implications for affected HGU holders.

Restrictions on Land Ownership and Control

The Bill further introduces minimum and maximum thresholds for land ownership and control. In the case of business entities, the assessment may include land controlled by the company together with its affiliated entities, meaning that landholdings may be assessed cumulatively at the group level rather than solely by reference to an individual legal entity. 

The applicable thresholds would not necessarily be uniform throughout Indonesia. The Government would be required to consider regional characteristics including landholding inequality, land availability, population density, poverty levels, environmental conditions, and territorial limitations. The Bill also provides that the maximum threshold is intended to reduce the landholding Gini ratio to no more than 0.30. 

In addition, the Bill prohibits the granting of a single land right covering the entirety of a small island or land directly adjacent to an entire coastline to one person or legal entity. Collectively, these provisions indicate a stronger emphasis on limiting excessive concentration of land ownership and control while preserving the social function of land. 

Administrative and Criminal Exposure

The proposed framework is supported by administrative and criminal enforcement mechanisms. Officials, business entities, and other relevant parties that fail to implement corrective policies arising from agrarian conflict resolution may be subject to administrative sanctions in accordance with applicable laws and regulations. The Bill itself does not specify the form of these administrative sanctions and instead leaves their implementation to the prevailing regulatory framework. 

The Bill also introduces criminal offences relating to conduct that obstructs or interferes with agrarian reform. These include falsification or manipulation of documents, data, information, statements, or maps intended to influence the determination of Agrarian Reform Objects or Subjects or the outcome of agrarian conflict resolution. Certain offences may also result in corporate criminal liability. 

Other prohibited conduct identified in the Bill includes unlawfully occupying or utilizing land designated as an Agrarian Reform Object and holding or controlling land resulting from agrarian reform in excess of the applicable maximum limits. The inclusion of corporate liability further increases the importance of accurate land documentation and internal controls for companies operating in land-intensive sectors. 

What Businesses Should Do

Businesses holding HGU titles, operating under land-based concessions, or controlling substantial land areas should begin assessing how the proposed framework may affect their existing land portfolio and future land-related transactions. Particular attention should be given to the legal status and boundaries of existing land rights, any areas affected by overlapping community claims or ongoing agrarian conflicts, and the extent to which existing HGU arrangements have complied with applicable land allocation obligations.

Companies should also ensure that land-related documentation is complete, accurate, and internally consistent. This includes land certificates, concession documents, licences, maps and boundary records, historical acquisition documentation, and records supporting the company’s legal basis for occupying and utilizing the relevant land. Given the proposed powers of the Agrarian Reform Agency to verify claims and adopt corrective measures, inconsistencies in historical land records or unresolved boundary and community issues may become increasingly significant.

HGU holders should pay particular attention to the proposed 20% allocation mechanism and consider its potential effect on existing concessions, future HGU extensions or amendments, and long-term land-use planning. Companies forming part of larger corporate groups should also consider the proposed cumulative assessment of landholdings across affiliated entities when reviewing their overall land exposure.

As the legislative framework continues to develop, businesses should closely monitor the final enacted text and subsequent implementing regulations before taking substantive restructuring measures. Further rules will be particularly important in clarifying the applicable landholding thresholds, procedures for implementing the 20% HGU allocation, calculation and distribution of alternative economic benefits, procedures for challenging decisions of the Agrarian Reform Agency, and the interaction between the new framework and existing land administration and licensing regimes.