As a part of its commitment to provide an ease of doing business in Indonesia, the government just issued the Government Regulation No. 16 of 2021 on Implementing Regulation of Law No. 28 of 2002 on Building Construction (“GR 16”) which integrates, simplify and amends numerous provisions of the former regulations concerning building construction.
GR 16 divides “Buildings” into several categories: general buildings, heritage buildings, special-purpose buildings, green buildings and state buildings – each with their own characteristic and technical standard requirements. This newsletter focuses only on general building.
GR 16 presents several new terms and concepts, including the introduction of the new “Building Construction Permit” (Persetujuan Bangunan Gedung or “PBG”), and clarification on building ownership, as elaborated below:
1. New Licensing Regime for Building Construction
The flow chart for building permit process of a general building is as follows:
- Developer to obtain the City Planning Information (Keterangan Rencana Kota – “KRK”) from the regional government where the building is located.
- GR 16 and the Omnibus Law introduce PBG as the new concept of building permit, which replaces the previous Izin Mendirikan Bangunan or “IMB”. Note that existing IMBs issued prior to the enactment of GR 16 remain valid until their expiry dates.
Although the terms are different, seemingly both serve the same purpose and should be obtained before the commencement of any construction, modification, expansion, alteration, and/or maintenance of a building. The requirements to obtain the PBG are relatively similar to those for the IMB, but with more concise and harmonized procedures due to the compiled technical standards under GR 16.
One notable highlight in relation to the PBG is the introduction of the so-called “Collective PBG”, a building permit for a group of buildings within 1 (one) area having the same technical plan. In line with the spirit of the Omnibus Law, this Collective PBG would reduce the licensing works to be done by a housing developer in doing its business. - Before a building can be utilized by the devopler, it must obtain a Function Worthiness Certificate (Sertifikat Laik Fungsi or “SLF”) and a Certificate of Building Ownership (Surat Bukti Kepemilikan Bangunan Gedung or “SBKBG”). It is important to note that existing buildings without the SLF and SBKBG must now obtain the SLF and SBKBG.
2. Clarity in Building Ownership
In addition to the introduction of SBKBG as an evidence of ownership of building, which provides more clarity in the ownership of building, GR 16 also provides specific procedures for the sale and purchase of buildings through the transfer of the SBKBG, which could be done either by way of sale and purchase, inheritance, or tender. For the sale and purchase, this must be done in front of a notary and in a notarial deed.
Prior approval from the landowner must be obtained if the building is erected upon a third party’s land. The new owner may then enter into a new agreement on the utilization of the land with the landowner. If the land and building are owned by the same person, the purchaser must enter into an agreement with the seller on the utilization of the land (either before or after the sale and purchase).
3. Security Interest
Consistent with the Indonesian mortgage law, GR 16 allows a building to be charged with mortgage along with the land, provided the owner is the same.
If the building owner and the landowner are different, or if a landowner intends to encumber only the building but not the land, GR 16 opens the possibility for the building to be charged with fiducia security (a building that has been charged with a mortgage cannot be encumbered with fiducia security). This clarification is believed to make Indonesian market more commercially attractive.
4. Insurance Program
Unlike the previous regime where the owners of buildings for public use must apply for an insurance program covering building failures during the building utilization period, under GR 16/2021, the insurance program is now optional.
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