News & Announcements

W&P Newsletter – New Flexibility in the Requirement to Develop Public Apartments

Under Law No. 20 of 2011 on Apartments (“Apartment Law”), apartment developers (“Developers”) that develop commercial apartments are required to also develop public apartments with an area of at least 20% of the total floor area of the commercial apartments they build. For many years, this has not been commercially attractive to Developers.

However, the Omnibus Law, as implemented by Government Regulation No. 13 of 2021 (“GR 13”), offers a more practical alternative to such public apartment development requirement by allowing Developers to pay the so-called ‘public apartment development fund’ to the Accelerating Body for Housing Development (Badan Percepatan Penyelenggaraan Perumahan or “BP3”).

If Developers choose to pay the development fund, they must first submit their development fund calculation to BP3, and BP3 will assess the proposed calculation, among others, by taking into account the following:

  1. 20% of the total floor area of the developed commercial apartments;
  2. price per square meter of the public apartments, to be determined by the Central Government;
  3. development costs against the selling price; and
  4. management fees in relation to the use of the public apartment development fund.

Once the proposed amount is approved by BP3, Developers must deposit the fund with BP3 at the latest on the issuance date of the Apartment Certificate of Worthiness (Sertifikat Laik Fungsi Rumah Susun), which serves as evidence of the apartments’ worthiness for safe utilization.

GR 13 mandates BP3 to use the fund to develop public apartments in the same regency/city or province as that of the commercial apartments.

The table below shows a comparison of some advantages and drawbacks between simply paying the development fund and actually developing public apartments from the perspective of Developers:

Considerations Developing Public Apartments Paying the Development Fund
Costs and Value The construction costs are fully controlled by Developers. The amount of development fund payable by Developers is subject to the approval of BP3; therefore, Developers need to anticipate the possibility of BP3 coming up with a higher calculation.
Works and Efforts More works and efforts are needed since Developers need to be involved in the land acquisition process and construction of the public apartments. No land acquisition and construction works are required. The obligation is deemed discharged once the fund is deposited with BP3.
Future Liabilities As the constructing party, Developers assume liability related to the public apartments. Developers have no liability related to the public apartments.

 

As GR 13 requires further implementing regulations from the President of the Republic of Indonesia and the Minister of Public Works and Housing on the methods to calculate the fund and deposit, we will stay alert on any regulatory updates on this matter and will certainly keep you posted on any useful development.

Please reach out to us at info@wplaws.com or any of our lawyers if you have any question on the above.