Land Development Cluster – What You Need To Know
On 2 November 2020, the President of the Republic of Indonesia enacted the Law No. 11 of 2020 on Job Creation (known as “Omnibus Law”). We set out below some crucial changes regulated under the Omnibus Law that have impacts on the land development.
1. Suitability between business activity and spatial zone.
Before a company applies for the business licensing, it is required to ensure the suitability between its business activity and the spatial zone on its project location. In this case, the company will be granted an access to check the prevailing spatial zone, and if they are suitable, then the company should apply for a suitability of spatial utilization approval through the Online Single Submission (“OSS”) system. Once the company receives the approval, it can apply for the business licensing. It remains to be seen how the government will regulates the implementing regulations on the above matters.
2. Requirement before the transfer of a plot of land
Particularly for the transfer of a plot of land, the Omnibus Law stipulates that a legal entity should first obtain the suitability of spatial utilization approval before signing the land transfer deed before a Land Deed Official (Pejabat Pembuat Akta Tanah). It remains to be seen how the government will regulates the implementing regulations on the above matters.
3. Removal of the requirement to obtain an environmental permit.
The Omnibus Law stipulates that some specific licenses and recommendations will be integrated into the business license, including the environmental permit. Hence, a company is no longer required to apply for a separate environmental permit to the relevant regional government, which usually hinder the company’s business as the relevant regional government usually does not give certainty on time period and fees to obtain the environmental permit.
Nevertheless, depending on the business activity, the company is still required to obtain AMDAL (environmental impact analysis/analisis mengenai dampak lingkungan hidup) or to provide a statement latter on the compliance with UKL/UPL (environmental management and monitoring efforts/upaya pengelolaan lingkungan hidup/upaya pemantauan lingkungan hidup). The central government will determine the implementing regulations on this matter under the government regulation.
4. Simplify the procedure to obtain a building approval (persetujuan bangunan gedung) and a certificate of eligibility to function (sertifikat laik fungsi “SLF”).
Building construction permit (Izin Mendirikan Bangunan) has been replaced with the building approval. Similarly, the construction of a building can only be conducted after a company obtains the building approval. The company applies for the building approval through the OSS system.
In order to apply for the SLF, a company should appoint the construction supervisory service provider (penyedia jasa pengawasan konstruksi) or the construction management service provider (penyedia jasa manajemen konstruksi) to issue and submit the statement letter on the eligibility to function to the central government or regional government through OSS system.
It remains to be seen how the government regulates the implementing regulations on the above matters under the government regulation.
5. Commercial apartment developer obligation
The Omnibus Law stipulates that a commercial apartment developer is obliged to construct a public apartment with a minimum of 20% of the total floor area of its commercial apartment. The public apartment could be constructed within the same district or city of the commercial apartment. Alternatively, the developer may provide funds to construct public apartments, which the funds will be managed by the Housing Acceleration Agency (Badan Percepatan Penyelenggaraan Perumahan). The implementing regulations on the above matters will be further regulated under the government regulation.
6. Commercial housing developer obligation
The Omnibus Law stipulates that a commercial housing developer is obliged to have a balanced housing ratio between low cost, medium and luxury houses within the same area or the same regency/city. Alternatively, the developer may (i) construct public apartment within the same area, or (i) provide funds to construct public residences, which the funds will be managed by the Housing Acceleration Agency (Badan Percepatan Penyelenggaraan Perumahan). The implementing regulations on the above matters will be further regulated under the government regulation.
7. The strata title to own apartment unit (sertifikat hak milik atas satuan rumah susun “SHMSRS”) can be owned by foreigners
In addition to the Indonesian citizen and the Indonesian legal entity, the Omnibus Law states that (a) foreign citizens with relevant permit, (b) foreign legal entities in the form of representative office in Indonesia, and (c) representatives of foreign countries and (iv) state representative or international institutions domiciled in Indonesia can also own the SHMSRS. This is a significant change becuase previously a foreigner, with relevant permit, was only able to have a strata title to use apartment unit (sertifikat hak pakai atas satuan rumah susun/SHPSRS).
8. Land Bank Agency (Badan Bank Tanah)
The central government establishes the Land Bank Agency to plan, acquire, procure, manage, utilize and distribute the land under the Right to Manage (Hak Pengelolaan “HPL”). HPL can be granted to:
- Central government
- Regional government
- Land bank agency
- State-owned enterprise/regional state-owned enterprise
- State/regional-owned legal entity
- Legal entity appointed by the central government
Similar to the existing regulations, other land titles namely Right to Cultivate (Hak Guna Usaha “HGU”), Right to Build (Hak Guna Bangunan “HGB”) and Right to Use (Hak Pakai “HP”) can be granted on top of HPL. Further, the utilization of land under HPL can be granted to a third party by signing the land utilization agreement, in which many cases the third party can also be granted with other land titles (e.g., HGB) on top of the HPL.
9. Issuance of land titles for the underground space
The land titles for the land on the ground and underground can be granted to separate land title owners. For certain purposes, the government may issue the land titles in the form of HGB, HP or HPL for the underground space. Further, the underground space ownership limitation should be in accordance with the depth of use (batas kedalaman pemanfaatan) as regulated by the prevailing laws. The implementing regulations on these matters will be set out under the presidential regulation.
Do let us know if you have any questions regarding the above . You may contact our Partner, Hamdi, at: firstname.lastname@example.org. We are happy to help.
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