Category: Real Estate

Principle Regulations Governing Batam Island and Its Effect on Property Sector

Mar 22, 2010 | , ,

Batam has a strategic geographical location as the closest island to Singapore and Malaysia, which strategically located in the international shipping route. As the special zone for multinational trade area, Batam has a special treatment from the Government of Indonesia. This specialization can be seen from the several regulations on Batam status, which are as follows:

Batam Island as the business area of Bonded Warehouse regulated in the Presidential Decree of Republic of Indonesia Number 41 of 1978 as amended lastly by the Presidential Decree of Republic of Indonesia Number 25 of 2005.Batam, Rempang and Galang (which also declared as an Industrial area), is developed to serve several main functions, namely: industrial, warehouse, trade, and transshipment.
Free Trade and Free Port Zone regulated in the Government Regulation Number 46 of 2007 on the Free Trade Zone and Free Port Zone Batam.Batam has been determined as a Free Trade Zone (“FTZ”) and Free Port Zone (“FPZ”) which it gives the guarantee and the protection for all investors to conduct their business in Batam.
Tax liberation regulated in the Government Regulation Number 2 of 2009.Batam was not only determined as place of warehousing, but also for place of processing with the liberation for Import Duties (Bea Masuk), Customs and Excise (Bea Cukai), Value Added Tax (PPN), and Luxury Goods Tax (PPnBM) which can be enjoyed by the entrepreneur who has obtained permission in Batam.
Economic Cooperation regulated in Joint Statement by the President of the Republic of Indonesia and the Prime Minister of the Republic of Singapore.On June 25, 2006, the President of Republic of Indonesia and the Prime Minister of Republic of Singapore committed the joint statement of the Framework Agreement on Economic Cooperation between the Government of the Republic of Indonesia and the Government of the Republic of Singapore in the Islands of Batam, Bintan and Karimun.

The stipulations of Batam in becoming a free trade area have been attracting the investors both of foreign and local investors. A large amount in the investment flows on Batam also gives a large impact in some businesses in Batam. With regards to the development of Batam island as a FTZ and FPZ, Batam would need a high-quality infrastructure for supporting the investment development; such as residential, entertainment facilities and other supporting facilities. Furthermore, one of the potential businesses in Batam is in the property area.

The great amount of business opportunities in Batam invites many entrepreneurs to establish their business in Batam. There are new properties projects in Batam, with many types and segmentation, such as:

1. Very low-class and middle-class housing development;

2. Low-class houses;

3. Middle-class apartment;

4. The trade center;

5. Luxurious trade center and a high-class apartment in the certain location;

6. Condominiums.

In order to maintain the local and foreign investment in Batam, the Government always assures the legal certainty in the use of property services. There are a several Government Regulations to support the investment itself, which are as follows:

The Government Regulation Number 46 of 2007 on Batam Free Trade zone and Free Port Zone On the Management and the Usage of Land in the Industrial Area of Batam Island;In this regulation, the Government gives the authority to Free Trade Zone and Free Port Zone Management Body (Badan Pengelolaan Kawasan Perdagangan Bebas dan Pelabuhan Bebas) for developing investment, including regulating the allocated land permit or business permit.
The Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build and Right to Use of Land and the Government Regulation No. 41 of 1996 about residences ownership by foreigners who are domiciled in Indonesia;
Regulation of State Minister of Agrarian/Head of National Land Authority No. 8 of 1996 about changes on Regulation of State Minister of Agrarian/Head of National Land Authority No. 7 of 1996 about the conditional residences ownership by foreigners who are domiciled in Indonesia.
Circular letter of State Minister of Agrarian/ Head of National Land Authority No. 110 –2871 of 1996 about the implementation of Government Regulation Number 41 of 1996.
The Government determines the rights of land which can be owned by foreigner who wish to stay in Batam in order to maintain and manage their investment.

All of these things reflect the commitment of the Indonesian government to fully support the development of Batam island. The development of Batam Island as FTZ and FPZ also make Batam one of a strategic investment area on property and real estate projects in Indonesia.

Grace Tobing

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Summary of Government Regulation No. 41 of 1996 on Residences Ownership by Foreigners Who Are Domiciled in Indonesia

Mar 8, 2010 | ,

The purpose of the Government Regulation No. 41 of 1996 (the “GR No. 41”) is to give a legal certainty for foreigners who own property in Indonesia. Foreigners who are domiciled in Indonesia are foreigners who give benefits for national development.

The requirements of property ownership by foreigners who are domiciled in Indonesia are as follows:

1. Property which is built on a land:

Having a Right to Use (Hak Pakai) over a state land;

Having a Right to Use which based on an agreement between the foreigner and the holder of rights over land (for example: Rights to Own or Rights to Build)

2. Strata title units which are built on a land with Right to Use over a state land.

The agreement between foreigner and the owner of the land must be made in writing, with a deed made by a land official (Pejabat Pembuat Akta Tanah), registered in the book of land (Buku Tanah) and certificate of Right to Use. According to the Law of Principles of Agraria, the agreement between foreigner and the owner of the land is not a lease agreement or cultivated agreement. The agreement is made with the terms agreed by the parties but shall not exceed 25 (twenty five) years time period. The term of the agreement can be extended with a new agreement which shall not exceed another 25 (twenty five) years time period, provided that the foreigner is still domiciled in Indonesia.

If the foreigner is no longer domiciled in Indonesia, in a period of one year, the foreigner must release or transfer their rights over the property to other who is eligible. If the foreigner did not release or transfer it, then the state will take over and sell it through a tender. For property which is built over a land owned according to an agreement with the owner of the land, then the property will belong to the owner of the land. The results from the tender of house and land held by the Government will be returned to the foreigner after deducted by tender fee, stuffs and other fee.

Handy Samot

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Legal Aspects of Building in Indonesia

Jan 14, 2010 | ,

Buildings are made to support people’s need of spaces. Building has many functions such as work space, business place, education place, recreation place and many more. In developing countries, especially for small countries, building is used to maximize the use of spaces.

In Indonesia, building is regulated in the Law No. 28 of 2002 on Building (“Law of Building”). According to Law of Building, the definition of building is a physical form of construction works which integrate with the land it stands on, partly or wholly stands over and/or under ground or water, having a function as a place for people to do their activities, either for residence or place to live, religious activity, business activity, sosial activity, culture or any specific activity.

Construction of building is held with the principle of utility, safety, balance, also the harmony between building with its environment. The regulation for building is intended for:
1. Materializing a functional building and suitable with the construction building order which is harmonious and balance with its environment;
2. Materializing an orderly execution of building that ensures technical reliability in terms of safety, health, comfort, and convenience.
3. Materializing a legal certainty in the execution of bulding.

As for building function, according to Paragraph 1 of Article 5 Law of Building, building functions consist of residential function, religious, business, social and cultural, as well as special function. Paragraph 7 of Article 5 stipulated that one building can have more than one function.

Basically, Law of Building is regulating the requirements of a good and fully functional building. As for the implementing regulation of Law of Building is Government Regulation No. 36 of 2005 on Implementing Regulation of Law No. 28 of 2002 on Building (“GR No.36 of 2005”).

The purpose of GR No. 38 of 2005 is to materialize the implementation of orderly buildings, both administratively and technically, in order to materialize a building that is functional, reliable, which ensures safety, health, comfort, and ease of use, and balance and in harmony with its surroundings.

Some of the provisions in GR No. 38 of 2005 still need guidance and technical standard as the guidance to construct buildings. To do so, Minister of Public Works issued the Minister of Public Works Regulation No. 29/PRT/M/2006 on Guidance on Building’s Technical Conditions (“Minister Regulation”). This regulation includes everyone so that every party, person, legal entity and also government body, in constructing building shall fulfil the technical conditions set out in the Minister Regulation.

Retno Anggraeni

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Parties That Can Be Involved In Legal Conflicts in Condominium

Jan 7, 2010 | ,

A life in condominium is different from life in ordinary house. Tenants not only have next door neighbours but also have upstairs and downstair neighbours. In condominium there is also a governing body that regulates the management of the condominium environment, maintenance and the construction of environmental infrastructure and social facilities for the purpose of living together with all tenants in condominium.

However, legal conflicts often arise in living in a condominium. The parties involved in are as follows:

a. Developer;
Developer acts as condominium manager until a Tenant Association is established. Article 65 of Government Regulation No. 4 of 1988 on Condominium regulates the period of condominium management by the developer, at least three (3) months and a maximum of one (1) year since the establishment of Tenant Association.

Problems that often arise from the interests of developer are:
1) Developer decides on the charge of condominium management fees. Potential conflicts that arise are objections to the number of the fee that will be charged towards the tenants, who may feel that it is too high.
2) Developer basically has the principle of getting profit in constructing condominium, and it can be applied by determining service charge or management fees one sidedly.

b. Tenants Association;
Tenants Association is a representative of tenants, it takes care the interests of condominium tenants. Potential conflict that might arise is the decisions made by the Tenants Association which are not necessarily in the best interests of the tenants. This is happened often because there are strongholds that support or oppose the management of a Tenants Association. This has happened in some places.

c. Owner and Tenant;
Owners and tenant as the parties who are using a strata title unit and its environment, have an obligation to comply with disciplinary or house rules in accordance with the Article of Association and Bylaws, to pay management fees and sinking fund, to pay fire insurance premium, and to maintain the strata title unit and its surroundings. Potential conflict that may arise is if there are violations againts the rules, committed by the owner and/or tenants, and also disobedience of the owner and/or tenants in paying the management fees.

Conflicts that are possible to arise as described above are the result of the absence of detailed regulations as a legal protection for regulating the management and condominium’s life in Indonesia. Although there are Law No. 16 of 1985 on Condominium (the “Law of Condominium”) and Government Regulation No. 4 of 1988 on Condominium, but these rules cannot comprehensively accommodate the problems that can arise in living in condominium.

Ways that can be done to accommodate the problems above are as follows:
a. Toset a proper regulation and the provisions in the Article of Association and Bylaws which govern the things that might potentially inflicting legal conflicts;
b. Socialization from the housing agency or Regional Government about life in a condominium;
c. Guidance and instruction on how to manage condominium properly and effectively.

Ardhityo Rompas

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For the last 15 years, our members have written many articles that have been published in various blogs that we manage, including Indonesia Real Estate Law blog and Hukum Properti blog. Our members have also participated in various directories and websites within and outside our firm's blogs, including different legal topics outside real estate-related topics. Thus, this blog is set up as a portal of all of our articles and materials that our members have written to date, within and without our firm's blogs. This blog covers a wide-array of topics, different from specialized topics as in our previous two blogs, Indonesia Real Estate Law and Hukum Properti. We build this blog to be a main source for the readers to understand the vast legal knowledge of our firm and which our firm will continue to share.

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