Penalties too small for defiant developers<\/p>\n
Controversy over building permits is back in the news these
\ndays with the building of the 40-storey Hotel Mulia in South
\nJakarta which allegedly deviated from its 16-floor permit.
\nPanangian Simanungkalit, chairman of the Center for Indonesian
\nProperty Studies, talks about building licensing procedures.<\/p>\n
Question: Despite the government's 1985\/2005 spatial plan,
\nviolations by developers are rampant. A five-star hotel, Hotel
\nMulia, has allegedly built more stories than permitted...<\/p>\n
Answer: Tata Ruang has become Tata Uang (the spatial plan
\nhas become a money plan) because laws are negotiable with
\npolitical power and money. Laws sometimes lose power since they
\ncan be \"purchased\" with money.<\/p>\n
Many buildings have been constructed even before their
\nconstruction permits are issued. Why is this happening?<\/p>\n
Since laws can be negotiated with political power and money,
\ndiscrimination in law enforcement automatically occurs.<\/p>\n
Q: Is there a penalty for such a violation?<\/p>\n
A: Actually the developer has to pay a fine as a penalty for the
\nviolation. But the penalty is too small -- only about 8 percent
\nof the difference in the residual land value of the building
\nbefore and after the violation. In comparison, the fine is 50
\npercent in Singapore, a sum adequate for the government to build
\ninfrastructure needed to compensate for the impact of the
\nviolation. Because the fine in Indonesia is far too small
\ncompared to the advantages that the developer can obtain after
\nthe violation, such violations have now become a trend.<\/p>\n
Q: Former Jakarta governor Surjadi Soedirdja once complained that
\nhe found it difficult to control the issuance of building permits
\nto match the spatial plan. How many institutions are involved in
\nthe issuance of these permits?<\/p>\n
A: There are too many institutions directly or indirectly
\ninvolved, including the national land agency (BPN), the office of
\nthe State Minister for Public Housing, the Ministry of Finance
\nand Bank Indonesia, besides the local administration. In reality,
\nthere is a difference in perceptions among these institutions and
\na mismatch of policies and their implementation in the field.<\/p>\n
Bad attitudes among parties involved have also made it
\ndifficult for the governor to control the issuance of permits.<\/p>\n
Q: Has the government made efforts to make cuts in the
\nbureaucracy?<\/p>\n
A: It has shown its willingness to do so. But where would it
\nstart? I think there must be some correction from the outside,
\nlike the International Monetary Fund (IMF), which has recommended
\na reform package to salvage the country from its monetary crisis.
\nThe property sector should also have been included in its reform
\npackage because bad loans for this sector were the main cause of
\nthe monetary crisis.<\/p>\n
Q: Developers often complain about the too many permits they have
\nto obtain and the excessive levies they have to pay. What permits
\ndo developers need to start their projects?<\/p>\n
A: First of all, a developer must obtain recommendations from the
\nBPN on the availability of a plot of land in a certain location
\nbefore going to the local administration to process a location
\npermit.<\/p>\n
The developer then must obtain a number of other permits
\nbefore he or she is allowed to acquire the land. The BPN then
\nmeasures the land and checks whether it is a property under
\ndispute before issuing a certificate for it.<\/p>\n
The developer also must obtain permits for the design of the
\nbuilding, public facilities and all equipment related to the
\nbuilding, such as air-conditioners, power generators and electric
\nequipment. An infrastructure permit is needed for the development
\nof a housing complex.<\/p>\n
The developer is then allowed to start constructing the
\nbuilding if a construction permit is issued. After the
\nconstruction is completed, another permit for the building's
\nutilization is needed.<\/p>\n
Q: How long does it take for a developer to process those
\npermits?<\/p>\n
A: Because some of the permits can be processed simultaneously, a
\ndeveloper generally needs about nine months to obtain all the
\npermits before starting construction. Another one month is needed
\nfor processing the building utilization permit after construction
\nis completed.<\/p>\n
Q: How much are the official rates set by the related offices for
\nall those permits?<\/p>\n
A: The official rates are only about 3 percent to 5 percent of
\nthe total costs of property projects.<\/p>\n
Q: Do developers have to spend extra money for invisible costs
\nwhen processing those permits?<\/p>\n
A: Yes. The long bureaucratic procedures for processing the
\npermits, land acquisition, construction and marketing are so
\nattractive to related officials that some ask for parts of the
\n\"large gains\" expected from the property business.<\/p>\n
Such invisible costs generally raise the expenditures for
\nprocessing the permits to 20 percent of the costs for
\nestablishing a housing complex and a range between 10 percent and
\n15 percent for other property projects.<\/p>",
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"sponsor": "Okusi Associates",
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