By Helmi Amnijar, January 2024
Overview of Regulatory Compliance for Industrial Buildings in Indonesia
The Building Construction Approval (PBG-Persetujuan Bangunan Gedung), Certificate of Feasibility (SLF-Sertifikat Laik Fungsi), and Certificate of Building Ownership (SBKBG-Surat Bukti Kepemilikan Bangunan Gedung) are essential regulatory elements in Indonesia’s building development framework, particularly for the industrial sector. The PBG replaces the previous Building Construction Permit (IMB-Izin Mendirikan Bangunan), which has been revoked. PBG is regulated under Law No. 6 of 2023 concerning the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation Law and Government Regulation No. 16 of 2021 on the Implementation of Law No. 28 of 2002 on Buildings. In an effort to enhance the investment climate and ease of doing business, Law No. 6 of 2023 simplifies basic licensing requirements, including those related to PBG and SLF. Below are key legal aspects of PBG, SLF, and SBKBG and their impact on the industrial sector.
Key Definitions
- PBG is a permit granted to a building owner to construct a new building, alter, expand, reduce, and/or maintain a building in accordance with applicable technical standards.
- SLF is a certificate issued by the local government stating that a building is fit for use.
- SBKBG is a document that serves as proof of legal ownership of a building.
PBG is required before physical construction begins. SLF is issued after construction is complete, verifying that the building is ready for use. SBKBG is an official ownership document issued to the building owner by the government.
Strategic Value of PBG, SLF and SBKBG for Legal Safety and Market Access
a) PBG
- Legal Compliance Assurance: Ensures that construction complies with all laws and technical standards, reducing legal risks.
- Construction Quality Oversight: Enables authorities to monitor compliance during the construction process.
- Enhanced Competitiveness: Buildings with PBG can better compete in the market, signalling adherence to standards.
- Streamlined Permitting Process: PBG often serves as a prerequisite for other permits, such as operational licenses.
b) SLF
- Safety Assurance: Guarantees compliance with safety standards, protecting users.
- Legal Certainty: Confirms that a building has met all legal requirements.
- Increased Property Value: A valid SLF enhances a building’s market value.
- Investment Incentive: Reassures investors regarding a building’s viability and compliance.
- Support for Sustainable Development: Encourages consideration of sustainability and energy efficiency.
c) SBKBG
- Ownership Security: Serves as legal proof of building ownership, preventing future disputes.
- Building Legality: Confirms the building’s lawful status, aiding in administration and permitting.
- Permit Support: SBKBG are often needed for applying other permits.
- Value Enhancement: Buildings with SBKBG are more marketable and valuable.
- Ownership Recordkeeping: Assists government in spatial planning and infrastructure development.
- Legal Protection: Acts as strong evidence in case of disputes.
Application Procedures for PBG, SLF, and SBKBG
a) PBG Application Process
- Submission of Technical Design Documents: Building owners must submit technical planning documents to the relevant local or central government authorities to obtain the PBG before commencing construction.
- Planning Consultation and Issuance: Involves registration through the Building Management Information System (SIMBG-Sistem Informasi Manajemen Bangunan Gedung) and verification of technical standards and a technical compliance review. The issuance process includes the determination of local retribution fees, payment of the fees, and formal issuance of the PBG.
b) SLF and SBKBG Application Process
- Application via SIMBG: Applicants upload the Functional Feasibility Statement.
- Functionality Inspection: For new buildings, the SLF is issued based on inspection results submitted by the building owner during the construction phase. In the case of existing buildings—whether or not they already possess a PBG – as well as for SLF renewal or post-disaster reconstruction, the SLF is issued following a functional feasibility assessment conducted by an authorized Technical Assessor.
- Issuance of SLF and SBKBG: Issued within three working days after document submission.
SLF Renewal Periods:
- 20 years for single-family homes and row houses
- 5 years for other buildings
The renewal of the SLF must be preceded by a functional feasibility assessment, which considers the alignment between current site conditions and/or as-built drawings with the most recently issued SLF and applicable technical standards.
Regulatory Requirements for Industrial Companies
Industrial firms building new structures or renovating facilities must obtain PBG, SLF, and SBKBG. This applies to all types of buildings, including factories, warehouses, and production facilities. Failure to comply may result in administrative and criminal sanctions.
Sanctions For Non-Compliance with PBG
1. Administrative Sanctions:
- Written warning
- Construction activity restrictions
- Temporary or permanent construction halt
- Temporary or permanent halt of building use
- Freezing or revocation of PBG or SLF
- Demolition orders
2. Criminal Sanctions and Fines:
- Imprisonment up to 3 years or fines up to 10% of building value if causing property loss for someone;
- Up to 4 years’ imprisonment or 15% fine of building value if resulting in an accident which results in permanent disability;
- Up to 5 years’ imprisonment or 20% fine of building value if causing loss of life.
For Operating Without SLF:
1. Legal and Administrative Risks:
- Buildings without SLF may be deemed illegal. Sanctions may include fines, sealing, or demolition.
- Business license delays or revocation may apply, affecting operational continuity and financial stability.
2. Safety and Security Risks:
- Without SLF, the building may not meet safety standards in structure, electrical installation, or fire protection systems, endangering occupants.
3. Property Transaction Challenges:
- Absence of SLF complicates sale or lease transactions, as buyers/tenants may question legality and safety.
4. Insurance Invalidity:
- SLF is often required for insurance coverage. Claims may be rejected if SLF is missing.
Conclusion
PBG, SLF, and SBKBG serve to ensure legal certainty of ownership and use, demonstrate regulatory compliance, and provide safety assurances that protect users and support investment confidence. These documents significantly influence foreign investment in Indonesia’s industrial sector by:
- Providing legal certainty for investors
- Enabling more efficient, transparent permitting through SIMBG
- Guaranteeing construction quality and safety
- Enhancing Indonesia’s global competitiveness
- Reducing investment risks through verified regulatory compliance
Source
- Skylight Analytics Hub
- Law No. 28 of 2002 on Buildings
- Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation
- Government Regulation No. 16 of 2021 on Implementation of Law No. 28 of 2002 on Buildings
- Ministerial Regulation No. 27/PRT/M/2018 on Certificate of Proper Functionality
- Ministerial Regulation No. 3 of 2020 on Amendments to Ministerial Regulation No. 27/PRT/M/2018