What is Developer Liability? | Frequently Asked Questions

In the property sector, we sometimes read news about developers who have not fulfilled their obligations to local governments to build public facilities. Within DKI Jakarta Province, the accumulated value of these obligations varies, depending on the time period since when the calculation began. Some say that the total obligation of developers amounts to Rp 22 trillion, while others state Rp 13 trillion. However, how exactly is the process of incurring obligations until they are recorded as chronic receivables for the government?

What exactly is developer liability?

Developers who build ABC have an obligation to build public facilities. This obligation is stated in the Principle Permit for Space Utilization (IPPR) issued by the local government. The form of obligation is to build a number of public facilities and then submit them to the government. Having an IPPR is one of the requirements in the process of obtaining a Building Permit (IMB).

Who and how is the developer's liability determined?

Local governments determine the types of obligations based on certain calculations, such as built-up area or building capacity. If building apartments, private developers will be required to build subsidized flats. If building offices, the developer is usually required to build an employee canteen or other facilities.

Why is the developer charged with the obligation when he has already paid taxes?

It is true that developers also pay taxes and comply with other requirements before obtaining IMB. This obligation is one of the developer's additional contributions to the city where they conduct commercial activities. Therefore, the form of obligation is mostly in the form of facilities or infrastructure.

Why have so many developers not fulfilled their obligations?

Carrying out obligations and handing them over after construction to the local government is not as easy as one might think. To build subsidized flats, for example, developers must wait for the land to be ready from the government. As long as the land is not available, the obligation will continue to be recorded as the developer's debt.

The transfer of obligations is also often constrained. Obstacles usually occur if the agency or body responsible for maintenance is not ready. Readiness includes budget, human resources, and the required maintenance technology.

The effect is not just unpaid obligations from the developer side and uncollected receivables from the government side. The delayed submission of obligations also has an impact on the longer it takes for the Certificate of Fitness for Function (SLF) to be issued. Without SLF, the handover of Sale and Purchase Deed to consumers cannot be done. Everyone loses, including consumers.

That is why policy innovation in the governance of the implementation and delivery of developer obligations is imperative. Vibrant economic growth arises from policy innovation. The Jakarta Property Institute (JPI) is ready to help the government explore alternative solutions so that developers can fulfill their obligations immediately.