Construction documentation, how to legalize a building in Bali?

There are more and more developers in Bali, and more and more questions. Just recently, I addressed the issue of “WHICH DEVELOPER TO CHOOSE IN BALI?” in one of my interviews.

You can watch my answer here - https://youtu.be/1zMKYwLL_yc?si=mduhPUzAfwORGN2l.

Bali Legal is a company that helps you start your business, handles your accounting and tax matters, and provides legal support for your business processes in Bali.

Upload date:2024-10-01T00:00:00

Construction is indeed moving at a crazy pace.

The number of newly opened development companies in Bali exceeded 300 last year. On our personal balance at BALI LEGAL for tax support, more than 70% of companies are developers.

We have already covered several important points regarding investing in Bali for new developers. In particular:

These two articles will provide a clear understanding of how to approach the process of investing in construction correctly and avoid common scams.

How to Legalize Construction When the Land Has Already Been Verified and Payment for Lease/Purchase Has Been Made?

So, you've decided to build.

To legalize the construction, you need to have:

And two certificates:

Both certificates must be obtained in this order: first the PBG, then the SLF.

Obtaining these certificates often presents the biggest challenges, as there are two main pathways to legalize construction in Bali.

The choice of pathway depends on the current stage of your project. This isn’t about whether the project is finished or not — legalizing a building without a project is IMPOSSIBLE..

It’s about the degree to which the project has been approved and whether changes are planned during the construction process.

Read the article to the end, and you will clearly understand what this is all about.

Path 1: Legalization After Completion of Construction

This is the most common pathway. Due to frequent changes, adjustments, concept shifts, and unanticipated factors during the construction process, many choose to pursue legalization after the construction is complete, as it offers a certain degree of freedom.

You don’t need to coordinate every detail with commissions, and the construction process can proceed quite quickly. Many large developers on the island also initially utilized this method.

The photo from website https://amusementlogic.ru/

How It Works

You first complete the construction, and once the finishing touches are done, you apply for both the SLF and PBG at the same time.

Indonesian law has a procedure stating that if you obtain the SLF, you automatically receive the PBG (if it wasn’t obtained beforehand).

The application fee for the SLF and PBG is paid without a guarantee of receiving the certificates. This payment is intended for the special agency PUPR (Kementerian Pekerjaan Umum dan Perumahan Rakyat Republik Indonesia) to allocate a commission to assess the construction's quality according to regulations.

The application fee for the SLF varies and depends on the scale of the construction.

After submitting the application for the SLF, you will receive an application number within a few weeks and wait for the commission's visit.

PUPR Commission:

Sometimes, the list of violations is too extensive, or some issues may be impossible to resolve. In such cases, the property owner incurs additional costs for the “legalization” process.

If your project includes engineers, you can assess its compliance with local regulations yourself (before submitting the application with the project to PUPR) using the current construction standards (SNiP) for 2023 for the Kuta Seletan area, available here: https://drive.google.com/file/d/1lL-_HdINNYjwG6lCShz0fdy6KehhxQY9/view?usp=sharing.

The amount of additional expenses directly depends on the size of the project, the number of violations, and how critical they are. The approximate funding required at this stage, aside from the application fee for the SLF, if the building does not meet the requirements, can range from 5,000 - 50,000 USD.

After the commission approves the project and agrees to issue the SLF and PBG certificates, you will receive all the documents in about 2-3 months (3-6 months in total) without any additional payments.

Total Expenses and Payment Plan for a Property Without Violations (as in the Kuta example):

Total Expenses and Payment Plan for a Property With Violations (as in the Kuta example):

The biggest downside of this approach is the unpredictability of expenses. You might spend 4,000 USD, or you could end up spending 20,000 USD. However, you don’t have to wait for the permitting documents, and you can start building right away. Plus, you have much more freedom to make changes to the project during the construction process.

2nd Path: Legalization Before Start

This path can also be called "not a step aside," because here your project becomes a literal law that you must strictly adhere to.

The costs and overall expenses for this scheme are more predictable; however, the sequence of actions is entirely different..

So, just like in the previous case, the project must already be prepared. It is for the approval of this project that you will send the application to PUPR. Once PUPR receives your application, specialists will immediately identify the deficiencies in the project and what needs to be changed for you to obtain the PBG certificate. Essentially, this is the building permit.

This is quite convenient, as it allows you to understand in advance which specific project will definitely receive certification.

If you have engineers in your project, you can assess it for compliance with local regulations using the current SNIP 2023 for the Kuta Seletan area: - https://drive.google.com/file/d/1lL-_HdINNYjwG6lCShz0fdy6KehhxQY9/view?usp=sharing.

The cost of submitting the application for the PBG will be approximately the same as in the previous pathway:

After correcting the deficiencies in the project documentation and submitting it for additional approval, you will receive a PBG application number. All that remains is to wait for the issuance of the PBG certificate (approximately 6-9 months in total) and to strictly follow your own project during the construction process.

IN TOTAL, the expenses and payment plan for such a scheme for a property with or without violations, as in the example from Kuta:

After the construction is completed and officially accepted by the Kementerian Pekerjaan Umum dan Perumahan Rakyat Republik Indonesia (Ministry of Public Works and Public Housing of the Republic of Indonesia), you can obtain an SLF certificate that describes the purpose of the building.

The SLF certificate is issued for both cases for a duration of 5 years and must be renewed according to this deadline. Currently, there are no established practices for renewing the SLF on the island, as the SLF and PBG certification system was implemented only 2 years ago, replacing the outdated IMB system (see photo above).

How are payments for PBG and SLF made? What are the responsibilities of contractors?

In Bali, there are companies that handle the legalization of construction. Typically, a developer either has their own team to address the following tasks:

Or they don't…

Regardless, it is important to understand that the contractor does not guarantee the final approval of documents. The overall payment for obtaining a building permit or both the SLF and PBG certificates is structured as follows::

Engaging specialists for:

This requires additional payment and provides guarantees for obtaining the documents. The cost of such specialists is usually calculated as a percentage of the state fees and can reach 25-30% on top of the total payment.

Together, we will make life on the island comfortable and legal!