APPRAISAL INDONESIA

Indonesian Valuation Standard (SPI) Edition VI – 2015

Posted on January 1, 2016

Effective from 1 January 2016, the Indonesian Valuation Standard (Standar Penilai Indonesia/”SPI”) has been updated from Indonesian Valuation Standard (SPI) 2013 to Indonesian Valuation Standard (SPI) Edition VI – 2015.  SPI is mandatory for all valuers who are practicing valuation in Indonesia.  The standard is adhered in connection with the Indonesian Valuers Code of Ethics (Kode Etik Penilai Indonesia/KEPI).  SPI is made by KPSPI.

The Purpose of SPI

The purpose of SPI is as follow:

  1. Encourage valuers to carefully define and understand the needs and requirements of the client, and to provide certainty to the assessor that the assessor is equipped with an adequate assessment standards to meet those needs.
  2. Promote the use of valuation basis and consistent assumption in the assessment and selection of appropriate valuation basis according to the needs of the client.
  3. Assists the valuerto achieve professional competence with a relatively high standard in the preparation and implementation of valuation assignment.
  4. Ensure that a valuation report is produced is not ambiguous and is comprehensive, easy to understand and contains opinions and information, which are required and must be obtained by readers.
  5. Ensure that references are published in the valuation report contains information that is clear, accurate, and appropriate so as not to mislead.

 

 

Indonesian Valuation Standards 2013

Posted on May 17, 2013

The Indonesian Society of Appraisers (ISA) has just issued a new valuation standard in 25 April 2013.  The board claim that the standard adhere to the International Valuation Standard 2011 that is issued by International Valuation Standards Council in July 2011, and using references from other standards around the world, that is adjusted to the needs and condition of the valuation practice in Indonesia.  This is the fifth edition of the Indonesian Valuation Standards (previous 2007), and will be called KEPI and SPI  (Standar Penilaian Indonesia) 2013.

KEPI and SPI has important role for the valuers, users, government, and other bodies.  KEPI is the moral ground, while SPI is the practice guide of valuation in Indonesia, while from the user it is as a guide to understand and using the valuation reports.

KEPI and SPI 2013 is made following the systematics of International Valuation Standards where KEPI is a separate part from SPI, but printed as one.

SPI 2013 is principle base, with platform of property and business valuation.  Di this edition, the term “property” is replace by “asset or liability”, where in this edition, the terms have the same definition in Real Property, Personal Property, Business, or Financial Rights.

With the application of the new standard, it is hoped that Indonesian Valuers will have more profesionalism and at the same level of other valuers in other countries, and can compete internationally.

Jakarta Hotel Market Review 2010

Posted on March 18, 2011

As the capital city of Indonesia, Jakarta is bustling with commerce.  The hotel market is one of the most productive income-producing properties in Jakarta.  How is the Jakarta hotel market in 2010?  Read on this property research piece, courtesy of Colliers International Indonesia.

Jakarta Hotel Newcomers and Prospects

During the year 2010 four new hotels began to operate Jakarta: a 3-star hotel, two 4-star hotel and one 5-star hotel. Kawanua Aerotel, a 3-star the hotel has 79 rooms and was developed by North Sulawesi provincial government and managed by Aerowisata. From this hotel 11 floor, 10 operated as a hotel and one as their Jakarta Representative Office. Meanwhile, 5-star hotels Merlynn Park KH Hasyim Ashari also operates under the Sunlake Hotel Group. Hotel Merlynn Park, from 26 floors, consisting of 301 rooms and ballroom. Other hotels, Harris 4-star hotel in Kelapa Gading, which Under Tauzia Hotel management, operates with 226 rooms. In the last quarter of 2010, Best Western Mangga Dua launched. This is the first Best Western hotel chain in Jakarta, operates the first 118 of the planned total of 168 room.

In short, during the year 2010 four new hotels giving a total 724 rooms. Conversely, hotel market also saw the closing down one 3-star hotel, Sofyan Cikini (111 rooms), has been operating for about 27 years.  The hotel is owned by PT Hotel Sofyan Language. and sold to PT Cempaka Jaya Wenang Rp44.47 billion. PT Cempaka Jaya is Wenang developers to Villa Del Sol and Villa Earth Ciherang, both located in Cipanas, West Java. developer has also developed Pearl Kemang Townhouse and Pearl UB Residence in Jakarta. All in all, with the introduction of of four hotels, minus Sofyan Cikini Hotel, number of hotel rooms in Jakarta 23 638, of a total of 98 hotels.

Based on the classification, the percentage of space both 4-star hotel and 5-star hotel is 39%, which 4-star hotel has 9154 rooms in 35 hotels. In the short term, the remaining 50 rooms of Best Western Mangga Dua will be launched in 2011. Furthermore, in the same year, Jakarta will receive another 370 from the operation of a hotel room in Pullman Hotel Central Park commercial complex in West Jakarta.


Source:  Colliers International Indonesia

Over the next three years, it is estimated that the supply of hotel rooms will grow at 6.3% per year, with hotels 5-stars as the largest contributor, with 2407 rooms. During the same period, Jakarta should see an additional 804 rooms of a 3-star hotels and 1575 rooms of 4-star hotel. It is interesting to note that some future development of hotels will be built in the compound mixture of commercial uses such as Pullman in Central Park, County Aryaduta in Kemang Village, Aryaduta Hotel & Convention in St. Moritz, hotels in Gandaria City and hotels in Kota Kasablanka.

Source:  Colliers International Indonesia

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REIT in Indonesia: Why Not?

Posted on January 10, 2011

REIT or Real Estate Investment Trust is an investment vehicle (trust) that pool investor funds to purchase a portfolio of properties.  A REIT may be sponsored by a property company that has already had a portfolio of properties and wanted to get more cash to purchase more properties.  Normally, it has two unique characteristics: investment in income-producing properties, and almost all of its profits distributed to investors as dividends.

By the time I write this article (January 2011), there are two REITs originating in Indonesia, but not listed in Indonesia.  It is the First REIT, and LMIR REIT, both were listed by Lippo Group.  First REIT is a hospital and hospitality REIT with portfolio of several Siloam Hospitals in Indonesia (now add several more in Singapore), and a hotel, Imperial Aryaduta.  LMIR, or Lippo-Mapletree Indonesia Retail Trust is a REIT consisting of several shopping centres in big cities in Indonesia.  They were listed in Singapore  (SGX), thus not giving any capital-appreciation value to Indonesians.

So, why Lippo didn’t list its REITs in Indonesia?  And why there is no REIT in Indonesia?

In my opinion, it is Tax.

Bapepam (Financial Authority in Indonesia) has acknowledged a financial product very similar to REIT, named KIK-DIRE, short of Kontrak Investasi Kolektif – Dana Investasi Real Estat (literally translated as Collective Investment Contract – Real Estate Investment Fund).  However, this financial instrument, unlike in America, where REIT is often used for tax shelter, KIK-DIRE is very heavy in taxation.   KIK-DIRE can invest its fund with or without a special purpose company, but both are subject to the same tax.

In Indonesia, a formation of KIK-DIRE (Indonesia’s REIT) is regarded as a real estate transaction, plus PPN.  In the sale of a real estate, the buyer  has to pay 5% stamp duty of purchase value (BPHTB).  On top of that, they must also pay a 10% Value-Added Tax (PPN).  Plus another 5% of income tax (PPh).  So, in total, you spend  a whopping 20% tax to turn your assets into a REIT.  The same is true for transfer of a property to KIK-DIRE.

Until the tax regulation for REIT or KIK-DIRE is given a special tax consideration (like in Singapore) and somehow modified to be more issuer-friendly, you won’t see any REIT issued in the IDX.

Too bad.. because we still have many potential income-producing properties that is suitable for REIT in Indonesia.

Appraisal “Law” in Indonesia

Posted on August 24, 2010

As of now (October 2010), the appraiser profession in Indonesia is regulated by the Ministry of Finance with a regulation in the ministry level, namely PMK No.125/PMK.01/2008 tentang Jasa Penilai Publik. (right click and save as to download).  However, lately in the appraisers community, and the government of Republic of Indonesia has realize the importance of having a Law in the country level to regulate this profession.

As a comparison, Malaysia has had the law on appraiser profession since 1981, in the Laws of Malaysia, Act 242, “Valuers, Appraisers, and Estate Agents Act 1981”. Indonesia is targeting to have the law (“Undang-undang” or “UU”) about the appraisal profession in the year 2011. The talk in the Legislative (“Dewan Perwakilan Rakyat” or “DPR”) has been started since this year and it has been one of the priority.

Two decades ago, the appraisal profession is only known to a few of potential users. But now, with the advent of market-based economy, the importance of appraisers become very evident. So, in order for the profession to function and to protect all the stakeholders, including the public, a law is needed.

MAPPI or Indonesian Society of Appraisers has been a self-regulating professional society and the “gatekeeper” for this profession for a long time. MAPPI has issued the Indonesian Appraisal Standards 2007 (“Standar Penilaian Indonesia 2007” or “SPI 2007”), and Appraisal Code of Ethics (“Kode Etik Penilai Indonesia” or “KEPI) that all appraisers must obey if they want to be the member of MAPPI.

MAPPI is the only government-approved appraiser profession in Indonesia, making it the only organization overlooking the education of appraisers in Indonesia, and although not giving the license, is the prequisite for getting the appraisal license from the Ministry of Finance.

Land Titles in Indonesia

Posted on July 27, 2010

So, you want to buy a piece of land in Indonesia? The first you should know is the land title you will get.  Read this article first to know an overview of land titles in Indonesia.

The land tenure legal system in Indonesia is administered under the Basic Agrarian Law No. 5 Year 1960. Land tenures and titles are the jurisdiction of The National Land Agency (“Badan Pertanahan Nasional” or “BPN”), a government body that manages all grants, extensions, renewals of certified titles as well as running the land registration system.

Land ownership titles in Indonesia are divided into two broad categories, which is customary traditional land title (“Adat” land rights), and certified titles. The traditional land title is not registered in the BPN and is considered as having a lower degree of ownership power. Land plots containing such title are usually owned by inheritance. Other typical terminology for such land title is “girik” or “petok” or “pipil”. Girik was not actually an ownership title per se, but only the old version of the land tax bill, as compared to the modern bill called SPPT-PBB now. However, girik is considered a land title and can be the basis of a transaction. Land plots containing such “adat” title can be converted into certified titles as registered in the BPN. Buying the land with traditional land title is always riskier than with the certified titles.

Certified land titles are governed by The Basic Agrarian Law No. 5 Year 1960. They are registered at the local BPN office. The types of certified titles are as follow:

Freehold (“Sertifikat Hak Milik” or “SHM”)

This title grants absolute ownership of a plot of land. It is similar to a freehold title. This title is hereditary and may be held only by individuals (Indonesian citizens). Foreigners cannot be granted SHM.

Rights to Build (“Sertifikat Hak Guna Bangunan” or “SHGB”)

HGB title gives the right to construct and own buildings on a plot of land. The right is transferable and may be encumbered. HGB is the form of ‘freehold title’ that may be owned by Indonesian citizens and legal entities established under the Indonesian Law and domiciled in Indonesia, including foreign-owned companies and joint-venture companies. HGB title is the most common title that foreign companies use to hold real estate in Indonesia.

Banks and financial institutions will accept HGB land for mortgage and securitization purposes because it can be bought, sold and bequeathed and it is covered by the same planning and land use provisions as would apply with freehold land plots.

HGB title is granted by the National Land Agency for an initial period of up to 30 years and is extendable for a subsequent 20-year period. Upon the expiration of such extensions, new HGB title may be granted on the same land with the same terms.

This land title is actually a quasi-leasehold because it is can be renewed for infinity after it is expired. Thus, it can be sold as well as freehold and can be used for loan collateral as well as freehold. If you are a foreigner looking to own a piece of property in Indonesia, I recommend you sought this land title. You have to create a company in Indonesia, but it is better than obtaining only the SHP title.

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