Ulrich Löffler, (1996):
Land Tenure Developments in Indonesia

6.3 Urban Fringe Pressure

On the urban fringe of Jakarta, land is predominantly privately owned. The pattern of land acquisition, according to STEINBERG, shows that there is a multitude of ways of acquiring land for building on:[FN 219]

• The household can buy directly from the landowner
• The household buys land from an informal sub-divider who buys it

• directly from the landowner or
• from an investor / speculator (who keeps the land in expectation of rising prices). In this case, the speculator has a preference for land in the vicinity of highway construction sites, housing projects, or new public facilities.

• The household buys the land from a real estate developer who has bought it

• either directly from the landowner
• or from an investor / speculator (however, little land passes hand from an investor to a real estate developer).

Here one must differentiate between formal private development and informal private development.[FN 220] Formal private development is carried out on land which is registered, for which there are the necessary permits, and where the planning and construction standards are satisfied. This formal private development is carried out first and foremost by real estate companies which buy land and develop houses ready for occupancy, shopping centers, factories, office buildings, hotels and industrial parks. Real estate companies may not sell land for construction purposes unless it is for ear-marked industrial areas where completely opened up parcels of land may be sold.

But all the houses which are built on land which has been bought or inherited by people or entrepreneurs who already have a land title, or obtain one, also belong to formal private development.

Activities carried out on land without a title are described as informal private development. Since permits are not issued for unregistered land, the building of houses takes place without permits as a rule, and thus outside the existing regulation systems. A further characteristic is that such a building is erected under the owner’s own direction, and with his own design and standards. Therefore, the regulations which concern the size and layout of the construction or property, and provisions for the necessary infrastructure are frequently not taken into account. On the other hand, this has the advantage for families with low incomes that the builders can build their houses without regard to construction regulations as low income housing. Some estimates are that approx. 20 % of the new buildings in towns have been erected without permission.[FN 221]

Informal private development predominantly takes place in rural areas on land which is under adat rights. The most varied of documents are presented here in an attempt to prove land ownership:

• property tax ("girik")
• notarized or unnotarized purchase receipts
• transfer papers, some sealed and witnessed by local officials, some not
• letters from kepala desa, or the sub-district head (lurah) or the district head (camat).

A part of the unregistered areas of land are kept with a so-called "possessory title". This refers to state land which has been farmed for decades by the owner and his family who can also prove this with various documents.

Only a small part of this informal development form the squatter settlements on state land. This mostly happens in DKI Jakarta. Squatters can also sometimes be awarded a so-called "surat garap" by a local official who acknowledges the right for squatters to "occupy" public land. This "letter" can be transferred and sold and thus creates a form of "legal squatters".[FN 222]

With informal land development, the owner of a kampung frequently divides the property further in order to create new land for construction with access to roads or connecting roads. By doing this he makes the settlement area all the more dense without the provisions for infrastructure in the form of drinking water, sewage etc. being extended. This can sometimes happen retrospectively if the settlement is chosen for a Kampung Improvement Program (KIP). A KIP gives the residents a certain legal security although land titles under community-based law are not converted into registered titles. Since the complexities of land tenure aspects were already well-known, KIPs were started from the beginning out of practical considerations so as to save time. The registration was supposed to be caught up on later.

Other concepts for urban development on rural land in urban fringe areas are the "Guided Land Development" (GLD) and the Urban Land Consolidation Programme. Both concepts will be discussed later (see chapter 8.2. and 8.3.).

The real estate companies, other private companies, the National Housing Corporation (Perumnas) as well as various private people usually register land when they buy unregistered land. Real estate companies must first of all receive a location permit (Izin Lokasi) and a land purchase permit before they are authorized to buy up land in a certain region. The Izin Lokasi gives the real estate company the exclusive right to carry out the purchase of the land in the designated area. Of course, in JaBoTaBek far more land is in the possession of an Izin Lokasi than has been previously developed. This leads to the blockage of the development of conurbation.[FN 223]

The private household which buys unregistered land and wants to have it registered must reckon with additional expenses (about 25 % of the sale price) if the land is bought from an informal sub-divider.[FN 224] The costs of registration, alongside the lengthy (6-12 months) and complicated process is the main reason why the landowners hesitate to register their land in spite of the advantages for them. They cannot use their land without registration as collateral, and in the case of land acquisition by the government, they would only receive little compensation.

At the end of the 80s, supposedly about 37 % of all landowners in Jakarta possessed a certificate. Of this 37 %, more than 4 / 5 of all landowners have full ownership rights (hak milik). Next to hak milik, the tax receipts (girik) already mentioned above and further letters play a part in this process. It is assumed that next to the 37 %, a further 24 % can produce a property tax receipt. This means that half the landowners in Jakarta cannot be called upon to pay property tax. [FN 226]

Proyek Operasi Nasional Agraria (PRONA)

In order to quickly raise the numbers of registrations, in 1981 the Government introduced a special land project (Proyek Operasi Nasional Agraria (PRONA)) through the Decision No. 189 / 1981 of the Minister for Home Affairs. PRONA is supposed to have the following functions:[FN 227]

• Mass land titling
• Popular legal education (agrarian law)
• Research on land disputes
• Resolving land disputes

As much land as possible is supposed to be registered within a short time under the auspices of PRONA. To achieve this objective, those regions in which maps exist and other data on land and land rights are available are being concentrated on first and foremost. Up to 1989, around 37,000 certificates for a relatively small fee of 23,700 RP had been issued in certain priority areas.[FN 228] According to WORLD BANK statistics, 900,000 titles have been awarded under PRONA. In total, 8,000,000 land parcels are said to have been registered since 1960, but only about 10 % of those in rural areas.[FN 229]

Since the middle of 1994, a Land Administration Project supported by the World Bank has been running, the important component of which is registration (see part 8.5.).

Land rights for foreign investors

Land rights also play an important role in the growing industrialization of Indonesia. This is also true, for example, for regulating land rights for foreign investors. Thus, since the Government Regulation No. 20 / 1994 has been in force, not only joint ventures, but also direct investments with 100 % foreign capital have been possible. Of course, there is no regulation about whether or not undertakings with 100 % foreign capital can have "hak guna bangunan" in the way it is possible for joint ventures in the agrarian sector and for certain industrial projects to have "hak guna bangunan" and "hak guna usaha" according to the Presidential Decree No. 34 / 1992.[FN 230]

The rights "hak sewa untuk bangunan" and "hak pakai" are aimed at both Indonesian and foreigners who have their residences in Indonesia, and also for foreign corporate bodies, which have a representation in Indonesia.