Restrictions on the Provision of Credit or Financing by General Banks for Land Acquisition and/or Land Processing

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 44 /POJK.03/2017
CONCERNING
RESTRICTIONS ON THE PROVISION OF CREDIT OR FINANCING BY GENERAL BANKS FOR LAND ACQUISITION AND/OR LAND PROCESSING BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in order to maintain the continuity and stability of economic growth, stable macroeconomic conditions and healthy banking operations based on prudential principles need to be continuously maintained; b. that excessive growth rates of credit or financing in the banking sector in the property sector are one of the factors that can affect monetary stability and banking health;
c. that the provision of credit or financing for land acquisition and land processing is an element that largely drives excessive growth in credit or financing in the property sector;
d. that in connection with the transfer of functions, duties, and authority for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to re-regulate restrictions on the provision of credit or financing by general banks for land acquisition and/or land processing; e. that based on considerations as referred to in letters a through d, it is necessary to establish a Financial Services Authority Regulation concerning Restrictions on the Provision of Credit or Financing by General Banks for Land Acquisition and/or Land Processing; Recalling:

1. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
2. Law Number 21 of 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
3. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING RESTRICTIONS ON THE PROVISION OF CREDIT OR FINANCING BY GENERAL BANKS FOR LAND ACQUISITION AND/OR LAND PROCESSING.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Bank means General Banks as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking, including branch offices located outside the country, as well as General Islamic Banks and Islamic Business Units as referred to in Law Number 21 of 2008 concerning Islamic Banking.
2. Credit means the provision of money or IOUs that can be equated with it, based on a loan agreement or agreement between a General Bank and another party that obligates the borrower to repay their debt after a certain period with interest, including:
   a. overdrafts, which are negative balances in customer checking accounts that cannot be paid in full by the end of the day; b. the takeover of receivables in the context of factoring activities; and
   c. the takeover or purchase of credit from other parties.
3. Financing means the provision of funds or IOUs that can be equated with it in the form of:
   a. profit-sharing transactions in the form of mudharabah and musyarakah; b. leasing transactions in the form of ijarah or lease-to-own in the form of ijarah muntahiya bittamlik;
   c. sales transactions in the form of murabahah IOUs, salam, and istishna’;
   d. loan transactions in the form of qardh IOUs; and e. service leasing transactions in the form of ijarah for multi-service transactions, based on an agreement or consensus between General Islamic Banks and/or Islamic Business Units and other parties that obligates the financed party and/or the party receiving financial facilities to return the funds after a certain period with a fee (ujrah), without a fee, or profit-sharing as referred to in Law Number 21 of 2008 concerning Islamic Banking.
4. Securities are debt instruments, bills of exchange, bonds, credit securities or any derivatives thereof, or other interests, or obligations of the issuer, in a form commonly traded in the capital market and money market, including commercial paper as referred to in regulations concerning the issuance and trading requirements for commercial paper through general banks in Indonesia.
5. Sharia Securities are investment certificates based on Sharia principles that are commonly traded in the money market and/or capital market, including sukuk, Sharia mutual funds, and other securities based on Sharia principles.
6. Property means assets in the form of land and buildings as well as facilities and infrastructure that are an inseparable part of the land and/or buildings in question.
7. Developer means a company that conducts land acquisition and land processing activities as well as building and/or facility and infrastructure acquisition with the intention of selling or leasing, and does not include toll road developers.
8. Land Acquisition means any activity to obtain rights to use land by providing compensation or remuneration to the party that previously had rights to the land.
9. Land Processing means any activity to make land ready for use or ready for construction.
10. Simple House means a non-storey house with a floor area of no more than 70 m² (seventy square meters), built on land with a plot size of 54 m² (fifty-four square meters) to 200 m² (two hundred square meters), with the highest construction cost per m² (square meter) for the construction of Type C official houses and storey houses with a floor area of no more than 36 m² (thirty-six square meters), as well as ready-to-build plots with a maximum area of 72 m² (seventy-two square meters), including shop-houses (ruko) with a total floor area of a maximum of 70 m² (seventy square meters), and kiosks or traditional market stalls for small businesses, with floor area sizes of a maximum of 36 m² (thirty-six square meters) each.

CHAPTER II
RESTRICTIONS ON THE PROVISION OF CREDIT OR FINANCING FOR LAND ACQUISITION AND/OR LAND PROCESSING
Article 2
(1) Banks are prohibited from:
a. providing Credit or Financing to Developers, either directly or indirectly; and/or b. purchasing or guaranteeing Securities or Sharia Securities from Developers, for Land Acquisition and/or Land Processing. (2) The prohibition as referred to in paragraph (1) does not apply to:
a. the transfer of Credit or Financing from a Developer to another Developer for rescue purposes, provided that it does not increase the Credit or Financing balance; b. the extension of the term of Credit or Financing for rescue purposes, without increasing the Credit or Financing balance; and
c. the provision of Credit or Financing and/or the purchase or guarantee of Securities or Sharia Securities from Developers for Land Acquisition and/or Land Processing for the construction of Simple Houses, with the following requirements:
1) for non-storey Simple Houses, at least 90% (ninety percent) of the financed land area is used for the construction of non-storey Simple Houses along with public facilities and social facilities necessary for the residents of the respective Simple Houses;
2) for simple storey houses, at least 90% (ninety percent) of the land area and 75% (seventy-five percent) of the total floor area are used for the construction of simple storey houses along with public facilities and social facilities necessary for the residents of the respective simple storey houses;
3) for shop-houses, at least 90% (ninety percent) of the land area is used for shop-house buildings and public facilities and social facilities for the residential and business needs of shop-house owners; and
4) for kiosks or traditional market stalls, at least 90% (ninety percent) of the land area is used for the construction of kiosks or stalls and public facilities or social facilities for the business interests of kiosk or stall owners.

Article 3
The provision of Credit or Financing to Developers other than for Land Acquisition and/or Land Processing as referred to in Article 2 paragraph (1) letter a is regulated as follows:
a. the price or value of the land cannot be used to meet the self-financing requirements of the customer stipulated by the Bank in the Credit or Financing agreement; b. the provision of Credit or Financing facilities for Property construction can only be carried out based on proof of land ownership in the name of the Developer or other documents that grant the Developer the right to use the land for the construction of the financed Property; and
c. the disbursement of Credit or Financing for Property can only be carried out based on a Building Construction Permit (IMB), or at least proof of the submission of an IMB application issued by the competent authority and a work implementation agreement for the financed project between the Developer and the contractor.

Article 4
The provisions in Article 2 paragraph (1) and Article 3 do not apply to the provision of Credit or Financing to Developers for the purpose of constructing Simple Houses.

CHAPTER III
REPORTING
Article 5
Banks report every provision of Credit or Financing to Developers online through the Financial Services Authority's Financial Information Services System (SLIK) with reference to Financial Services Authority regulations concerning reporting and requests for debtor information through the financial information services system.

CHAPTER IV
SANCTIONS
Article 6
(1) Banks that do not comply with the provisions as referred to in Article 2 paragraph (1) shall be subject to administrative sanctions in the form of a fine of 10% (ten percent) of the amount of Credit or Financing approved to finance Land Acquisition and/or Land Processing or of the nominal value of Securities or Sharia Securities purchased and/or guaranteed. (2) Banks that do not comply with the provisions as referred to in Article 3 letter a shall be subject to administrative sanctions in the form of a fine of 10% (ten percent) of the land value calculated in self-financing. (3) Banks that do not comply with the provisions as referred to in Article 3 letter b and Article 3 letter c shall be subject to administrative sanctions in the form of a fine of 10% (ten percent) of the amount of Credit or Financing approved to finance Land Acquisition and/or Land Processing. (4) The imposition of administrative sanctions as referred to in paragraphs (1), (2), and (3) is carried out for each violation and is imposed after the disbursement of Credit or Financing facilities or after the purchase and/or guarantee of Securities or Sharia Securities.

CHAPTER V
CLOSING PROVISIONS
Article 7
Upon the commencement of this Financial Services Authority Regulation:
a. Board of Directors Decision of Bank Indonesia Number 30/46/KEP/DIR concerning Restrictions on the Provision of Credit by General Banks for the Financing of Land Acquisition and/or Land Processing; b. Circular Letter of Bank Indonesia Number 30/2/UK concerning Restrictions on the Provision of Credit by General Banks for the Financing of Land Acquisition and/or Land Processing; and
c. Circular Letter of Bank Indonesia Number 31/2/UK concerning the Reporting of Credit Provision by General Banks for the Financing of Land Acquisition and/or Land Processing,
are repealed and declared invalid.

Article 8
This Financial Services Authority Regulation shall come into force upon its publication.

This copy is in accordance with the original
Director of Law 1
Law Department signed
Yuliana

In order that everyone may know it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on July 12, 2017
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated in Jakarta on July 12, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 150

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 44 /POJK.03/2017
CONCERNING
RESTRICTIONS ON THE PROVISION OF CREDIT OR FINANCING BY GENERAL BANKS FOR LAND ACQUISITION AND/OR LAND PROCESSING

I. GENERAL
To maintain the continuity and stability of the national economy, it is necessary to continuously maintain healthy banking activities based on prudential principles. The application of prudential principles by Banks is carried out for both fund mobilization and fund distribution activities. One of the developing fund distribution activities by banks is Credit or Financing in the Property sector. Given that the Property sector has experienced quite high growth, it is also necessary to increase the application of prudential principles in the distribution of Credit or Financing in the Property sector. The excessive growth rate of the provision of Credit or Financing by banks in the Property sector is feared to affect banking health, which in turn can affect the overall economic conditions. The element that largely drives excessive growth in Credit or Financing in the Property sector is, among others, the provision of Credit or Financing for Land Acquisition and/or Land Processing. Thus, it is necessary to regulate restrictions on the provision of Credit or Financing for Land Acquisition and/or Land Processing in a Financial Services Authority Regulation.

II. ARTICLE BY ARTICLE
Article 1
It is clear enough.

Article 2
Paragraph (1)
What is meant by "provision of Credit or Financing directly" is the provision of Credit or Financing by the Bank directly to the Developer.
What is meant by "provision of Credit or Financing indirectly" is the provision of Credit or Financing by the Bank to other parties that can effectively be utilized by the Developer for Land Acquisition and/or Land Processing. Paragraph (2) It is clear enough.

Article 3
Letter a
The provision of Credit or Financing by Banks must be based on the project value excluding the costs of Land Acquisition and/or Land Processing.
Letter b
The land ownership documents are:
1) proof of land ownership, namely certificates of land rights in the name of the Developer issued by the competent authority, namely certificates of ownership rights, certificates of business use rights, certificates of building use rights, and certificates of use rights; or
2) other documents, namely land sale and purchase deeds made and certified by a Land Deed Official (PPAT) or a Land Use Permission Letter (SIPPT) issued by the competent authority or a Notarial Power of Attorney regarding land use permission from the land owner whose name is listed in the document as referred to in item 1).
Letter c
It is clear enough.

Article 4
It is clear enough.

Article 5
It is clear enough.

Article 6
It is clear enough.

Article 7
It is clear enough.

Article 8
It is clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6093