As investment from China continues to play a vital role in Indonesia’s property, industrial, and infrastructure sectors, compliance with local construction and building regulations remains essential. One key regulatory requirement for any construction project is obtaining a Persetujuan Bangunan Gedung (PBG), or Building Approval, a mandatory document that ensures a building meets both technical and administrative standards as prescribed by Indonesian law.
Under Law No. 28 of 2002 and Government Regulation No. 16 of 2021 as well as implementing regulations under the Ministry of Public Works and Housing (PUPR), the PBG serves as the legal foundation for construction activity in Indonesia. For foreign investors, particularly Chinese companies expanding into industrial zones, hospitality, or real estate projects; understanding and maintaining compliance with PBG regulations is crucial for operational continuity and legal certainty.
When Can a PBG Be Revoked? Common Causes Often Overlooked
Although the PBG legitimizes a building project, it is not an irrevocable authorization. Indonesian law provides several grounds under which a PBG may be revoked or canceled, typically when a developer or property owner fails to comply with established regulations.
- Violation of Regulations
A PBG may be revoked if the owner or developer:
- Constructs or modifies a building without the required legal permits.
- Changes the building’s designated use or zoning without obtaining re-approval.
- Fails to meet safety, health, or environmental standards outlined in the approved design.
- Fraud or Misrepresentation
If a PBG was obtained using falsified or inaccurate documentation; such as forged land certificates or misleading project information, the permit may be declared void. - Change of Ownership or Building Function
- Significant changes to the building’s function (e.g., converting an industrial facility into a commercial complex) without re-authorization may result in PBG revocation.
- If the property changes ownership without proper notification to authorities, the PBG may also be subject to cancellation.
- Structural or Safety Issues
If the building is found to be structurally unsound or poses a safety risk, authorities may revoke the PBG to protect public welfare and nearby communities.
Legal and Practical Consequences of Revocation
Revocation of a PBG carries serious implications, such as:
- Construction Suspension: Ongoing construction must be halted until compliance is restored or a new permit is obtained.
- Fines and Penalties: The authorities may impose administrative sanctions or monetary fines.
- Demolition Orders: In severe cases, structures built in violation of regulations may be ordered demolished.
For foreign investors, such as Chinese enterprises operating in Indonesia’s industrial and property sectors, these disruptions can have significant financial and reputational consequences. Therefore, proactive compliance and legal review during both the planning and operational phases are essential.
Understanding the Process: Revocation Is Not Automatic
However, the revocation of a PBG does not occur immediately upon identification of a violation. The process involves several procedural steps to ensure fairness:
- Inspection and Evidence Collection
The relevant government authority conducts an on-site inspection to verify the alleged violations and collect supporting evidence. - Official Notification
The owner or developer receives a formal warning and is given the opportunity to rectify the violations within a specified timeframe. - Formal Revocation
If corrective actions are not taken, an official revocation letter (Surat Keputusan Pencabutan PBG) will be issued. - Right to Appeal
The owner or company has the right to appeal the decision by submitting documentation or arguments demonstrating compliance or mitigating factors.
Thus, investors should not immediately accept a revocation notice as final but should first assess the grounds and ensure the process has been properly followed.
Impact and Opportunities for Chinese Companies
The PBG framework should not be viewed merely as a regulatory burden but as an opportunity to strengthen project governance and investor confidence. For Chinese companies in sectors such as manufacturing, construction, and hospitality, maintaining a valid PBG demonstrates legal compliance, enhances credibility with local authorities, and supports long-term business stability.
The Building Approval (PBG) is more than just a permit—it is a legal assurance that your project aligns with Indonesia’s safety, zoning, and regulatory framework. For Chinese investors seeking to establish a lasting presence in Indonesia’s rapidly developing regions, from Bali to Kalimantan, understanding the nuances of PBG compliance is essential.
Moreover, navigating Indonesia’s PBG requirements effectively often requires localized legal expertise—particularly in coordinating with regional authorities, aligning designs with local zoning plans, and managing documentation in both Bahasa Indonesia and English. By ensuring compliance from the start, investors can avoid unnecessary delays, penalties, or disputes that may arise later in the project lifecycle.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.
Author:
Budhi Satya Makmur