land development : housing and settlement

Land Development : Housing & Settlement by Group A Master of Geomatics Engineering UGM Jogjakarta 22 September 2007 / 10 Ramadhan 1428

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LAND DEVELOPMENT :

HOUSING AND SETTLEMENT

by Group A :

1. Nur Rahmanto 20655/PS/TG/06

2. Pratomo Adi Wibowo 20656/PS/TG/06

3. Fahmi Charish MDW 20657/PS/TG/06

4. Margaretha Ellya LP 20658/PS/TG/06

5. Sri Hartini 20659/PS/TG/06

1. INTRODUCTION

Space or land must be used for the greatest welfare of all citizens. Land

development aim to make the wider community healthier and wealthier. On the other

hand, however, it has to consider the balance of the interest of the entire community.

Accordingly, it is essential in the land development to accommodate both national

“vision & mission” as it is stated in the national development policy, particularly

concerning to the area development.

The supreme regulations establishing the policy for people welfare is the UUD

1945 (National Fundamental Law) article 33 number (3) stated : Land, water, and

natural resources contains are being controlled by the State and used to the most

welfare of the people. Regarding to the UUD 1945 , Undang-Undang number 5 year

1960 was issued and well known by the name of UUPA (Basic Agrarian Law).

Land development is a process that involves changing or intensifying use of

land to create buildings for settlement. It is an exciting, yet at times frustrating,

complex activity involving the use of scarce resources. It is a high-risk business

involving large sum of money, lengthy, indivisible product and is influenced by

economic environment. It is more than bricks and mortar; it brings people with

different objectives and interests (Cadman D and Topping R, 1995). Land

development can be defined as “utilization a place or area consisting of surface of

land and also the space above earth surface and below earth surface".

Based on the above definition, land development reflected on the area master

plan aims at giving direction on development programs, including infrastructure


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program on a definitive area. Thereby, land development plan can be used as a

guideline for the performance of the development as a realization of national “vision

& mission” and the goals of national development. Moreover, it is implemented upon

the issuance of certificate of appropriateness.

Concerning land supply for settlement, land development can be interpreted as

physical development that supplied simple buildings giving at least minimum

protection for human life against weather, diseases, etc. In a wider context, it is

expected that the society is supposed to be able to live in a good and pleasant

environment, to live in proper housing with infrastructures functioning well at any

time and any weather.

The need for new housing in Indonesia is more than 800,000 units per year.

Data collected from Statistics Center Office based on socio-economic survey on

2004 show that mortgage sector only finances at the most 200,000 for this demand.

National housing survey (BPS, 2004) showed that the great majority of houses were

constructed on land owned by the owners of the house It was perceived that the lack

of formal title to the land becomes the barrier on the expansion of housing

development.. Thus, it is not the lack of formal title to the land hinders the expansion

of housing development.

Fig 1. Population and Household Figures 1990-2004


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As can be observed on the table (fig.1), implied extra ordinary growth of

population that creates large amount of demand aspect on housing and settlement.

From macro point of view, the operation of a development, especially that of housing

and settlement, synchronization between two systems, namely urban and rural,

should be done. This effort is done in order to avoid overload in housing

environment in urban areas that may result in unprofitable impacts for urban areas

and the hinterland that is usually a rural area (Suparno Sastra and Endy Marlina,

2006).

2. POLICY ON HOUSING & SETTLEMENT

Policy may be defined as a set of measures aiming at achieving the goals

formulated by the public authority (Haim Darin-Drabkin, 1977). According to Ismail

Omar, the substance of land policy are :

≈ Land uniqueness in terms of legal, economic and physical characteristics.

≈ Real meaning of land – terra firma settlement and conservation

≈ Natural land resources and legal factors

Fundamentals of land policy are :

≈ The nature of socio-politics, economy and administrative

≈ Based on direct and indirect measures. Direct measures include land acquisition,

own and country planning whereas indirect are assessment, land rent and levy.

Housing and settlement land development that is done well by either the

developer, government or the society should be based on the prevailing regulations.

If the development is done based on the existing regulations, there will be security,

safety, and comfort in both internal and external land development. Moreover, there

will be such a sustainable development with environmental insight.

The policies / regulations include, among others :

1. Requirement for Land Allocation Appropriateness


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In order to guarantee the existence of optimal environment support, land

development for housing and settlement must be in line with its allocation area,

in a location intended for residence and settlement.

2. Development Concept with Environmental Insight

Anticipative action for housing development with environmental insight can be

done, among other things, by placing the object (activity location) by paying

attention to the environmental supports, for example management of clean water,

supply of septic tank, family sanitation, and management of other things related

to the environment that may influence the environment around the housing and

settlement.

3. Concept of Settlement Pattern 1 : 3 : 6

This concept constitutes a mandatory regulation from the government for

developers that will develop urban-scale settlement project in a location, that is

developing settlement facilities in a composition of one luxurious house( fig.2),

three medium houses (fig.3), and six simple house or ‘Rumah Sederhana - RS’

(fig.4) and very simple houses or ‘Rumah Sangat Sederhana - RSS’. With the

concept of 1 : 3 : 6 the dwellers of the RS/RSS area can enjoy real estate

facilities, such as wide and green environment roads, play ground, sport center,

wide car park area, jogging track , tennis court, etc.

Fig 2. Luxurious House


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Fig 4. ‘Sederhana’ House

Fig 3. Medium House


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Fig 6. Condominium (luxurious strata title)

Fig 5. Front design of ‘Sederhana’ House


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3. LAND DEVELOPMENT STAGES

In the case of property development, the product is a change of land use

and/or a new or altered building in a process combining land, labor materials and

finance. In practice, however, the process is complex, often takes place over a

considerable time. The end product is unique either in terms of its physical

characteristics and/or its location. The development process, as Cadman and

Topping wrote, may be divided into the following stages :

3.1. Initiation

Development is initiated when either a parcel of land or site is considered

suitable for a different or more intensive use or demand for a particular use leads to a

search for suitable site. The initiative may come from one of the actors in

development process seeking an appropriate site in anticipation of the demand or

need for any of the above uses.

In Indonesia, the initiative comes from the government and the developer.

Hence, location determination required by the government and the developer is

suited with the RTRW (area master plan) stipulated by the local government and that

Fig 7. ‘Rumah Susun’ (strata title for the low incomes)


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fulfills the requirements of environmental facilities and infrastructure services

standardization

3.2. Evaluation

This is the most important stage of the development process as the guidelines

for the decision making of the developer. Evaluation includes market research, put in

general and specific time and financial appraisal of the proposal. This stage should

be carried out before any commitment is undertaken and while the developer retains

flexibility. Evaluation involves the combined advised of the developer’s professional

team but the responsibility for this stage rests ultimately with the developer.

The result of the evaluation will define the shape of the house, the prevailing

regulations, city planning, market and supporting facilities and infrastructures. In

this evaluation stage, optimal (highest and best) use of land is determined. Highest

and best use is the most feasible and allowable of a vacant land or developed land,

which physically is feasible and supported/allowed by regulations, financially

reasonable and results in highest values.

3.3. Acquisition

Legal basis for a developer for the operation of land development enterprise

activities are:

≈ Regulations of the Minister of Domestic Affairs Number 3 Year 1974 on

Stipulations of Land Provision and Allocation for Company Purposes completed

with Regulations of the Minister of Domestic Affairs Number 3 Year 1987 on

Provision and Authorization of Land for the purpose of Developers.

≈ Regulations of the State Minister of Agrarian Affairs / Head of National Land

Office Number 2 Year 1993 on the Protocols of Obtaining Location Permit and

Rights over Land for an Enterprise in the Frame of Capital Investment.

Stages in land acquisition :

≈ Application of Principle Permit : basic permit for other activities, issued by the

Local Government.


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≈ Application of Location Permit : location permit is the permit given to an

enterprise to get the land according to the RTRW, which also servers as permit of

right transfer. Location permit, which issued by Head of Local land Office, is

valid for 12 months and can only be extended once for 12 months.

≈ Executing acquisition of land : after getting the location permit, the developer

may begin land acquisition activity. To get the land, the developer discusses with

the holder of the right over the land located in related developer’s permit

location.

According to the UUPA, the status of the right over the land owned by the

developer as a legal institution is the HGB (Hak Guna Bangunan = right over land

that gives the authority to the holder to construct and to own the building on the land

not of his own, for at most 30 years as stated on UUPA article 35 and article 4

number 2) or the HP (Hak Pakai = right to utilize and/or to collect products from the

land occupied directly by the State or someone else’s land, which gives rights and

obligations stipulated in its decision to give it by the authorized officials or with an

agreement with the land owner), and in general, the land under control of a developer

is of HGB status. There are two methods to obtain the HGB :

≈ Right transfer (according to the Regulations of State Minister of Agrarian Affairs

number 2 year 1993 article 6)

≈ Direct giving the right by the holder of the right (according to the Regulations of

the State Minister of Agrarian Affairs number 2 year 1993 article 7)

Housing consumers who buy the property offered by the developer exactly

buy the HGB from the developer. This means that consumers buy the right over land

with HGB status including the house or building and not just the house or building.

Housing consumers holding the HGB can perform legal actions related to the right

over the land, for example selling, transferring, exchanging, inheriting and using is as

collateral. Besides, they can propose the extension and renewal of their right. The

holder of HGB is also given the opportunity to increase its right over the HM (right

of land ownership) in accordance with the prevailing regulations.


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3.4. Design and costing

Design is an almost continuous process running parallel with various other

stages getting progressively more detail as the development proposal increases in

certainty. Work Design will be kept to minimum in order to keep cost-efficiency

before the developer is committed to the scheme. The developer needs increasing

certainty over costing to improve the quality of the financial appraisal. The design

and costing stages involve all members of professional team and continues

throughout the construction of the scheme.

Since housing and settlement have functions as the place for developing

human resource and embodiment of social life, the planning of housing should take

into account the aspects underlying the planning of the housing, for example:

≈ Environment : Considering environmental factors in planning the housing is

necessary because the process of housing environment formation is an

accumulation of house units making up the housing. For the reason, the planning

of the housing also requires the planning of the housing environment; it is related

in macro (detail planning of house units) micro (planning and observation to the

environment where the housing is located). Macro insight can be implemented by

creating balanced condition between housing environment and the environment

before the housing is built. It is better that the process of changing leads to

balance. If there are alterations, they are still in the limit of tolerance threshold.

≈ Affordability : In a housing planning, the accordance between size of the

building, space requirement, building construction and building materials during

its service period is always considered. This has to be anticipated considering the

average affordability of the society in an area is different from that of another,

even when looking at the data of the need for dwelling houses in Indonesia in

general, the affordability of the society to buy house is still under standard

affordability line. The following table is a case example in Jakarta :


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≈ Institutional : The success of housing development in an area, in both urban and

rural, is not separated from the role of the Government as the party that is

obligated to direct, guide and create conducive situation for the success. The

society as the main agent of the development plays an important role in each

executed development program. The role of the private (developer) in the

housing development decides the creation of the direction and the course of

housing development.

In housing development, cost and benefit analysis plays a very important role

since it constitutes part deciding the feasibility of such an activity. In doing its

operation, the developer will review and find out the benefits. The revenue and

expenditure of a property enterprise can be measured directly using money (tangible)

or indirectly not using money (intangible). The revenue system can be direct of

indirect. A house is a kind of goods that can be measured directly using money

because the house including the land sold by property market or by public has certain

value.

3.5. Permission

The obligation to be fulfilled by the developer is obtaining permits for the

housing and settlement projects to be developed including :

≈ Land use and change permit (PPT)

≈ Location determination permit

≈ Site plan proposal and legalization

≈ Building permit (IMB)

Fig 8. Estimated Median Monthly Income Figures in Rp and Monthly Payment for Housing and Loan

Affordability


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≈ Land certificate checking

3.6. Commitment

Developer must fulfilled all necessary preliminary work been carried out

before any substantial commitment made relating to development. Ideally all the

appropriate inputs of land, finance, labor and materials, and acquisition of statutory

permissions must be satisfactorily negotiated before any agreements are signed.

When the preliminary work has been completed as far as possible, the project must

be evaluates once again. The preparation of that scheme has take some time and the

economic circumstances that determine the success of the development have

changed. It is critical, therefore, that the developer pauses for thought until

absolutely satisfied that the evaluation is based on the best possible information and

the scheme is still viable.

3.7. Implementation

Implementation begins once all the raw materials of the development process

in place. A commitment has now been made to a particular site and to particular

buildings at a particular cost spread over a particular time. The flexibility that was

possible in the earlier phases has been lost. This emphasizes once again the

importance of careful evaluation and of maintaining flexibility as long as possible.

3.8. Let-manage-dispose

This phase of development, though often the last stage, will need to be at the

forefront of the developer’s thoughts from the initiation of the scheme. In some cases

the occupier may have been secured at the start or during the development process.

The development’s process will depend on the ability to secure a willing occupier at

the estimated rent or price, within the period originality forecast in the evaluation.

The disposal may take the form of a letting or it may be the outright sale of the

freehold interest. In the case of major retail development, there are many lettings,

while in that of a single office building the property may be disposed of in one major

letting.


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3.9. Marketing

Marketing the housing product, the developer usually uses certain

management system that is expected to be able to trigger the sale of its product.

After deciding the market segmentation for its product, a developer usually analyzes

the competitors concerning the sale.

In order for the housing marketing to run well, there are some factors to be

understood thoroughly and to be observed by developer:

≈ Consumer attitude/profile

≈ Market buying power/affordability

≈ Market economy condition during the product marketing and future prediction

≈ Data of consumer qualitative and quantitative analysis

≈ Buyer characteristic, including location position, lifestyle, habit, pattern

tendency, behavior, etc.

≈ Futuristic potential (development plan)

Fig 9. Inflation Table and Interest Rates, 1996 – 2005


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4. ISSUE ON HOUSING & SETTLEMENT DEVELOPMNET

Environmental balance : Property land development prioritizes the impact

of land change into housing land. Thus, in addition to considering the quality of a

healthy house, it must also consider minimal environmental damage and the

absorbance power of natural resources resulted from the housing development.

Regarding this environmental issue, the local government issuing RTRW (long-term

land use master plan).

Vertical Housing : The construction of vertical houses is more profitable in

many aspects compared to the construction of lateral houses :

≈ Requires minimal use of land

≈ Economically cheaper and constructively faster. Using pre-fabricate technology

to make the non-structural wall and column, the construction will be carried out

easier and faster. It happens to be inexpensive since a single building element,

like roof and foundation, can be sufficient for some houses.

≈ Minimizes the land clearance cost and, in some cases, employee.

≈ Technologically, the composting system of human waste and other household

solid waste can be easily and effectively implemented. Air conditioning

technology can be passively applied more simply and more economically. A

solar panel can be set on the roof of vertical house to make it alternative energy

resource.

≈ Self-supporting of housing development

5. DEVELOPMENT EXECUTION MECHANISM

Housing and settlement infrastructures are enhanced development tasks and

settlement done within an area. They aim to increase healthy and wealthy housing

and settlement condition, in order to avoid the citizens living in the area from various

disease due to unhealthy housing and settlement conditions.

Housing and settlement infrastructures do not have any cost recovery

character. It means that the investment total cost for financing the development of

housing and citizen settlement is merely for enhanced condition. It generates no


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direct profit following a certain economic action period. As housing and settlement

are not cost recovery sector, an economy analysis is necessary rather than the

financial one. The housing and settlement infrastructure development consists of the

following stages:

5.1. Execution Preparation

In this execution preparation consists of several stages, that is :

≈ Work plan arrangement : In this stage, an executing team is established and the

development executing work plan is arranged, including the time setting and the

period of activities as necessary.

≈ Administration preparation : This stage involves letter and document preparation

under the regulation in effect.

≈ Land clearance and acquisition : In this stage, the land property or land

ownership, land clearance and acquisition model become the main concern.

≈ Land maturation : Land maturation is any activities carried out in order to

prepare an area, making it ready for housing and settlement development. The

land is ready for use after fulfilling the requirements of using, authorizing,

ownership, and living environment spatial plan or environment of settlement of

building construction.

5.2.. Activity execution

≈ Financing : Through a certain mechanism, development can be realized after

money is available.

≈ Principal construction work : This stage needs neatness/carefulness, skill, ability

and work experiences.

≈ Continuation of construction work

≈ Landscape activity : This is the final stage of the generally development activity

series in which aesthetics and beauty are important.

≈ Supervision and control : Supervision is done under structural or functional lines.

5.3. Job taking over

Job execution should physically be finished at agreed time of fulfillment and

should meet the specification in appointment fulfill time, as according to technical


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specified are included in agreement / technical work reference, so it needs job taking

over.

6. MAIN ACTORS

In terms of housing and settlement development, the society plays the main

role, while the government has the obligation to direct, consult and create conducive

situation. The society and the government have to support and complete one to each

other in order to move in one direction.

Any performance must have a director who has the capacity and energy to

pull together the performance to ensure it reaches a satisfactory solution. In land

development activity execution for housing and settlement developing involved 3

(three) stakeholders to carry out task and function from management cycle, namely :

6.1. Government (public sector)

Due to central government policy, the public sector is currently under taking

little direct development. Local authorities are primarily involved with developments

for their own occupation or community use and the provision of infrastructure. Local

authorities are both constrained use and the provision of infrastructure by financial

resources and limited by their legal powers. Local authorities have to be publicly

accountable and have regard to the overall needs of the community they serve. Local

authority involvement in the development process will depend on whether they wish

to encourage development or control development in order to main standards.

This institute is (this case is generally and may be it is different from

another region) :

≈ Region Development and Planning Office

≈ Region Income Office

≈ Public Works Office

≈ Housing Office

≈ Land Office

≈ Drinking Water Company


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≈ Civil Works Office

6.2. Private

This case is all of non-government agency that is related directly or not

directly with housing and settlement development, that is:

≈ Developer : In our context of property development, generally ‘developers’

implied as housing developers. The ‘housing developer’ means any person, body

of persons, company, firm, or society (by whatever name described), who or

engages in or carries on or undertaken a housing development.Private sector

development companies come in a variety of forms and sizes from one-man-

bands to multinationals.

≈ Financial institution : The strength of a developer among others lies in his

financial capability. Unless a development is being financed entirely with a

developer’s own capital or that of a partner, then financial institutions, as

providers of finance, have a very important role in development process.

Financial institution is a term usually used to describe pension funds and

insurance companies.

≈ Consultant : It consists of planning consultants. Planning consultants are

employed to negotiate with local planning authorities to obtain the most valuable

permission for a development particularly with large or sensitive schemes. If a

planning application is refused they will be employed to act as expert witnesses

in presenting the case for the developer.

≈ Public Accountant : Public accountant evaluates all stages of the activity,

including the financial matter.

≈ Planners : Those belong to the planners group are architect, civil engineer,

communication experts. Architects are employed by developers to design the

appearance and construction of new buildings or the refurbishment of existing

buildings. They may also administer the building contract on behalf of

refurbishment work, building surveyors are usually employed to survey the

existing building and advise on the alter. In addition to designing structural

elements of a building, civil engineers are employed to design and construct


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infrastructures such as clean waterworks, bridges, etc. Communication experts

design the required communication line and plan.

≈ Building Contractors : Building contractors are people / enterprise constructing

buildings and all infrastructures as designed by the developers.

≈ Agents : Commercial agents or estate agents (in the case of residential) may be

instrumental in initiating the development process and / or bringing together

some of the main actors in the process. They also form the link between the

developer and the occupier, unless the developer uses ‘in house’ staff to perform

the agent’s raw and the occupier is not represented by an agent. Therefore, they

play very important role within the development process and they are often

involved in every stage of he process. In Indonesia, there is no distinct separation

between the developer and the agent, because developer acts as an agent.

≈ Professional Team : Lawyer and ‘PPAT’ (Pejabat Pembuat Akta Tanah / Land

Certificate Issuing Officer), Architect, Engineer Planning, Consultant, Surveyor,

Project Manager.

6.3. Society, user & landowner

In this case, society participation is active process where society have a

willingness to contribute, influence, initiative and make decision about land

development activity. Cadman and Topping (1995) described landowners as the key

players to any development either actively or passively. It is the landowners who

either initiate development with they outright sell the land to property developers or

they themselves take the role of the developer. If it is neither, then they become the

hurdle of development. Without their willingness to sell their interest or participate in

the development, unless acquired, no development can take place.

7. MAIN CONSTRAINTS

7.1. Government (policy aspects)

≈ Limited finance regarding population and city growth.

≈ Lack of entrepreneurship soul.

≈ Bureaucracy barrier.


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≈ High taxation for land conveyancing.

7.2. Private aspects

≈ Time consuming: agreement process needs a long time.

≈ Inconsistency regulation: often change base on recent political will.

≈ Paradigm contradiction: there are different opinions exist to carry out business

activity.

7.3. Socio-culture aspects

≈ Society does not have enough understanding about development activity.

≈ Society disappointment to towards development activity, so it consequences that

society dislike to participate.

≈ Activity management is bureaucratic so that society refuses to participate.

≈ Lack on regulation: there is no such a rule for specific subject, or there is a rule

but ineffective on supporting land development.

≈ Land speculator existence.

7.4. Force Majeur

Force majeure is a situation that happens out of human power, such as

disaster (earthquake and flood), riots that will cause the developer and consumer to

take risks to do land development activity.

8. CONCLUSION

Property (land) development process is unique and complex, risky and

rewarding– therefore it is interesting: land matters, resources available, land supply

constraints by way of valuation, market, physical, planning and landownership

constraint. It offers huge opportunity for employment and indicates the economic

climate of a particular country.

Housing and settlement development is very fundamental requirement for

citizen’s welfare, but ironically this hungry-demand for housing facing speculators

creates uneconomical house price and it is not affordable for common people.


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The Government as one of the actors plays important role to protect the low

incomes so they could get housing facilities. Government’s intervention was required

to break the chain of development-marketing in Indonesia through regulations and

national housing institution – re-empowering the function and role of PERUMNAS

(National Housing Agency).

9. SUGGESTION & RECOMMENDATION

1. The government set up an integrated housing data base that includes price and

appraisal information, information on building permits issued and housing

transactions completed for different types of houses, consolidated information on

housing finance, etc.

2. The government explore ways to tie requirements for saving for housing over a

period of time to subsidized loans to establish lender confidence and increase

owner equity particularly for borrowers who have low incomes

3. The enforcement of the permit system, measures to release public land for

residential development in suitable locations, improvements in the process and

reduction of upfront and hidden costs to gain development and building

approvals

4. Finance Companies can play a role in medium term mortgage lending with the

availability of liquidity funding from SMF, which could increase competition in

the mortgage sector and will help the low incomes get settlement.

5. The enforcement of PERUMNAS role for example by creating Subsidized

Housing Credit Program.

Jogjakarta, 22 September 2007 – 10 Ramadhan 1428

Group A of Land Development Class

Master of Geomatics Engineering

Gadjah Mada University Jogjakarta

INDONESIA


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REFERENCES

Cadman, David and Topping, Rosalyn, 1995, Property Development, E & FN Spon, London.

Stephen H.K. Yeh and A.A. Laquian, 1979, Housing Asia’s Millions, International

Development Research Centre, Ottawa.

Omar, Ismail, Property Development, Department Of Land Administration, Universiti

Teknologi Malaysia.

Sastra M, Suparno dan Marlina, Endi, 2006, Perencanaan dan Pengembangan Perumahan,

Penerbit CV. Andi Offset, Yogyakarta.

land development : housing and settlement

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