Indonesia changes the rules of the game
For many years, construction in Indonesia was rather chaotic, causing dissatisfaction among local residents, environmentalists, and entrepreneurs. Risks arose from insufficient verification of documentation and permits and a lack of understanding of local legislation. In January 2026, Regulation Permen PKP No. 18/2025 came into force — the most extensive reform of housing sector regulation since 2011. The document introduces strict control over developers and creates real mechanisms to protect buyers.
New legislation
What has changed in practice
Developers are now required to undergo a three-level review before starting construction: confirmation of compliance with the permitted land use, approval by local authorities, and submission of financial statements audited by independent experts. Illegal projects or those lacking a complete set of documents are frozen.
Control is carried out at national, provincial, district, and public levels. Inspections can be scheduled or unscheduled. The system is designed so that problems are identified quickly rather than after years of court proceedings.
The government describes the approach as “educational rather than punitive.” Sanctions are applied gradually. The first violation results in a written warning for 15 days. If the issue is not resolved, a second warning is issued for another 15 days. This is followed by a temporary suspension of construction for 30 days. Next comes a license freeze for up to six months with blocked access to the electronic licensing system. The final stage is full license revocation. In the case of serious violations, stages may be skipped and the license frozen or revoked immediately.
SLF: no certificate — no operation
The Certificate of Proper Functionality (SLF) confirms that a building meets safety, health, and comfort requirements. It is issued only after construction is completed, based on an inspection by an independent expert.
Without a valid SLF, a building cannot be used, ownership cannot be transferred, it cannot be leased out, and usage rights cannot be extended. This is a strong incentive for developers to complete projects in accordance with specifications.
Combating fraud
A regulation of the Ministry of Law requires verification of the beneficial owners of all companies. The data is updated annually, and money laundering risk assessments are conducted. The Criminal Code introduces direct criminal liability for corporations.
Buyer protection
If a project is delayed, the buyer has the right to cancel the purchase and receive a full refund. In addition, compensation is provided for each day of delay in accordance with the contract terms.
If the quality does not meet the stated standards, the buyer may demand that defects be corrected or losses compensated. Complaints can be filed with a consumer court, a local regulator, or a supervisory authority.
Criminal liability for developers provides for up to 5 years of imprisonment and fines of up to 2 billion rupiah (approximately $130,000) for violations of consumer protection law. For failure to provide infrastructure and utility services, fines can reach up to 5 billion rupiah.
For investors
Entering the Indonesian real estate market is now significantly less risky than before 2026. Is it worth buying apartments and villas during this transition period? We have highlighted the key changes expected in the near future:
- Due to the reforms, all transactions become more transparent, and the verification of documentation and permits is now additionally handled by the state.
- A shortage of high-quality properties is expected while developers adapt to the new rules.
- Increased returns driven by the legal transparency of the market, an inflow of new capital, and higher liquidity, especially in locations with limited land supply such as Bali.
- Construction costs do not yet reflect the future tightening of standards (expensive certification, legal support, environmental requirements, approval timelines). Therefore, it is still possible to find strong projects at “old” prices.
- Projects that have already passed the stricter control become assets with built-in growth potential.
What to check before purchasing
- type of land ownership (Hak Milik, HGB, Hak Pakai, Leasehold) and its term
- zoning compliance under RDTR / RTRW
- availability of PBG and SLF
- environmental approvals AMDAL / UKL-UPL
- developer company structure and absence of court injunctions
- ownership structure for foreigners (registered Leasehold, PT PMA, Hak Pakai) and resale procedure
Conclusion
The reform creates a stricter but more predictable environment. For bona fide developers, this becomes an advantage. The market will attract more foreign capital, new projects will become even higher in quality, and existing properties will increase in value. Buyers now have real protection tools with a clear compensation mechanism and developer liability. All this shows that the Indonesian authorities are interested in the country’s development and in attracting international investors. High tourist flows, limited available land for development, rental yields, and new laws make the country, and Bali in particular, one of the most in-demand destinations for overseas property purchases.
