Proposed Evaluation of Industrial Land Prices Under the Draft Industrial Estates Law

The Government has proposed granting the Minister of Industry the authority to evaluate the sale and lease prices of land during the deliberation of the Draft Law on Industrial Estates ("Draft Law"). The Director General of Industrial Resilience, Regional Development, and International Industrial Access ("KPAII") at the Ministry of Industry, Tri Supondy, stated that the proposed mechanism is intended to maintain investment competitiveness and prevent land speculation.

Tri explained that, in principle, land prices would continue to be determined based on market mechanisms. However, he emphasized that a supervisory mechanism is necessary to ensure that land sale and lease prices set by industrial estate developers do not impede investment.

"The Government does not intend to intervene in the market per se. Rather, it acts as a regulator to ensure that land sale and lease prices remain within a range that supports investment viability, so that the competitiveness of industrial estates is not undermined by land speculation," Tri stated.

According to the draft of the Draft Industrial Estates Law obtained by Hukumonline, provisions on the prevention of land speculation are set out in Article 36. The draft authorizes both the Central Government and Regional Governments to issue policies aimed at preventing land speculation within industrial estates.

Tri further explained that, under the proposal, an evaluation may be conducted where certain conditions are met. These include circumstances where the land sale or lease price is considered disproportionate to the facilities provided by the industrial estate developer, the occupancy rate of the industrial estate is relatively low, or a significant number of land plots remain unsold for a specified period.

In addition, the Government may conduct an evaluation where lease renewal prices are considered excessively high, where an official complaint has been submitted by a business actor, or where other strategic considerations relating to the national interest exist.

In conducting such evaluations, the Government will take into account various factors, including the location of the industrial estate, the Sales Value of Tax Objects (Nilai Jual Objek Pajak – "NJOP"), the quality of estate management and services, as well as the availability of supporting facilities and infrastructure.