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Valuation Practices in Indonesia
Written by Agus Prawoto SH MA MAPPI   

MODULE

VALUATION OF URBAN AND RURAL

LAND AND BUILDING TAX


A. INTRODUCTION

In Indonesia even though valuation activity has existed since Dutch colonial era, and private sector  started in 1967 when the government began to invite foreign investment, the term of valuer is still not known by too many people because valuer’s service is yet to develop.  Not only is valuation formal education yet to exist, because valuation science by the Department of National Education is not considered to be part of science tree, the use of valuer is usually still limited to financial institutions, such as banking institutions, investment institutions and tax institutions.  Through the establishment of Indonesian Banking Restructuring Agency (IBRA), the use of valuer has become more and more popular in order to value assets of restructured banks.  However, the condition of valuer in 2000 was still similar to the accountant’s service condition in 1955 whereas due to unavailability of regulations determining accountant’s quality, each person at that time could call himself an accountant.  Valuer certification test (Ujian ser¬tifikasi penilai – USP) held by Indonesian Valuer Professional Society (Masyarakat Profesi Penilai Indonesia – MAPPI) in order to implement the Decree of te Minister of Finance Number 57/KMK.017/1996 is a breakthrough to provide temporary solution to determine the minimal quality that must be met for a person to be admitted as a valuer.  Furthermore, this issue on valuer’s qualification must be settled with a law as conducted by other more developed countries.

Professional property valuer and business valuer (since 2008 valuer has been classified into property valuer and business valuer) provide various types of service, such as undertaking valuation on assets for various purposes, providing consultancy for clients, and participating in decision making regarding real estate / business.  Indonesian Valuation Standard (Standar Penilaian Indonesia – SPI) is the guidelines that must be understood and implemented by valuer to serve as guidelines in conducting valuation.

According to Indonesian Valuation Standard 2007 valuation is interpreted as valuer professional job to provide an opinion on economic value.  Valuer carries out valuation work to produce review in the forms of analyses, opinions and recommendations by presenting it in a report, so that misinterpretation by service users and the public can be avoided.  Valuer presents conclusion of his valuation outcome by putting forward his opinions related to natural characteristics, quality value or use value of a certain interest or various aspects of identified real estate.  Real estate valuation involves various selective research activities on comparable market area, use of sufficient analysis method, knowledge application, experience as well as professional decision and consideration making to develop an adequate solution on valuation issue.

Natural characteristics of valuation issue will give indication to determine whether or not the assignment to be completed is a valuation or consultancy assignment.  According to valuation objective, value that can be estimated includes market value, insurance value, investment value, or several other types of valuation identified as interest over a real estate in a certain period.  Valuation assignment can produce market valuation estimation on fee simple estates, leasehold estates, preservation easement and some other interests.

Consultancy is defined as an activity or process to provide real estate information, data analysis, and recommendation or conclusion on desertification of real estate issue, and others which are not value estimation.  Consultancy assignment also includes land use study, supply and demand study, fea¬sibility study, highest and best use analysis, and marketing and / or investment consideration related to a proposal or on-going development.

In a valuation task, valuer provides the client with estimation of property real value that reflects everything related to market justification.  In a consultancy task, market activity at that particular time and evidence being studied are used to make a conclusion that can be not focused on specific value indictaion.  However, in both assignments, conclusion is made from suitable and appropriate data analysis in order to meet professional practice standard.  To avoid misunderstanding, certainty must be obtained from the client on whether the assignment will be a valuation or consultancy one.

Three kinds of service that can be given by valuer are review, namely study / review activity or process of a report submitted by other party.

To carry out their activities, professional property valuer and business valuer require licenses and certification.  Professional valuer takes various training, possesses experiences and are very much bound by professional ethic codes and working standard.  Included in this group are they who undertake and carry out property valuation review.  Valuer is obligated to obey and meet the regulatory requirements and is a member of a professional association providing professional activities and education development.  All members obey and follow their professional ethic codes or performance and are willing to undertake peer review reflecting their high commitment to profesionalism.

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