Buying a Bali Property with an Incomplete Building

Buying a Bali Property with an Incomplete Building: Understanding PBG, SLF, and the Myth of “Partial SLF”

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Investing in real estate in Bali often presents unique opportunities, one of which is the acquisition of “distressed” or incomplete projects. It is a common scenario: a developer or private owner begins construction, completes the ground floor, but halts progress due to financial constraints, leaving the planned second floor unbuilt.

For a prospective buyer, this presents a dilemma. The property has a valid Building Permit (Persetujuan Bangunan Gedung or PBG) for a two-story structure, but the physical reality is a single-story building.

The critical question for investors is strictly regulatory: Can you obtain a Certificate of Functionality (SLF) for this partially completed structure to prove it is safe and legal to use?

This article details the regulatory framework, addresses the misconception of the “Partial SLF” in the Bali residential market, and outlines the correct administrative path to compliance.

1. The Regulatory Framework: Defining PBG and SLF

To understand the solution, one must first understand the distinction between the two primary documents that govern construction in Indonesia. Following the Omnibus Law (Job Creation Law), the old IMB system was replaced, creating a stricter separation between “permission to build” and “permission to use.”

PBG (Persetujuan Bangunan Gedung)

The PBG is the approval required before construction begins. It focuses on the planning phase.

What it covers: Technical drawings, architectural plans, structural engineering calculations, and zoning compliance.
The Commitment: When you hold a PBG, you are legally committing to building exactly what is in the drawings. If the PBG specifies a 300-square-meter, two-story villa, the government expects a 300-square-meter, two-story villa.

SLF (Sertifikat Laik Fungsi)

The SLF is the certification issued after construction (or a phase of construction) is complete. It focuses on safety and habitability.

What it covers: An inspection of the physical building to ensure it matches the PBG plans and meets safety standards (structural integrity, sanitation, electrical safety, and fire protection).
The Function: You cannot legally operate a commercial business (such as a vacation rental) without an SLF, as it is a prerequisite for uploading documents to the Online Single Submission (OSS) system for business licensing.

2. The Scenario: The “Incomplete Build” Mismatch

Let us analyze the specific scenario commonly seen in Bali:

The Document: The property holds a PBG approved for a two-story building.
The Reality: Only the ground floor is constructed. The second floor has not been commenced.
The Gap: The buyer wishes to purchase the property “as is,” perhaps to live in the ground floor or rent it out, without immediately building the second floor.

The buyer needs assurance that the ground floor is legally compliant. The logical assumption is that one should be able to apply for an SLF for the work done to date. This leads to the concept of the “Partial SLF.”

3. The “Partial SLF”: Theory vs. Reality in Bali

There is often confusion regarding SLF Parsial (Partial SLF). In Indonesian construction law, provisions for partial certification do exist, but their application is context-dependent.

Where Partial SLF is Common

A Partial SLF is typically utilized in large-scale industrial or commercial developments.

Example: A massive factory complex plans to build five warehouses over five years. They build Warehouse A and B first. They need to operate these immediately while Warehouses C, D, and E are built later.
The Outcome: The authorities may issue an SLF specifically for the completed functional units, acknowledging that the project is ongoing.

The Reality for Residential Villas in Bali

In the context of private residential villas or small commercial accommodations in Bali, authorities generally do not issue Partial SLFs.

The Public Works Department (Dinas PUPR) in most Bali regencies (Badung, Gianyar, Tabanan, etc.) views a single villa as a single functional unit. If your PBG states “Two Floors,” and you present a building with only one floor, the authorities view this not as “partially complete,” but as “non-compliant with the approved permit.”

From the inspector’s perspective, a building intended to have a second floor that stops at the first floor may have exposed rebar, unfinished roofing, or drainage issues that were designed to accommodate a second level. Therefore, it may fail the safety standards required for an SLF. Even if finished neatly, it legally contradicts the PBG.

4. The Correct Solution: PBG Revision (Perubahan PBG)

If you acquire a property where the construction stopped halfway, and you do not intend to finish the remaining floors immediately, you cannot simply apply for an SLF based on the existing PBG.

The correct administrative path is to align the permit with the reality. This process is known as a PBG Revision or PBG Perubahan.

Step 1: Technical Assessment

Before purchasing, engage a technical consultant to assess the existing structure. They must verify that the ground floor, as built, is structurally sound and habitable on its own, independent of the unbuilt second floor.

Step 2: Redrawing Plans (As-Built Drawings)

You must commission new architectural and structural drawings that depict the building exactly as it stands (one floor).

If you intend to build the second floor in 5 years, you still need to permit the building as a one-story structure now to get your SLF.
The drawings must show how the roof is sealed and how drainage is handled in the absence of the second floor.

Step 3: Submission of Revised PBG

You submit these new drawings to the local Dinas PUPR/SIMBG system. You are essentially asking the government to amend your permit from “Two Floors” to “One Floor.”

Note: This will incur administrative costs and retribution fees, though typically lower than a new application since the primary data exists.

Step 4: Inspection and SLF Issuance

Once the Revised PBG is approved, the SLF inspection is conducted.

The inspector compares the physical one-story building to the new one-story PBG plans.
Because they now match, the building passes inspection.
A “Full” SLF is issued for the property.

5. Why Not Just Keep the Old PBG? The Risks.

Some buyers might be tempted to keep the original two-story PBG, live in the one-story house, and hope for the best. This “wait and see” approach carries significant risks in the current regulatory climate.

1. Inability to Obtain Business Licenses

If you intend to rent the property as a holiday villa (Pondok Wisata), you must register via the OSS Risk-Based Approach system. The OSS requires the upload of a valid SLF. You cannot get the SLF if your building doesn’t match your PBG. Therefore, no SLF = no legal rental license.

2. PBG Expiration

Building permits are not valid indefinitely if construction pauses. If a PBG is issued and construction stalls for a significant period (often defined as 6 months to 1 year of inactivity), the permit may be considered void or require re-validation. Buying a property with a “stale” PBG and an incomplete building puts you in a legal grey area where the government could force you to re-apply for a new permit under current (potentially stricter) zoning laws.

3. Satpol PP (Civil Service Police) Enforcement

Bali has increased enforcement regarding construction compliance. Buildings that clearly deviate from their permits are subject to audits. If authorities discover you are operating a business in a building that is technically “under construction” according to its paperwork, you face fines or temporary closure.

6. Financial Implications for the Buyer

When negotiating the price of a partially constructed property, the cost of the PBG Revision must be factored into the acquisition cost.

The costs are not limited to government fees. They include:

Consultant Fees: Architects and structural engineers to redraw the “As-Built” plans.
SLF Consultant Fees: Professionals to navigate the SIMBG system.
Physical Rectification: The SLF inspection is rigorous. If the previous owner ran out of money, they may have cut corners on grounding, septic tanks, or grease traps. You may need to spend capital to bring the “finished” ground floor up to code before the SLF can be issued.

Buyer’s Leverage: Recognizing that the property does not have an SLF (and cannot get one without a permit revision) provides the buyer with leverage. The cost of this administrative rectification should be deducted from the asking price.

7. Due Diligence Checklist for Incomplete Builds

If you are considering a property where the PBG specifies more extensive construction than what exists on-site, perform the following due diligence:

Request the Full PBG Document: Do not settle for the certificate cover. Ask for the approved architectural attachments to see exactly what was supposed to be built.
Compare Plans to Reality: How drastic is the difference? Is it just a missing floor, or is the footprint (KDB) different?
Check Zoning (ITR) Updates: Zoning laws in Bali change. Ensure that the “old” PBG is still compliant with the current spatial planning laws. If the zoning has changed since the PBG was issued, revising the PBG might be difficult or impossible.
Consult a Local Specialist: Regulations vary by Regency (Badung vs. Gianyar vs. Denpasar). What is accepted in one area may be rejected in another. Always use a consultant familiar with the specific local office.

8. Conclusion

While the concept of a “Partial SLF” seems like a logical solution for a stalled construction project, it is rarely an accepted pathway for residential or small commercial properties in Bali.

The regulatory reality is binary: the building must match the permit. If the construction has stopped at the ground floor, the permit must be revised to reflect a single-story building. Only then can an SLF be issued, securing the asset’s value and enabling legal commercial operation.

Investors should view these incomplete projects not as turnkey solutions, but as properties requiring administrative rehabilitation. With the correct budget allocation for PBG revision and SLF processing, these properties can be secured safely, but they require a clear understanding of the difference between what was planned and what was built.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Construction regulations in Indonesia are subject to change and regional variation. Always consult with a qualified legal professional or certified PBG/SLF consultant regarding your specific property.