Posted by: erestajaya | November 17, 2008

Land valuation in Indonesia

Background
Land Valuation in Indonesia has been recognized earlier for taxation. Ministry of Finance through its Land Tax Directorate has been working the valuation for nearly 100 millions parcel till today. All the data are stored in their fiscal cadastre system. However, Since the value recorded in the fiscal cadastral system is intended for the taxation purposes, there is a policy not to tax too much to the public. The results do not yet reflects the fair value. There is always a long debate whether to refer to the tax value for other purposes such as land expropriation.

Purposes with land valuation in Indonesia
Based on that background, there is a need to have the land valuation that more reflect the fair value. The fair value is the value that is the most probable value to the real value of an object. The real value itself should also comprehensively reflect the market (financial) value and/or non market (financial) value embedded in a legal land objects. The legal land objects will include a piece of land or and legally defined are which has a certain economic function. This fair value, in turn, will be beneficial for all society to support the sustainable development as a reference for land market, land asset management, land tax and fees, land policy making and other decision related to land.
Present valuation methods
In order to fulfill the urgent need to have the fair land value, BPN-RI focuses on the mass valuation to have all the land valued in the short run. This mass valuation involved the data collection, data processing and information representation on the digital map.
The market valuation method is refer to the International Valuation Standar. On the other hands, the economic resource valuation method is refer to ?????????????? due to such standard is not covered by the IVS.
The problem to meet the standard is the market data itself as a required basis for market valuation. In Indonesia, the market data of transaction price is only known by the parties involved in the transaction. Due to avoid the transaction tax which cover 5% for each party, people intend to hide the transaction price. Hence, the valuer in most cases ask the opinion of the people who involve in the transaction or the people who are expert in land value. Such kind of data might degrade the reliability of the data.
In the first year of conducting the task, BPN has collected approximately 8000 market data which cover the area of 200.000 Ha. However there are some problems in processing the data. The first problem is the data adjustment. This adjustment would cover the building adjustment to get the land value, time adjustment, type of right adjustment, type of data adjustment, and other adjustment. There is no valid data to support this adjustment due to the least experience of the people working for valuation. The other problem is the value mapping. Since the data are collected in the grid basis that cover 500 m x 500 m area, the data do not reflect the existing value zone. There is a difficulty in processing the data to form the value zone automatically. Therefore, the value zone produced might be different with the real value zone in the field.

Change over to more market oriented methods
The valuation is a marriage between science and art. Science itself might fail to form the valuation zone. The art component has not been included in the previous project due the lack of confidence doing it. However the application of art component can be minimized by using enough reliable data for data processing. Consequently, there is a must to improve the methodology for data collection and data processing in order to have reliable result.
The improvement of the data collection methodology should cover how to collect data. The standard for the valid data must be established. The true transaction price from the party is the most valid data, followed by the listing price and the report from the other market valuation in the last place. Opinion from the owner of a piece of land should be avoided, because they are not the component of land market unless the owner wants to sell his/her land.
The improvement of data processing methodology to produce the land value zone should also been made. If in the previous methodology, the data are used to form the land value zone, The order should be reversed. The valuer should determined the land value zone in advance by surveying the field and collect the data from the appropriate sources. Once the land value zone boundaries have been determined, the valuer then could find the reliable data to get the value for each zone.

Market data collection
There is no other way instead of field survey to get the market data in Indonesia. This is mainly due to no such data base developed. The surveyor/valuer has to do the door knocking in order to get the relevant data for the survey. The survey itself could takes more than 60% of the time consumed for overall project. To minimize such devastating effort, the land transaction data base should be developed and maintained. BPN-RI as the official agency to register the land transaction should collect the information of recent (last 2 years) transaction and present it in the spatial way.

Market valuation
Market Valuation is the ultimate goal in providing the information of land value. The market valuation in Indonesia is intended to provide the land value information for the purpose of land transaction, investment, land expropriation and land fees and taxes. For the purpose of general information the mass market valuation is adequate. However, for the special purpose an individual valuation is necessary to have the more accurate result.

Non market valuation
However, nor all the land either the other legal land object have the market value. Some land or natural resources zone might have never been transacted in the market. For instance is the natural resources that provide oxygen and habitat for human life. The other example is the historical site that has the historical value for the society. They are valuable but there is no market data of transaction for such objects. Therefore, the non market valuation approach should be applied for those objects.

Examples from pilot projects
The example for the land value zone and other economic value zone are represented in this paper.

Categories