Guidelines on Property Valuation Report in the Capital Market

The Capital Market and Financial Services Supervisory Agency (Bapepam-LK) has moved to enforce a higher qualitative standard for ‘Property Valuation Reports’ (Laporan Hasil Penilaian Properti) in capital markets, and accordingly issued the Head of Bapepam-LK Decision No. KEP-478/BL/2009 on Guidelines on the Valuation and Presentation of the Property Valuation Report in the Capital Market.

The Decision’s Attachment (specifically, Rule No. VIII.C.4) provides guidelines for different Property Valuation processes, and details precisely what must be contained in the subsequent Value Report.

Generally, any valuation of property by ‘Property Valuers’ in capital markets must be made on the basis of ‘Market Values’ - categories articulated within Point 1(a)(3) of the Rule.

The exception: Valuations of ‘Specialized Properties’ - generally defined as those with ‘certain characteristics’, limited utility, and rarely purchased on the open market - shall make use of either the ‘Market Value for the Existing Use’, or the ‘Value in Use’. Clearly the former is formulated on the basis of market values, yet the Attachment fails to clarify which value system applies to what sorts of Specialized Properties.

The Rule instructs Valuers to maintain current Property Value Reports; updated reports are required either every 6 months, or if the value of a property changes by more than 5% of its total value at any time.

Valuers are prohibited from providing misleading information and / or allowing other parties to provide misleading information, according to the Rule. 

Valuers are further prohibited from providing two or more value assessments for a single valuation object. Generally, valuation objects fall into five categories: real property, personal property, plantation property, forestry property, and mining property.

Bapepam-LK reserves the right to conduct a review of any suspicious Value Report, either by calling upon another Property Valuer or, if necessary, some other ‘expert’ to provide a second opinion, and to ascertain whether: 1) Analysis, assessment approach, and assessment method were conducted properly; 2) The final property value is correct, and; 3) Value conclusions are sufficiently supported by evidence. 

All future Reports are bound by the Rule’s provisions; any Valuer that signed a previous valuation contract but has not yet completed a report is obligated to comply with the provisions.

The Rule was issued on 31 December 2009, and comes into force on 1 April 2010.