Lacking Incentives for Green Building Construction

When State Minister of Environment Regulation No. 8 of 2010 on Criteria and Certification of Green Buildings was issued on 19 January 2010 (see ILB No. 1313 12/2/2010), developers anticipated a dovetailing regulation that might provide an incentive structure for shifting the mode of building construction to a greener effect. Developers are still waiting, and the aforementioned regulation’s implementation is effectively stalled.

Indeed, ‘Green Building’ development has been slow to gain momentum: there is little fiscal incentive to take on the additional costs and certification procedures to construct such buildings. Not only must green buildings satisfy several additional criteria beyond those required of regular constructions, they must also be certified as ‘green’ by an appraisal agency.

Among other things, developers must use local, environmentally-friendly materials, provide water conservation, waste-water management facilities, and a garbage-sorting mechanism before being certified as ‘green’. Yet, from tax to tariff preferences, the regulatory framework (thus far) affords no favorable treatment to such buildings and their developers.

“We need incentives,” said F. Teguh Satria, Chairperson of the Central Branch of the Corporate Real Estate Indonesia (REI) Association’s, when speaking at a discussion held by the Public Housing Journalist Forum on Tuesday (11/5) in Jakarta (Bisnis.com). Mr. Satria explained that in order to develop sustainable buildings, such things as discounted import duties for eco-friendly building materials, preferential property taxes, and other forms of special treatment would be required. Social or ethical considerations alone are apparently insufficient.

The necessity of a preference-granting regulation to complement the existing green building framework - and perhaps liberate its indwelling potential - is suggested by the evident inertia of the construction sector to shift towards greener development.