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Bali Zero handles visas, company setup, tax and property compliance in Indonesia. Ask us directly on WhatsApp.
Chat with Bali Zero on WhatsAppIndonesia's construction permitting landscape underwent its most significant structural change in decades when Government Regulation 16 of 2021 (PP 16/2021), issued under the Job Creation Law (commonly referred to as the Omnibus Law), formally replaced the Izin Mendirikan Bangunan — known by its acronym IMB — with a new two-stage framework. The IMB, which translates as a permit to establish a building, had been the country's primary construction authorisation instrument since the 1980s. After four decades of implementation at the local government level, the regulation abolished new IMB issuance across most of the country.
The first stage of the replacement framework is the Persetujuan Bangunan Gedung, or PBG, which translates as Building Approval. The PBG must be obtained before construction, substantial renovation, or change of use begins. It functions as the authorisation confirming a proposed building complies with technical, spatial planning, and administrative requirements. Applications are processed through local government one-stop service offices, known as DPMPTSP, with the national government having introduced a digital integration system intended to standardise what had historically been an inconsistent, region-by-region process.
The second stage is the Sertifikat Laik Fungsi, or SLF — the Certificate of Worthiness of Function. The SLF is issued after construction is complete and verifies that the finished structure conforms to what was approved at the PBG stage and meets safety and technical standards. Without a valid SLF, a building is not legally authorised for use or occupation. This has direct operational consequences for commercial properties: villas operating as tourist accommodation, restaurants, and hotels all require an SLF to be in compliance, and the certificate must be periodically renewed depending on building classification.
Existing buildings issued an IMB before the 2021 transition retain full legal validity under that document, provided the structure has not been materially altered, expanded, or converted to a different use. Once any of those changes occur, the property re-enters the permitting cycle under the new PBG regime. This creates a critical inflection point during property transactions: buyers of existing buildings must verify not only that a permit document is present, but that it accurately reflects the current state and use of the structure.
Bali has become the de facto benchmark for how strictly the new system is applied. The island concentrates foreign property investment, high-value tourism development, and active inter-agency oversight in a way few other Indonesian provinces do. Unpermitted construction, informal conversions of residential land to commercial use, and nominee ownership arrangements have all faced increased scrutiny in recent years, making the gap between what a permit says and what a building actually is one of the most consequential risk factors in any Bali transaction.
The transition from IMB to PBG and SLF is not merely a nomenclature change — it represents a meaningful tightening of the permitting infrastructure, and Bali is where that tightening has real teeth. What we see consistently among incoming clients is a due diligence gap: a vendor presents an old IMB as sufficient documentation, a buyer accepts it without verifying whether the building as it stands today actually matches the permitted description, and the discrepancy only surfaces after contracts are signed.
The SLF requirement compounds this. Many villas and commercial properties in Bali were built or extended under the old IMB system and have never gone through an SLF assessment. The practical consequence for anyone purchasing or leasing such a property is that they may be operating in a building not authorised for its current use — a vulnerability that creates leverage for local authorities and complicates exit strategies.
At Bali Zero, our position is straightforward: permit verification must precede any financial commitment, not follow it. In the current enforcement environment, an undocumented or misdocumented building is not a negotiating point — it is a liability that transfers to the buyer at the moment of signing.
For anyone buying existing property in Bali, the first due diligence task is confirming exactly which permit the building holds — legacy IMB or current PBG — and then cross-referencing the permitted description against the physical reality of the structure. An IMB issued for a single-family residence that has since been converted to a six-room villa rental, for example, represents serious compliance exposure. The renovation and change of use required a PBG application, and the completed structure requires an SLF.
For those planning to build or substantially renovate, the PBG must be in place before work begins, not after. Commencing construction without it can result in a stop-work order and creates difficulties when applying for the SLF at project completion. Timelines for PBG approval in Bali vary depending on project complexity and the completeness of the application file; engaging a local permit consultant who works regularly with the relevant DPMPTSP office materially reduces delays.
Commercial operators — villa managers, restaurant owners, and hospitality businesses — should treat the SLF as a live document. It requires renewal, and an expired SLF in an active enforcement environment is a risk not worth carrying.
If you own or are acquiring property in Bali, pull the original permit documents now and have them reviewed by a qualified Indonesian lawyer or notary against the current physical state of the building. Do not accept a vendor assurance that an old IMB is sufficient without independent verification. If you are planning construction or renovation, engage a PBG consultant before breaking ground — the application requires technical drawings, spatial planning conformity checks, and coordination with local government that take time to prepare correctly. If you operate a commercial property, verify that your SLF is current and accurately reflects the use classification of your building. Do not wait for an enforcement event to discover the gap.