The Analysis of "Highest & Best Use" Government Land of Deli

Serdang District

A. P. Sipayung

, N Matondang

, and H. T. Fachrudin

Master of Property Management and Valuation Program, Universitas Sumatera Utara, Medan 20155, Indonesia

Faculty of Engineering, Universitas Sumatera Utara, Medan 20155, Indonesia

Keywords: Highest & Best Use, Benefit Cost Ratio, Land Owned by the Deli Serdang District Government

Abstract: Government assets were very much in the public spotlight today due to the lack of optimal asset utilization,

which was in accordance with Constitution of Indonesia 2004 No. 32 regarding to the Regional

Government, where the Regional Governments are granted autonomy to regulate and manage government

affairs and when necessary, to optimize the sources of Regional Original Income (PAD), particularly the

revenues from government asset management sector. One of the vacant land owned by Deli Serdang

regency of 22,802 M² located on Jalan Raya Medan - Lubuk Pakam KM 21.5 Tanjung Morawa needed to be

optimized to increase the PAD of Deli Serdang Regency. The Highest and Best Use (HBU) analysis method

was used to further identify the most optimal and beneficial use of the property for such vacant land. The

results obtained in this research was the Product Promotion Center by generating Net Present Value of Rp.

Rp38.142.832.106, - (thirty eight billion one hundred forty two million eight hundred thirty two thousand

one hundred six Rupiah), Internal Rate of Return of 27.92%, Payback Period of 5 years 7 months and

Benefit Cost Ratio of 7.67 and maximum productivity that provided an increase in the value of land from

Rp. 1,003,000, - / M² up to Rp. Rp1,186,591, - / M² or Productivity increased 118%.

1 INTRODUCTION

Utilization of government assets that had not been

optimal in most Regional Governments in Indonesia,

which was in accordance with the Constitution of

Indonesia 2004 No. 32 on Regional Government,

where the Regional Government is given the

autonomy to regulate and manage government

affairs and is required to optimize the sources of

Regional Original Income (PAD), particularly the

revenues from the government asset management

sector. Hence it was necessary to analyze the

utilization and use of land to determine the optimal

land use alternative before implementing the

construction of property on the land, and supports

sustainable properties that are actions and mitigate

negative environmental impacts typically manifested

in green buildings with eco-friendly design

(Fachrudin, 2017).

The assessment use of the Highest and Best Use

method (HBU Method) was the most feasible and

permissible use of an established land or soil, which

was physically feasible, legally permissible, and

financially feasible (Hidayati and Harijanto, 2001).

The HBU analysis was one of the many methods in

analyzing the optimal land use and had the highest

value.

The research will be conducted on one of the

assets owned by Deli Serdang Regency Government

covering 22,802 M² located at Jalan Raya Medan -

Lubuk Pakam KM 21,5 Tanjung Morawa. Currently,

the land is still idle and had not been utilized

optimally while located strategically in the strategic

area of industrial and trading center area thus

making it suitable to be developed into commercial

property such as product promotion center,

warehousing, offices, traditional market and

business hotel . By using Highest and Best Use

method (HBU Method) through physical aspect,

legal aspect, financial aspect and maximum

productivity will be determined land use. In AIREA

(2008: 278) AIREA (2008) said that Highest and

Best Use (HBU) was defined as the most reasonable,

feasible, and legitimate use of vacant land or built-

up land that was physically possible, appropriately

supported, financially feasible, and produced the

highest value of the land. Pratama (2011) also said

that the Highest and Best Use (HBU) on

Sipayung, A., Matondang, N. and Fachrudin, H.

The Analysis of "Highest Best Use" Government Land of Deli Serdang District.

DOI: 10.5220/0009897100002480

In Proceedings of the International Conference on Natural Resources and Sustainable Development (ICNRSD 2018), pages 32-37

ISBN: 978-989-758-543-2

government-owned vacant land had been done

several times, such as research conducted in North

Jakarta area with the conclusion of the development

of apartment project. A similar study was also

conducted by Supit (2013) on land owned by the

North Sulawesi Provincial Government with the

conclusion of use as a hotel. Pradhani (2013)found

the conclusion of HBU as a mix use of development

on one parcel of vacant land in Mataram City. Then

Manaf, et al. (2013) assessed the efficiency of

property lands and the relationship between land

availability and urban development where land was

a key determinant of development success. The

author also conducted studies of some literature

related to HBU, such as Luce (2012) who examined

a site and office building above it located in

Arlington, Virginia, United States, using HBU

analysis. Rattermann (2008) addressed the theme of

the HBU issue in the assessment to generate market

value.

2 METHODS

The research used Highest and Best Use (HBU)

concept to determine what kind of property was the

most optimum in the object of research by

performing analysis based on physical aspect, legal

aspect, and financial aspect and considering

maximum productivity. The type of research

conducted was quantitative research where

phenomenons could be classified relatively fixed,

concrete, observed, measured and causal symptoms.

The data that had been collected was analyzed in

order to be concluded as the formulated hypothesis

whether it was proven or not (Sugiono 2012).

Table 1: Research Variable

No. Variable Indicator

1. Alternative

Land

Utilization

Alternative Land

Utilization

2. Legal a. Zoning

. Building Code.

3. Physical a. Location &

Accessibility

b. State of Utility &

Environmental

Facility

c. Land Tread

Analysis (Shape

and size of lan

)

No. Variable Indicator

4. Financial a. Investment Cost

b. Income

c. Expense

d. Cash Flow

5. Maximum

Productivit

Land Value

Source : Data Processing, 2018

To facilitate in viewing the conceptual framework of

the research, the researcher described it as followed:

Figure 1: Conceptual Research Framework, 2018

3 RESULTS AND DISCUSSION

The results of land use research for the property that

yielded the highest land value of the land area of

22,802 M² located on Jalan Raya Medan - Lubuk

Pakam KM. 21.5, Tanjung Baru Village, Tanjung

Morawa Sub-district, Deli Serdang District.

Figure 2: Research Object Location. Source: Google Earth

& Field Survey, 2018

The Analysis of "Highest Best Use" Government Land of Deli Serdang District

Figure 3: Orientation of Land Location in Tanjung Baru

Village, Tanjung Morawa Sub District. Source : Field

Survey & Peta Rupa Bumi 1:50.000, 2018

3.1 Determination of Alternative Use

The results obtained from the observation of

buildings around the study site, interviews and

delivery of questionnaires to relevant stakeholders

will be studied to obtain the best alternative land

use. The survey results stated that the land located

on Jalan Raya Medan - Lubuk Pakam KM. 21.5,

Tanjung Baru Village, Tanjung Morawa Sub-district

was suitable for commercial property types such as

product promotion center, warehousing and business

hotel.

Table 2: Questionnaire Results Data

Alternative Land Utilization Number of

Respondents

Product Promotion Cente

Warehousin

Business Hotel 4

Port 1

One Stop Integrated Service

Office

(

PTSP

)

Commercial sports arena 1

Culinar

Cente

Total 30

Source : Data Processing Result, 2018

3.2 Physical Aspect Analysis

Subject to the analysis of physical aspects, there

were several criterias that became used indicators.

They were Location and accessibility, State of

Utility And Environmental Facilities, Land Tread

Analysis (shape and size of land).

3.3 Location and Accessibility

Based on the data, the land had a very convenient

location for commercial property, and had a very

strategic accessibility as it was very close to Tanjung

Morawa Toll Gate, Kuala Namu Airport and the

capital of Lubuk Pakam Regency. The land was also

located at small trading centers and industrial areas

and other commercial public facilities such as

showrooms, shops, warehouses and others, and the

availability of public transportation such as public

transport routes, and other transportation passing

through the land area. This supported the

development of alternative land research objects.

3.4 State of Utilities and

Environmental Facilities

Based on the data and field observations, the

previous land location was for agricultural nursery

and the land currently was idle. For the Utility

facilities around the land, it was also complete and

very adequate with the availability of electricity,

water and telephone lines. The availability of

existing utility facilities will facilitate the property

owner for any activities used on the land.

3.5 Land Tread Analysis

Based on the data and size in the field, the land was

an area of ± 22,802 m², land in the form of a plot of

land with a parallelogram, where the front width

facing Jalan Raya Medan - Lubuk Pakam ± 82

meters and extended to the rear for ± 278 meters.

With the shape and size of existing land, it was very

possible and suitable to use it as a building that had a

wide and flexible space functions, besides the

unique and strategic frontage. The overall object

topography was relatively flat, with the elevation of

the ground plane ± 0.2 meters higher than the road,

where the research object currently was empty.

Table 3: Result of Land Physical Aspect Analysis

Physical

Aspects of

Land

Use As

Product

Promotion

Cente

Use as

Warehouse

Use As

Business

Hotel

Size Possible Possible Possible

Shape And

Usefulness

Possible Possible Possible

Fronta

e Possible Possible Possible

Ease of

Access

Possible Possible Possible

Availabilit

Possible Possible Possible

ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development

Utilities

Locations

in the

Market

area

Possible Possible Possible

Topograph

Possible Possible Possible

Source : Data Processing Result, 2018

3.6 Legal Aspect Analysis

Legal aspect analysis was done to avoid the misuse

of land use which had been stipulated in the rules

and regulations that apply. To be legally permitted

on the research field, referring to Constitution of

Indonesia (2007) No. 26 on Spatial Planning.

Government Regulation (2000) No.25 Concerning

Government Authority and Provincial Authority as

Regional Autonomy For land use (Zoning) in this

area was planned as a mixed area between processed

industries, trade, transportation services and

warehousing, adjusted to Detailed Spatial Plan

(RDTR), and City Space Engineering Plan (RTRK)

which were derived from the National Spatial Plan.

In general, some of the above planning were also

supported by the Draft of Regional Spatial Planning

(RTRW) of Deli Serdang 2017 and adjusted to the

regulation stated in Presidential Regulation 62

(2011) regarding to Regional Spatial Plan (RTRW)

Urban Area of Mebidangro which already had legal

provisions. Based on land allocation (Zoning) from

three alternative land uses that were:

- Product Promotion Center

- Warehousing

- Business

There were only two legally permitted land use

alternatives. They were:

- Product Promotion Center

- Warehousing

For the Building Code regulation which took effect

at the location of research objects, it was

strengthened with observation of the surrounding

land, which was as followed:

- Basic Building Coefficient (KDB) maximum: <60-

70%

- Building Border Line (GSB) maximum: 12 m

- Green Basic Coefficient (KDH) minimum: > 30-

40%

- Floor Coefficient of Building (KLB): 1.5

- Border Line Fence (GSP) Side: 0 - 3 m

- Border Line Fence (GSP) Rear: 0 - 3 m

- The height of the building was in accordance with

the feasibility of building requirements.

(source: Kuala Namu Airport Authority).

Figure 4: Shape and Size of Field Research. Source:

Housing and Settlement Area of Deli Serdang District

2018

With the analysis of legal aspects based on the

description above, it could be summed up as

followed:

a. Product promotion center

Total land area 22,802 M² with Building Area 60%

from 22,802 M² area, that was ± 13,681 M², and

based on Neufert Architect Standards, 15% of

constructed land will be devoted to Circulation and

Space.With a total area of 13,123.38 M² or about

57.55%, it was still below the Building Coverage

Ratio (KDB) maximum 70%, while for the Green

Coverage Area (KDH) of 9,678.62 M² or about

42.45% was considered appropriate with a minimum

of 30% of the land area. The design of the Site Plan

for utilization as an alternative to the Product

Promotion Center met the applicable regulations.

b. Warehousing

With a total area of 13,613,00 M², or about 59,70%

that was still below the Building Coverage Ratio

(KDB) maximum 70%, while for the Green

Coverage Area (KDH) it was 8,803 M² or about

40,30%, which was in accordance with the minimum

terms of 30% of the land area. The site layout design

for utilization as an alternative Warehouse also

satisfied the regulatory requirements described

above.

Table 4: Result of Analysis of Land Legal Aspects

Legal

Aspects

of Land

Use As

Product

Promotion

Cente

Use As

Warehousing

Use As

Business

Hotel

Zoning Permitted Permitted Not

Permitte

Building

Code

Permitted Permitted Not

Permitte

Source : Data Processing Result, 2018

The Analysis of "Highest Best Use" Government Land of Deli Serdang District

3.7 Financial Aspect Analysis

After performing analysis of physical aspect and

legal aspect, the next step was to analyse the

financial aspect. These financial aspect analysis

included criterias, investment costs, revenues,

expenses, and cash flows.

3.7.1 Financial Aspect Analysis

After performing analysis of physical aspect and

legal aspect, the next step was to analyse the

financial aspect. These financial aspect analysis

included criterias, investment costs, revenues,

expenses, and cash flows.

3.7.2 Investment Costs Planning

Planning of the investment costs consisted of land

expenses, consultant costs and construction costs.

For investment cost of each alternative, it could be

seen in Table 5.

Table 5: Investment Costs

Use As Product

Promotion Cente

Use As Warehousing

11.086.178.015,46 30.284.899.593,64

Source : Data Processing Result, 2018

3.7.3 Revenue Planning

The revenue planning for the alternative buildings

were projected to come from the leasing of building

function, service charge and parking revenue. The

projected revenues could be seen in Table 6.

Table 6: Revenues

Year Use As Product

Promotion

Cente

Use As

Warehousing

1.074.720.315 1.367.976.250,00

1.888.374.002 2.797.151.437,50

2.780.786.373 3.572.037.984,38

3.092.267.871 3.750.639.883,59

3.602.739.755 3.938.171.877,77

3.789.747.940 4.594.533.857,40

3.986.553.162 4.824.260.550,27

4.193.674.303 5.065.473.577,79

4.411.658.078 5.318.747.256,68

4.641.080.545 5.584.684.619,51

Source : Data Processing Result, 2018

3.7.4 Expenditure Planning

The revenue planning for the alternative buildings

were projected to come from the leasing of building

function, service charge and parking revenue. The

projected expenditures could be seen in Table 7.

Table 7: Expenditures

Year Use As Product

Promotion

Cente

Use As

Warehousing

1 260.594.853,00 6.130.350,00

2 547.249.191,30 12.534.952,50

3 861.917.476,30 16.007.473,13

4 946.904.112,29 16.652.218,57

5 1.118.530.482,

17.484.829,50

6 1.174.457.006,

20.398.967,75

7 1.209.160.418,

21.218.739,35

8 1.269.618.439,

22.279.676,32

9 1.333.099.361,

23.393.660,13

10 1.399.754.329,

24.563.343,14

Source : Data Processing Result, 2018

3.7.5 Capital Budgeting Analysis

The feasibility indicators of a project could be

foreseen using the Capital Budgeting technique, as

for the techniques in Capital Budgeting such as

using NPV, IRR, Pay-back Period, and Benefit Cost

Ratio. The analyses were used to determine the

feasibility level of the project and to find out how

substantial the alternative options were capable of

creating a reasonable rate of return for the fund

provider. The following was the result of financial

feasibility analysis on the development of each

alternative, which could be seen in Table 8.

Table 8: Financial Feasibility Alternative Development

Financial

Indicators

Use Of Pro

ert

Product

Promotion

Cente

Warehouse

Net Present

Value (NPV)

38.142.832.106,81 22.924.450.185,16

Internal Rate of

Return

(

IRR

)

27.92 % 9.46 %

Payback Period

(

PBP

)

5.75 8.25

Benefit Cost

Ratio

(

BCR

)

7.67 0.74

Source : Data Processing Result, 2018

ICNRSD 2018 - International Conference on Natural Resources and Sustainable Development

3.7.5 Maximum Productivity for Alternative

Use of Property

The highest land value indication or property choice

that gave the maximum productivity was the use of

Product Promotion Center with indication of land

value post use was Rp.1.186.591, - (one million one

hundred eighty six thousand five hundred ninety one

Rupiah) or an increase of 118 percent. For

warehouse use there was a 32 percent drop in land

value.

Table 9: Indication of Land Value Based on Property Use

Use of property R

/ Mete

Vacant Land

Market

Indicato

Warehouse

Product

Promotion

Cente

1.003.000,00

1.186.591,27

Warehouse Rp

1.003.000,00

(322.798)

Source : Data Processing Result, 2018

4 CONCLUSION

Based on the results of the above comparison, the

development of the Product Promotion Center met

the 5 (Five) best eligibility criteria, namely NVP,

IRR, BCR & Maximum Largest Productivity and

Minimum Payback Period (PBP). Thus, the

preferred alternative suggested to be developed on

the land that belonged to the Government of Deli

Serdang Regency located on Jalan Raya Medan -

Lubuk Pakam KM. 21.5 Tanjung Baru Village,

Tanjung Morawa Sub-district, Deli Serdang

Regency, North Sumatera Province was the Product

Promotion Center.

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Undang-Undang No. 26 Tahun 2007 Tentang Penataan

Tata Ruang

The Analysis of "Highest Best Use" Government Land of Deli Serdang District