Guidance On How Foreigners Can Buy Property Or Real Estate In Malaysia
Guidance On How Foreigners Can Buy Property Or Real Estate In Malaysia
In recent years, it is axiomatic that many foreign purchasers have immersed themselves into Malaysia market property and seeking guidance on how foreigners can buy property or real estate in Malaysia. This provides a great investment opportunity for them due to its housing affordability in Malaysia. Real estate investment in particular plays a significant role to generate, stimulate and contribute to personal wealth in their investment portfolio.
Aside from individuals’ gain, foreign real estate investments have always shown positive results to spur our local economic growth in Malaysia. Conversely, the local engagement in this segment has shown a reduction of 8.1% in the first quarter of 2021 compared to the first quarter of 2020, according to the Revenue Services Sector the first quarter of 2021.
On a positive note, most respective local state governments have initiated a reduction in the minimum property price ceiling. The rationale behind this intention is to clear up the unsold units of each state in Malaysia, which is often known as ‘overhang properties’. Without a doubt, this initiative has attracted more foreign investors to expand and diversify their investment portfolio, especially during this unprecedented time.
In this brief article, we serve the purpose to highlight and discuss how foreign individuals can proceed to purchase their own desired property and the salient points to take note of before buying a property in Malaysia.
Are you within the purview of ‘Foreigner’ under the legal definition?
The legal definition of
- ‘Foreigner’ is defined-
– an individual who is NOT a citizen of Malaysia
– foreign national/ non- Malaysian resident
National Land Code 1965 (‘NLC’)
- ‘Foreign company’ is defined-
– a company incorporated outside Malaysia
– a company with 50% or more of voting shares held by non- citizen/ foreign company or by both
Companies Act 1965
Foreign individuals, Expatriates and non-Malaysian Companies are allowed to purchase their own desired property and there are no restrictions as to the number of properties that can be owned by them for staying, retirement or investment purpose.
In tandem with the National Land Code 1965 (‘NLC’), foreign individuals purchase the property in Malaysia will be guided by Malaysia’s Guidelines on the Acquisition of Properties.
What are the minimum threshold property pricing rules for foreign buyers in Malaysia?
Minimum Purchase Price
Foreign purchasers are only allowed to acquire the property at a certain minimum price ceiling that is set by the local state governments in Malaysia.
The rule of thumb on the minimum threshold for foreign buyers to purchase their property in Malaysia is RM1,000,000.00. The minimum threshold for the foreign property purchase price is entirely within the prerogatives power of the respective local state governments including the power to amend the minimum purchase price imposed depending on the different types of property in each state of Malaysia.
To put it in perspective, the minimum threshold for foreign property purchase price differs one another greatly depending on the
- location of the property (ie: States) and
- types of Property (ie: title of Freehold/ Leasehold of 99 years, renewable)
Click on the link below for an overview on the minimum threshold for foreigners’ property purchase price for the different types of property in each State of Malaysia.
Minimum Property Purchase Price & Types Of Properties For Foreigners In Malaysia (PDF)
State Authority Consent (Section 433B of National Land Code)
A prior State Consent is required to obtain from the respective local state authority to permit the acquisition of the piece of property. In such a case, the sale and purchase agreement (‘SPA’) between the vendor or developer and the foreign buyer must subject to the approval of the State (ie: Ruler/ Governor of the State).
However, there are circumstances where approval of State Consent is NOT required.
For example:
- an order for sale has been issued by a court/ public auction at the High Court of Malaya or Land Office,
- for the purpose of a charge and
- lien in respect of any alienated land or any undivided share in such land or any lease of such land.
Application of State Authority Consent
The State Authority Consent must be applied by the Owner or Vendor through their own respective solicitor.
The duration of the State Authority approval takes approximately 1 to 2 months. The duration of the State Authority approval may vary depending on the respective State and land office.
In the event that the state consent is rejected, the foreign buyer’s financier (ie: Bank) will not release the loan sum to the respective vendor or developer.
Hence, approval from the state authority must be strictly complied with, otherwise the sale or the disposal of the property will be rendered as null and void. Subsequently, the vendor or the developer may terminate the sale and purchase agreement.
Approval of Economic Planning Unit, Prime Minister’s Department (if necessary)
Generally, all properties acquisition is required to obtain an approval of the Economic Planning Unit, Prime Minister’s Department, with the EXCEPTION of the properties as follows:
- Acquisition of commercial unit valued at RM 1,000,000.00 and above
- Acquisition of agricultural land valued at RM 1,000,000.00 and above or at least 5 acres in area for the following purposes:-
- to undertake agricultural activities on a commercial scale using modern or high technology or
- to undertake agro-tourism projects or
- to undertake agricultural or agro-based industrial activities for the production of goods for export
- Acquisition of industrial land valued at RM 1,000,000.00 and above and
- Transfer of property to a foreigner based on family ties is only allowed among immediate family members and by love and affection
- The acquisition of residential unit by foreign interest valued at RM 1,00,000.00.00 does NOT require the approval of the Economic Planning Unit, Prime Minister’s Department but state authorities consent is required.
*LATEST: The approval of Economic Planning Unit, Prime Minister’s Department as mentioned above w.e.f 30.11.2020.
Off- limit properties (Restrictions) for Foreigner Purchasers
- Low cost and Low- medium cost as determined by the State Authority
- Properties on Malay Reserved land
- Properties allocated to Bumiputera interest in any property development project as determined by State Authority
One-off expenses that Foreigner Purchasers will incur in Purchasing Properties in Malaysia
- Sale and Purchase Legal fee and disbursement
- Transfer stamp duties calculated based on the purchase price or the current market value, whichever is higher
- Loan Agreement Legal fee and disbursement
- Loan Agreement stamp duties calculated based on loan sum
Miscellaneous fees
- Quit Rent
- Assessment rates
- Maintenance fee (Condominiums ONLY)
- State levy
3%- Penang
2% -Melaka (Notice of Approval Fee) & Johor
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