YOUR GUIDE TO INVESTING IN MALAYSIAN REAL ESTATE
Malaysia Property Incorporated (MPI) is a Government initiative set up under the Economic Planning Unit to drive foreign direct investments into the Malaysian real estate market. MPI connects interested parties through its extensive network of government agencies, private sector companies, real estate firms, business councils and real estaterelated associations. As MPI is an initiative funded by the Malaysian Government, all services provided by MPI are gratis.
WHY INVEST IN MALAYSIA? • Direct foreign ownership of real estate is permitted Security in legal ownership • No capital controls Non-residents are free to purchase any kind of property priced above RM500,000 • No capital gains tax The Real Property Gains Tax only applies if property is disposed of within 5 years from purchase • Transparent Torrens Land administration system Based on Australian Torrens System • No inheritance tax Property will be distributed according to the owners’ will • End financing available for foreign buyers Malaysian banks can offer overseas buyers loans of up to 70%
MORE REASONS TO INVEST HERE • Economic Stability • Real Estate Investor-friendly Tax Environment • Repatriation of Income is Allowed • Sound Basic Infrastructure & Amenities • Good Travel Infrastructure • Multilingual Advantage • Young and Growing Population • Away from Natural Disaster Zones • Summer All Year Round
OWNING MALAYSIAN PROPERTY
Landed Titles (May be freehold or leasehold)
Strata Titles (May be freehold or leasehold)
Gated Communities
Condominiums
OWNERSHIP OPTIONS
Semi-Detached & Terrace Houses
Serviced Apartments
Freehold Freehold property belongs to the owner in perpetuity. Transfer of interest in the property can proceed without any restrictions or approvals from the government.
Bungalows
Town Houses
Leasehold Land leased by the government for a specific term, most commonly in the duration of 33 years or up to 99 years. Transfer of interest to another party may require some state authority approval, depending on conditions in the title. Landed Issued for properties built on individual plots of land that is sub-divided horizontally. Strata A form of ownership commonly found within residential and commercial multi-storey buildings, as well as landed properties within a gated community. Strata title properties comprise individual lots owned by individual owners and include common property.
Golf Resort Homes / Beach Villas Residential Land
ARE THERE ANY RESTRICTIONS ON MY PURCHASE? The Economic Planning Unit’s Guideline on Acquisition of Properties (Updated January 2010) states that a foreigner is not allowed to purchase any types of properties below RM500,000.00 from 1 January 2010. One is also not allowed to purchase (i) low or low-medium cost residential properties, (ii) properties built on Malay reserve land, and (iii) properties allocated to Bumiputera interests. The minimum purchase price set by a few states differs from the abovementioned. Please confirm with your solicitor before you make a commitment on any property.
States
Min. Value Threshold
Federal Territory of Kuala Lumpur & Labuan, Penang, Johor, Melaka, Negeri Sembilan, Terengganu, Perlis, Kedah, Perak, Selangor
RM500,000
Pahang • Unless in Cameron Highlands, Bentong & Kuantan
RM500,000 RM750,000
Sarawak Sabah
RM300,000 Not Applicable
DO I NEED TO OBTAIN ANY SPECIAL APPROVALS? You are required under Section 433B of the National Land Code to obtain the respective state government’s approval for your purchase.
DO I NEED TO ENGAGE A LAWYER FOR THE PURCHASE? It is advisable to engage a solicitor who will conduct a search on the property to confirm ownership and perform a bankruptcy/windingup search on the vendor before you make any commitments. Your solicitor will prepare the necessary legal documentations. Solicitor’s fees are set out under the Solicitors’ Renumeration Order 2006. You may enquire with the Malaysian Bar Council for assistance.
IS THE HOUSE BUYER’S INTEREST PROTECTED UNDER MALAYSIAN LAW? Yes. The Housing Development (Control and Licensing) Act 1966 not only regulates the business of housing developers but also protects the interests of house buyers.
WHAT ARE THE STEPS INVOLVED? I. Sign a Letter of Offer/Intent prepared by the developer or the agent after your solicitor has perused it. You will usually pay 3% of the purchase price as earnest deposit which forms part of the purchase price. II. You are then required to execute the Sale & Purchase agreement within 14 days of signing the Letter of Offer/Intent. The contract must take the form of either: a. Schedule G of the Housing Development (Control & Licensing) Act when you purchase land and and buildings from developers, OR b. Schedule H when you purchase subdivided buildings from developers. III. The vendor will execute a Memorandum to transfer the title to you. If there is no title, the vendor will execute a Deed of Assignment to assign all his rights and benefits under the principal Sale and Purchase agreement to you. IV. If you are buying direct from a developer, they will execute a Letter of Undertaking to transfer the title to you.
V. You must also execute the Land Office forms for the application of the state government’s approval of your purchase. VI. Upon signing the Sale and Purchase agreement, you pay up to 10% of the purchase price. When you buy from an existing property owner, you pay the balance within 3 months from the date you obtain the state government’s approval of your purchase.
OWNERSHIP CHARGES
WHAT ARE THE TYPICAL OUTGOINGS INCURRED FOR A MALAYSIAN PROPERTY? Charges/Fees
Authority
Frequency
Quit rent
Land office
Yearly
Local Council Fee*
Local authority
Half-yearly
* paid for the maintenance of public services
HOW CAN I GET A LOAN IN MALAYSIA? Malaysian financial institutions and overseas buyers are able to negotiate a loan of up to 70% of the property purchase value. Your limit depends on the financial institution’s internal and credit assessment guidelines and your property will be charged/assigned to the financial institution.
DO I NEED TO PAY STAMP DUTY ON MY PURCHASE? You have to pay stamp duty on the document of transfer, calculated as follows: For every RM100.00 or fractional part of RM100.00 of the amount of the purchase price or the adjudicated market value of the property by the tax department, whichever is the greater • RM1.00 on the first RM100,000.00; • RM2.00 on any amount in excess of RM100,000.00 but not exceeding RM500,000.00; • RM3.00 on any amount in excess of RM500, 000.00.
WHAT ARE THE OTHER POSSIBLE COSTS ASSOCIATED WITH BUYING PROPERTY? Stamp duty on your loan documentation, land search fees, bankruptcy/winding-up search fees, land office registration fees etc.
IN THE EVENT OF MY DEATH, WHO WILL INHERIT MY PROPERTY? If you are a non-Muslim, your property will be distributed according to your will or the Distribution Act 1958 if you do not have a will. A Muslim’s estate will be distributed according to Syariah law. No inheritance tax is levied in Malaysia.
ARE THERE ANY RESTRICTIONS ON SELLING PROPERTY? None unless the state approval contains such conditions.
DO I HAVE TO PAY TAX ON THESALE OF MY PROPERTY? You may be required to pay a 5% real property gains tax (capital gains tax) if your property was bought less than 5 years ago.
CAN I TRANSFER MY EARNINGSFROM THIS PROPERTY OUT OF MALAYSIA? The Malaysian Central Bank does not impose any restriction on the repatriation of profits, rental or proceeds from divestment of investments in Malaysia by a non-resident.
Updated : June 2011
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