Complete Guide on How To Buy A Property In Malaysia As A Foreigner

If you are a foreigner and you intend to buy a house or property in Malaysia, then this guide is for you. In this article we will discuss the Malaysian law that governs property purchase by foreigners, what type of properties that a foreigner can buy in Malaysia and the minimum price of the property you are allowed to purchase. We are also going to look into the type of property documents and titles that you will deal with, the procedures as well as the cost. As an addition, we will look into the Malaysia My Second Home Programme that may be applicable in your property purchase. Alright. Let’s dive in.

What are the law that governs foreigners who want to buy properties in Malaysia?

In buying or selling properties in Malaysia, foreigners, whether individuals or companies, must abide specific requirements and restrictions under the Malaysian law. These are enforced under the National Land Code 1965 and the Guidelines on the Acquisition of Properties (“EPU Guidelines”), issued by the Economic Planning Unit, a government body under the Malaysian Ministry of Economic Affairs.

Type of properties that can be owned by the foreigners

Foreigners can own any type of property as long as it does not fall under these type of properties:

A. Properties that is valued less than the set price threshold as set by individual state governments in Malaysia.

A foreigner can purchase a property in certain states if the purchase price of the property is above a certain price threshold. The threshold applicable depends on each state and is generally set by the state government.

B. Properties which are built on Malay Reserved land

This is a type of land or property that is designated as a Malay Reserved Land. This status is stated in the land title document as set by the State Authority. You can conduct a land search at the land office to view the land status.

a) Low and medium cost residential units as defined by the State Authority

This is a type of land or property that is designated as a low or medium cost residential units. This status is stated in the land title document as set by the State Authority. You can conduct a land search at the land office to view the land status.

b) Properties distributed allocated to Bumiputera interest in any development project as determined by the State Authority

This is a type of land lot or property lot that is allocated by the developer and agreed by the State Authority to be a Bumiputera Lot. This land status is stated in the land title document as set by the State Authority. You can conduct a land search at the land office to view the land status.

Sometimes a developer may request a Bumiputera Lot release from the State Government. If the request by the developer is approved, the developer may sell the same property to any individuals and not just Bumiputera.

C. Price threshold for foreign property ownership

The act of the government imposing a minimum purchase price for foreign property buyers is based on three main factors :

• The state where the property is located in;

• Whether the property has strata or individual title; and

• Whether the buyer holds a Malaysia My Second Home (MM2H) visa or not

Since 2014 that the minimum purchase price for all kinds of property that can be owned by a foreigner is RM1,000,000.00. This applies to almost every state in Malaysia. Nonetheless, based on the recent Malaysian Budget 2020, Finance Minister Lim Guan Eng has stated that a reduction of the price threshold for property ownership for foreigners in urban high-rise properties shall now vary from RM1,000,000.00 to RM600,000.00.

The following is the table of the purchase price thresholds applicable to both foreigners with or without Malaysia My 2ndHome’s visa;

State

The Minimum Threshold For Foreign   Residential Property Purchase

With MM2H

Terengganu, Pahang, Wilayah   Persekutuan Kuala Lumpur, Putrajaya, and Negeri Sembilan

RM1 million

RM million

Selangor

RM2 million (for Zones 1 & 2)

RM1 million (for Zone 3)

RM2 million (for Zones 1 & 2)

RM1 Million (for Zone 3)

Johor

RM2 million (landed properties in   international zones)

RM1 million (strata title % landed   properties within non-international zones, except for Medini)

RM1 million

Kelantan & Sabah

RM1 million

RM500,000

Perak

RM1 million

RM350,000

Kedah

RM600,000 (Kedah)

RM1 million (Langkawi)

No minimum

Perlis

RM500,000

RM1 million

Sarawak

RM500,000

RM300,000

Penang

RM2 million (island)

RM1 million (mainland)

RM350,000

Malacca

RM1 million (landed properties)

RM500,000 (strata title)

RM1 million (landed properties)

RM500,000 (srata title)

*Zones in Selangor
Zone 1 – Districts of Petaling, Gombak, Hulu Langat, Sepang and Klang
Zone 2 – Districts of Kuala Selangor & Kuala Langat,
Zone 3 – Districts of Hulu Selangor and Sabak Bernam

Procedures for foreigners buying properties in Malaysia

In Malaysia, there are three types of title, namely :

Master title - refers to the title held by a property developer, which gives the developer full control and rights over the said land. Most likely, this title is referring to a new property that is being constructed, before the individual or strata title is granted.

Strata title - refers to the document of title of a strata property. In most cases these properties are condominiums and apartments although we see a treand that gate community with shared facility tends to also have a strata title although it’s a landed property.

Individual title - refers to title of landed property such as houses, bungalows, semi-detached houses and so forth.

All said and done, as a foreigner in Malaysia in the event you are purchasing a property in Malaysia, you will probably be face to face with an Individual Title and Strata Title. If no individual title is issued to the property that you intend to purchase then the legal document of your property should be as part of the Master Title and yet to be divided into an individual or strata title. Fret not. All is not lost.

You can still purchase the land via a Deed of Assignment.

You should also look in to the scenario of your purchase. Is this a purchase from a developer or from another property owner? If it’s a new property, you will be purchasing the property from the Developer. Where as purchasing a property from another owner is called as a subsale.

If you are a foreigner and you intend to purchase a property, it would be wise to conduct a land search first to know the land status. Take note that in some cases, individual properties may have yet to issued a title if it is a Strata Title. In such scenario, you must ensure that that the owner can provide you with a Deed of Assignment to the property.

The procedure of buying properties are as follows:

i. The first document that needs to be signed is the developer’s sales form or the offer to purchase form with the vendor, for sub-sale transactions.

ii. Apply for financing/home loan to purchase the property (if necessary)

iii. Provide the following documents to the solicitor :-

a) Photocopy of passport

b) Correspondence address and contact number(s)

c) Income tax number & the place of submission of the income tax (applicable for sub-sale purchase only).

iv. Within 14 days from the date of signing the sales form (or the offer to purchase form), sign the Sale & Purchase Agreement (SPA), deed of the mutual covenant (if applicable) and other relevant transaction documents. This is accompanied with payment of 10% from deposit to the developer/vendor.

v. In order for the Solicitor to apply for State Authority consent, purchaser needs to provide some relevant documents such as the copy of SPA, passport, etc.

vi. Pay the balance purchase price in accordance with the said SPA agreement or as per any rules.

vii. At last, the developer shall deliver vacant possession of the property within 36 months from the date of the SPA (or such later date as may be approved by the relevant authority). This is accompanied with the title. In the case of a sub-sale transaction, the vendor shall deliver vacant possession to the purchaser in accordance with the terms of the SPA.

How Malaysia My Second Home (MM2H) visa affect your property purchase as a foreigner?

Malaysia My Second Home (MM2H) is a 10-year visa programme that allows foreigners who wish to stay in Malaysia for a long period of time at a lower price in certain states.

Foreigners below 50 years of age are required to prepare a minimum of RM500,000 in their savings account/current account/fixed deposits whereas those aged above 50 years of age need to have at least RM350,000 in similar accounts.

As explained in the above-mentioned table, this programme provides foreginers to purchase property with a cheaper price tag.

State consent for Foreigner Property Purchase

It is important for you to obtain a state consent whenever you intend to make a property purchase as a foreigner in Malaysia. Based on the Malaysian National Land Code 1965 law, a foreigner is required to request approval from the relevant State Authority for any acquisition of property by non-citizens and foreign companies. 

Each State Authority in Malaysia has its own internal way of approving this foreigner consent. Applicants are required to submit forms and pay the application fees depends on each state’s own application fee sum.

This process is usually done by solicitors that conducts your property transaction with the related land office.

Despite requiring the relevant state authorities’ consent, foreigners does not need the additional approval of the Economic Planning Unit for any acquisition of residential property units valued at RM1,000,000.00 and above.

The cost of purchasing a property in Malaysia as a Foreigner

A. Stamp Duty

Stamp duty is a tax that will be paid to the Inland Revenue Board of Malaysia. The tax is calculated and adjudicated based on the property documents during the sale or transfer of the property. This includes stamp duty of the Sale and Purchase Agreement (SPA) of the said property and stamp duty for the Memorandum of Transfer (MOT), which are calculated based on the purchase price or the market price of the property (whichever is higher).

Stamp duty rates particularly on the SPA and MOT are calculated as follows :

Price Tier

Stamp Duty (% of Property)

First RM100,000

1%

Next RM400,000

2%

RM500,001 - RM1,000,000

3%

More than RM1,000,000

4%

B. Legal fees (SPA & Loan agreement)

You are also required to set aside a sum of money to pay your lawyers. As lawyers are govern by the Malaysia Legal Profession Act 1960, the rate of the transaction is the same for all lawyers in Malaysia. Lawyers are not allowed to charge that the value prescribed in the law unless otherwise stated.

The table below shows the calculation for Sale & Purchase Agreement :

Value of Property (RM)

Scale of Fees (% of Property Price)

First RM500,000.00

1% (subject to minimum fee of   RM500)

Next RM500,000.00

0.8%

Next RM2,000,000.00

0.7%

Next RM2,000,000.00

0.6%

Next RM2,500,000.00

0.5%

Where the consideration or the adjudicated value is in excess of RM7,500,000.00

Negotiable on the excess (but shall   not exceed 0.5% of such excess)

The table below shows the calculation for a loan or financing agreement & documents :

Amount Secured of Financed (RM)

Scale of Fees

First RM500,000.00

1% (subject to a minimum fee of   RM500)

Next RM500,000.00

0.8%

Next RM2,000,000.00

0.7%

Next RM2,000,000.00

0.6%

Next RM2,500,000.00

0.5%

Where the consideration or the   adjudicated value is in excess of RM7,500,000.00

Negotiable on the excess (but shall   not exceed 0.5% of such excess)

For the principal   instrument/document - Full scale fee

For each subsidiary instrument/document within the meaning of subsection 4(3) of the Stamp Act 1949 - 10% (subject to a minimum fee of   RM300.00 and maximum fee of RM1,200.00)

C. Real Property Gain Tax

The Real Property Gain Tax (“RPGT”) is also an important consideration for a foreigner who wishes to dispose or sell off his or her property. RPGT is a form of tax levied by the Inland Revenue Board of Malaysia and is chargeable on property owners when they dispose of their land or real property with a resale price that is higher than the purchase price. It should be noted that this is governed by Real Property Gain Tax 1976.

The following is the RPGT rates effective from 1st of January, 2019:

Date of Disposal

Individual (Non-citizen) & Company

Disposal within 3 years   after the date of acquisition

30%

Disposal in the 4th  year after the date of acquisition

30%

Disposal in the 5th  year after the date of acquisition

30%

Disposal in the 6th  year after the date of acquisition

10%