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Purchase of Real Estate as a Foreigner in Malaysia (2020)
(as of February 2020)
1. Introduction
Malaysia has developed into an attractive country for investors. The decisive factors
for this are the economic growth, the advantageous location in South East Asia and
an established legal reliability. Additionally, real estate prices are significantly lower
compared to cities like Hong Kong or Singapore.
Generally, foreigners are able to acquire full ownership of real estate in Malaysia.
2. Definition
Foreign
The term “foreign” is attributed to natural as well as legal persons. With regard to legal
persons, the term "foreign" comprises a large number of different partnerships and
corporations, legal persons under public law as well as corporate forms that do not
exist in the German legal system. Especially, legal persons should enquire how they
are qualified in the Malaysian legal order before acquiring real estate in Malaysia.
In summary, foreign natural persons are those that do not hold Malaysian citizenship;
whereas foreign companies or corporations are those that have their seat outside of
Malaysia or are incorporated abroad.
Initially, potential buyers can use this as orientation.
3. Five Prerequisites
Compared to other Asian countries, acquiring real estate in Malaysia is relatively easy.
As a foreigner you are even able to acquire full ownership of a property. The
acquisition of full ownership of real estate is often not possible in other countries of the
region.
Prospective buyers should have five prerequisites in mind.
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a. Minimum purchase price
The minimum purchase price is the most important prerequisite a foreigner has to
consider when purchasing real estate in Malaysia. There are different pricing
thresholds applicable to different states that have to be met when purchasing real
estate. Some states are divided into zones for which different thresholds exist. Aside
from the location, thresholds also depend on the type of real estate. Across the
country, the minimum purchase price for residential property is usual at 1,000,000
MYR.
1
The minimum purchase prices for commercial and industrial property as for
example in Selangor (3,000,000 MYR) can be higher.
States
Minimum Purchase Prices of Residential Property
2
Terengganu,
Pahang,
WPKL,
Putrajaya and
Negeri Sembilan
1,000,000
Selangor
2,000,000 MYR
(Zone 1: Petaling, Gombah, Hulu Langat, Sepang, Klang)
(Zone 2: Kuala Selangor, Kuala Langat)
1,000,000 MYR
(Zone 3: Hulu Selangor, Sabak Bernam)
Johor
2,000,000 MYR
(Landed property in international zones)
1,000,000 MYR
(Strata title and landed property in non-international zones, except for Medini)
Kelantan & Sabah
1,000,000 MYR
Perak
1,000,000 MYR
Kedah
600,000 MYR
(Kedah)
1,000,000 MYR
(Langkawi)
Perlis
500,000 MYR
Sarawak
500,000 MYR
1
Malaysian Ringgit
2
From 1
st
January 2020 until 31
st
December 2020, the minimum purchase price has been reduced to 600,000 MYR
in the Federal Territories, i.e. Kuala Lumpur, Labuan and Putrajaya.
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Penang
2,000,000 MYR
(Islands)
1,000,000 MYR
(Mainland)
Malacca
1,000,000 MYR
(Landed title)
500,000 MYR
(Strata title)
b. Excluded Real Estate
As long as those thresholds are met, foreigners are principally able to acquire real
estate with the exception of four property types which cannot be acquired by
foreigners:
No.
Type
1.
Real Estate worth less than MYR 1,000,000
2.
Real Estate that are labelled “Malay Reserved Land”
3.
Real Estate that are labelled “Bumiputera interest”
4.
So called low or low-medium cost houses
c. Real Property Gains Tax
Real Property Gains Tax (RPGT) is another important factor that should be
considered. RPGT is a tax that real estate owners have to pay when selling their
property. The tax rate is variable as it depends on different factors, e.g. the duration
of the acquisition and disposal of the real estate. The tax is to be borne by the seller.
d. Foreigner Consent
Additionally, foreigners must obtain a “Foreigner Consent” from the relevant authorities
in order to acquire real estate.
3
The consent procedure differs from state to state. The
same holds true for forms and fees. Fees are to be borne by the applicant.
Typically, consent is given as long as the requirements are met.
e. EPU Approval
At last, it should be inquired if an approval of the Economic Planning Unit (EPU) is
required for the acquisition of real estate. The EPU is an office of the Ministry of
Economic Affairs. EPU’s responsibility is the preparation of development plans for the
3
NLC 1965, Art. 433B.
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nation. Therefore, acquisition of real estate by a foreigner might require approval of
the EPU.
Summary:
1
2.
3.
4.
5.
4. Types and titles of ownership
In contrast to German law, Malaysian real estate law has titles of ownership, which
shape the ownership of the property in different ways. A real estate will be given a title
as soon as it is completed.
In regards to acquiring real estate, there are three types of title to consider:
a. Freehold
Freehold is comparable to full ownership according to German law. By obtaining the
title, the recipient obtains full and unlimited ownership of the property.
b. Leasehold
On the other hand, leaseholders are granted ownership of real estate however limited
in time. This right is often limited to 99 years. This period can be extended by paying
a certain amount of money to the competent authority.
c. Strata
Apartments are issued strata titles. Newly erected apartment houses will receive their
strata title within a certain time after completion.
5. Procedure
Before acquiring a property in Malaysia, it is recommended that to engage a local
lawyer who is familiar with Malaysian real estate law. Apart from the legal advice,
which is necessary due to the existing differences between German and Malaysian
law, it is also recommended to hire a lawyer due to different processes and interactions
with the Malaysian authorities and banks. Real estate agents can be engaged but are
paid by the seller.
The following 10 steps are advised:
1. Step
Procedure
2. 1
Seeking legal advice when choosing the real estate
3. 2
Signing letters of offer
4. 3
First down payment in the amount of 1% to 3% of the purchase price
5. 4
Signing of the sales and purchase agreement (SPA) within 14 to 30 days
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6. 5
Second down payment in the amount of 7% to 9% of the purchase price
The goal is to have a 10% down payment through two payments
7. 6
Obtaining the required approvals by the authorities
8. 7
Payment of the purchase price within 3 months
9. 8
Stamping of the SPA by the Inland Revenue Board (LHDN)
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9
Valuation of the real estate by the LHDN and payment of the stamp duty
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10
Registering the title at the Land Office or Registry
6. Sales and Purchase Agreement
The agreement to obtain real estate is called sales and purchase agreement (SPA or
S&P). This type of contract does not differ from ordinary Malaysian SPA’s.
Additionally, a Memoranda of Transfer of Title has to be signed, in order for the buyer
to obtain the real estate title.
7. Financing
In Malaysia, foreign prospective buyers have the possibility to obtain a financing loan
from a Malaysian bank subject to the creditworthiness of the potential creditor and an
existing residence or work permit.
Aside from this, foreign prospective buyers have the option of opening a Malaysian
bank account. This makes it easier to buy property with funds from abroad. However,
most banks will require a valid residence or work permit.
Disclaimer: This information is intended to provide a general overview on income tax in Malaysia and should not
be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any
person acting or refraining from acting as a result of any information in this overview can be accepted by Malaysian-
German Chamber of Commerce and Industry. Recipients should not act on the basis of this information without
seeking professional advice of a Malaysian tax agent.
4
Without the stamp the SPA is invalid.
5
Stamp duty is borne by the buyer. The calculation is made on an ad valorem basis.