Buying property in malaysia basic rules and regulation
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According to our local daily, The Star, Malaysia ranks top in the best countries to invest in. On that note, foreigners and locals alike clamoring to grab a piece of the property pie here should be aware of the basic rules and regulations governing the purchase of property, lest they end up on the wrong side of the law.

Compared to many neighboring countries or those on the other side of the globe, Malaysia is still an affordable place to buy property despite high growth. With free flow of capital and financing available, loans are generally easy to come by. Capital Gains Tax imposed by the Malaysian government on the sale of property is also considered low.

Plus, the exchange rate compared to other currencies also helps buyers who are interested to partake in the local property market. 



Property Titles in Malaysia

Hold your horses! If you’ve decided that buying property in Malaysia doesn’t sound like such a bad idea, you will first need to understand the different types of property titles. These usually refer to ownership rights. Malaysia operates under the Torrens Title System of land registration and there are three types of titles:


(i) Strata Title 

This is usually granted to property owners that buy property in a shared building such as condominiums.


(ii) Individual Title 

Similar to a strata title, this typically refers to landed properties like semi-detached houses and bungalows where there is a discrete piece of land, usually below the property.


(iii) Master Title 

This often refers to new properties which are being constructed and relates to the ‘top-level’ title held by a property developer, providing the developer with rights and full control over land that they own.



Two Main Ways to Buy Property in Malaysia


1. New Launch Properties

You can buy new properties directly from a developer (usually before these properties are even completed), by making a small booking or reservation fee and then paying by installments based on pre-agreed milestones. Developers usually use the installment money to fund construction. This method is popular among property investors.

Head over to PropSocial and you will find more than 135 new launch properties in KL. However, make sure you do your homework on the developer to make sure that they will deliver on time. Also ensure that they are regulated (with valid sales & advertising permits, as well as developer’s licenses) and will not go bankrupt, leaving you in the lurch.


2. Sub-sale Properties

As the name suggests, these are properties that have been previously owned and are now selling on the ‘secondary market’. The sub-sale market in Malaysia is significantly bigger than that for new properties and this method is useful for foreigners looking to buy property and live in Malaysia.

Do note that you should get yourself a good property lawyer as the Sales & Purchase Agreement (SPA) is not standardized in sub-sale transactions the way that it is for properties bought from developers.



Lawyer: To Hire or Not to Hire?

The answer is YES. Now that you know the basics and have identified the type of property you want to purchase, you will have to hire a real estate lawyer, make an offer to purchase and prepare a 10% deposit, which is refundable and conditional upon the approval being granted by the state authority (with each state having its own timelines and rules).

Next, your lawyers will have to construct the Sale & Purchase Agreement (SPA). If you are buying from a developer, a standard SPA will be used.

It has to be stamped at the Stamp Office and an examination has to be conducted on the property. Stamp Duty must be paid to the Stamp Office and the transfer must be registered at the Land Office Registry. You (the buyer) will have a maximum of three months to make full payment from the date of the signing.

If (for whatever reason) the approval is denied, the transaction will become void and your deposit will be returned. However, once approval has been received from the State Authority, the seller receives the balance and the property is transferred.

If an agent is involved, you should make it a point to clarify who will be footing the agent’s bill and bear in mind that if the answer is not clear, it will most likely be you (the buyer).

Also, take note that Malaysian regulations allow agents to charge either the buyer or seller, as long as it’s not both in the same transaction. Understand that asking prices are not selling prices and if you are considering property in Malaysia as an investment, be aware that political changes can have huge impact.

Depending on what you want to do with your property, you have to be cognisant of the laws and restrictions, which commonly deal with zoning (restrictions on whether the property is industrial, commercial, agricultural or residential, as well as height and size of the property’s improvements), public easement and right of way (concerning access to pavements, roads and electric/telephone line...etc) and environmental hazards (materials stored on the property such as petro-chemicals, lead paint, asbestos and toxic wastes as well as their removal).

You could be fined or even go to jail if you do not take these requirements seriously!



What if I’m a foreigner?

Foreigners generally cannot buy any Malay Reserve Land, Agricultural Land as well as Bumi Lots in Malaysia. Besides that, you’re not allowed to purchase landed properties unless in a gated community with a Landed Strata title.

The Malaysia My Second Home (MM2H) government initiative has brought some changes to the Malaysian property market for foreigners. When buying property in Malaysia, foreigners should know that there is a minimum purchase price (standard in Malaysia is RM1,000,000) which varies depending on whether the buyer holds a Malaysia My Second Home (MM2H) visa or not.

The minimum price imposed varies from state to state. For example, in Penang, the minimum price for MM2H visa holders is RM500,000 (minimum purchase of 2 units) whereas in Kedah, no minimum purchase price is imposed on properties bought by MM2H visa holders.

Some states such as Penang and Melaka impose a state levy, which can bring up your purchase price. Selangor, on the other hand, does not impose a state levy, but only allows foreigners to buy landed properties with strata titles and does not allow foreigners to buy properties at auction.

Buying property in Malaysia as a foreigner can be a slippery slope and you should have a clear understanding of the restrictions imposed before buying any property in Malaysia. Check out our previous article about buying property in the country as a foreigner to equip yourself with more knowledge.



Conclusion

All in all, grabbing a piece of the Malaysian property market is really not that difficult once you’ve done your homework, located the best deal and know which rules apply to you. Having a good lawyer and agent handy will make your journey that much easier. Overall, as with all things, preparation is key.

Are you looking for a place to invest? Submit your details on our post requirement and let us assist you. 



(Written by: Rauf Fadzilla, 26th Oct 2017)

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@anton 

May I know from which source did you learn that Johor and Penang, it is the agent's practice to collect fees from the buyer and seller? 

I guess if we discover such malpractice , we should report it. 

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@domng For Penang it's true! 1% commission paid by owner and 1% commission paid by buyer. Not sure for Johor though.

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In other words, if there is a willing party who want to pay the agent a total of 2% commission... It does not matter owner or buyer pays?

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@admin_ps thanks for sharing