Foreigner Purchase of Property
Purchase of Properties in Malaysia by Foreigners
With the blooming of the real property market in Malaysia, it is an ideal time for foreign investors to invest in the country. It is often said that Malaysia is still amongst the countries in Asia which has the most affordable property prices. Apart from that, with the advancement of infrastructures and its locality which is free from any natural disasters, a lot of foreigners have chosen to make Malaysia their second home. However, before making any decision to acquire a property in Malaysia, as a foreigner would need to understand the requirements, policies and restrictions imposed by the local government. This article serves to guide you on the requirements to take note of.
The acquisition of property by a non-Malaysian citizen and a foreign company are allowed in Malaysia subject however to the Guideline on the Acquisition on Properties (“EPU Guideline”) issued by the Economic Planning Unit (“EPU”) and the relevant rules and regulations imposed by the respective State Authorities.
Under the National Land Code 1965 (“NLC”), non-citizens and foreign companies may acquire any land with the approval of the State Authority . The EPU Guideline further provides the following types of property which are not allowed to be acquired by foreigners:
- Properties valued less than RM1,000,000 per unit;
- Residential units under the category of low and low-medium cost determined by the State Authority;
- Properties built on Malay reserved land; and
- Properties allocated to Bumiputera interest in any property development project as determined by the State Authority.
Having said that, the property acquired can easily be a condominium, a bungalow or commercial property so long as there is a minimum value of RM1,000,000. However, the State Authority prevails in power for land matters and has the right to amend the minimum value for property acquisition in the respective States. Below are the minimum threshold for the respective States in Malaysia at year 2019:
|State||Minimum Threshold (RM)|
|Penang||RM1,000,000 (Penang Mainland)||RM2,000,000 (Penang Island)|
|Malacca||RM500,000 (for Strata Title)||RM1,000,000 (for Landed Property)|
|Kedah||RM600,000 (in State)||RM1,000,000 (Langkawi Island)|
(Only Strata Properties Allowed)
|Zone 1 (Petaling, Gombak, Hulu Langat, Sepang + Klang): RM2,000,000
Zone 2 (Kuala Selangor + Kuala Langat): RM2,000,000
Zone 3 (Hulu Selangor + Sabak Bernam): RM1,000,000
Please take note that these conditions may change from time to time by the respective State Authority and thus it is wise to seek professional advice before making any commitment.
As mentioned earlier, the State Authority’s consent is required prior to any purchase of property by a foreigner in Malaysia. In practice, this will usually be done by the Solicitor which will be handling the Sale and Purchase Agreement. The approval for such consent will normally take at least 2 months and varies between States as the procedure of approval might be different. While waiting for the State Authority’s approval, the foreign purchaser could apply a loan with a bank. A lot of the banks in Malaysia especially foreign banks which have branches in Malaysia cater a lot to the needs of the foreigners. The bank will give a preferential treatment if you are a foreigner under the Malaysia My Second Home (MM2H) Scheme.
MM2H is a programme promoted by the Government of Malaysia to allow foreigners to stay in Malaysia for as long as possible on a multiple-entry social visit pass subject to fulfilment of certain criteria. The Government of Malaysia intends to promote Malaysia as a retirement place or a place for foreigners to come for long stays.
The benefits that comes as a successful MM2H applicant include a lower property value compared to the set minimum threshold. For example, for Sabah MM2H applicants, the threshold has been reduced to RM500,000 and Perak’s has been reduced to RM350,000 instead of RM1,000,000. As mentioned earlier on the preferential treatment given by bank, the margin of finance with home loan can go up to 80% compared to non-MM2H foreigners which would normally get 70%.
However, this application comes with certain requirements. Amongst those requirements, applicants below 50 years old are required to prepare a minimum if RM300,000 in a fixed deposit account while applicants above 50 years old will need to deposit RM150,000. Besides that, there are other financial requirements and medical requirements which are accessible on the MM2H official portal.
The procedure and documentation for purchase of property by foreigner is pretty much the same as that of a citizen of Malaysia. The transfer documents will be levied with ad-valorem stamp duty and any chargeable gains on any disposal of property by a foreigner will be levied with Real Property Gains Tax with a rate of 30 percent throughout the 1st to 5th year and subsequently 5% from the 6th year onwards. Legal fees are also payable to the solicitor in charge in accordance to the Solicitors’ Remuneration (Amendment) Order 2017.
And there you go. It might all seems confusing and complicated, a little research will definitely help to narrow down the rules which are applicable to you. Otherwise, it is prudent to seek legal advice from your solicitor to make sure that the rules applicable are up to date and that you are fully prepared.
If you have any questions or require any additional information, please contact our lawyer that you usually deal with.
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