Thanks to its stable political climate, strong economy, and attractive property market, Malaysia is a popular destination for foreigners looking to invest in property. However, as a foreigner, property purchase, or buying land in Malaysia can be complex, with strict rules and regulations to navigate.
If you’re a foreigner looking to buy property in Malaysia, this guide will walk you through everything you need to know about the local property market.
What do you need to know?
It’s important to note that in Malaysia’s real estate market, foreign buyers or foreign companies are only permitted to buy or acquire title/interest in land in specific states set by the local government, which we will detail in this guide.
In states where such purchases are permitted, the transaction will be subject to various requirements and restrictions prescribed by the National Land Code (Revised 2020) (Act 828), commonly called the ‘NLC’.
Can Foreigners Buy Land in Malaysia?
Have you ever dreamt of purchasing property in Malaysia? The good news is that foreign property ownership is a breeze in Malaysia! You can invest in residential properties, landed property, land office or terraced house, commercial properties, and high-rise property to jumpstart your business ventures.
However, there are a few limitations to keep in mind when purchasing property in Malaysia. Certain property types are off-limits, including Malay reserved land, affordable housing units, and indigenous ownership. Agricultural land is also a no-go for foreign buyers and foreign company.
There are some restrictions imposed in Selangor – you’ll need a special title, stick to auctions, or forget about buying agricultural land altogether. But don’t worry; there are plenty of fantastic opportunities to explore!
Regulations and Programs
Minimum purchase price
In certain states in Malaysia where foreigners are allowed to purchase agricultural land, the State Authority may set a minimum purchase price threshold. As of July 31, 2020, the minimum purchase price for agricultural land in certain states were as follows:
- Federal Territory: RM1,000,000
- Melaka: RM1,000,000 (lease only)
- Johor: RM1,000,000 (lease only)
- Pahang: RM1,000,000 (leasehold only)
I want to let you know that these minimum value thresholds may be subject to change by the respective state authority from time to time.
Guidelines on Property Acquisition
The Economic Planning Unit (EPU) has issued guidelines on property acquisition, which require EPU approval in two situations for legal purchase and transfer of property to take effect.
These two situations are as follows:
- Direct acquisition of property valued at RM20 million and above, resulting in dilution of ownership held by Bumiputera interest and/or government agency.
- Indirect property acquisition through the acquisition of shares other than Bumiputera interest, resulting in a change of control of the company owned by Bumiputera interest and/or government agency. Such property must be valued at more than 50% of its assets, valued at more than RM20 million.
Foreigners are not required to obtain EPU approval for the acquisition of agricultural land valued at RM1,000,000 and above, or at least 5 acres in areas for the following purposes: agro-tourism projects, commercial scale agricultural activities using modern/high technology, or agricultural/agro-based industrial activities for the production of goods for export.
It’s important to note that transferring property to a foreigner based on family ties is only permitted among immediate family members.
The latest EPU guidelines can be found on the official EPU portal.
Foreign Ownership Programs
Are you intrigued by the idea of living in Malaysia but want to own property, too? Look no further than these two visa programs designed to attract foreign residents and investors!
The MM2H (Malaysia My Second Home) program offers a 5-year renewable visa, perfect for those seeking a taste of Malaysian life. It even comes with perks like property purchase discounts, but be prepared to meet some income and financial benchmarks.
Malaysia welcoming country citizens interested in buying property in Malaysia such as property development project, housing development, and landed property.
For those seeking a more permanent Malaysian foothold, the PVIP (Premium Visa Programm) grants a long-term visa for up to 20 years. This program allows you to snag any property, but there are financial requirements to consider.
Read more
Essential Steps for Foreign Land Ownership
State Authority Approval
Under Section 433B of the NLC, a foreigner must seek the state authority consent before acquiring title/interest in land in Malaysia.
Section 433B of the NLC is required for foreigners in various scenarios, including the acquisition of land through disposal by alienation, dealing with land, transferring land to a foreign trustee/beneficiary, and creating any dealings or transmission on the registered document of title of any land under the endorsement of any memorial by the Registrar.
A fee is payable for the application, and upon obtaining state consent, a levy may also be payable before the transfer of interest/title to the foreigner is registered.
The State government determines the levy amount, typically based on a fixed percentage of the purchase price, subject to a minimum specified amount.
Additional Considerations
Are foreigners taxable?
Foreign investors who own land are required to pay taxes that become payable upon realising the investment. For example, real property gains tax (RPGT) applies to foreign owners who dispose of property and generate a profit from the sale or disposal.
The amount of RPGT payable is calculated based on the chargeable gain amount, with the applicable tax rate determined by the holding period. If the sale or disposal is made within 3 years of acquisition, the foreigner must pay RPGT at 30% on the chargeable gain. After 5 years, the tax rate was reduced to 10%.
After that, for the foreigners, there is also the stamp duty tax, just like everybody else. This tax has to be paid as below:
- First RM100,000 of the property price 1%
- From RM100,001 to RM500,000 2%
- From RM500,001 to RM1 million 3%
- Everything above RM1 million 4%
Financing
Financing might require some extra planning than locals. Unlike locals, securing a mortgage comes with stricter conditions. Expect to qualify for a smaller loan than the property value and a higher minimum property value threshold.
The process can also involve more paperwork and potentially higher interest rates. Don’t worry; with strong financial health and thorough preparation, navigating these hurdles and securing your dream Malaysian property with a mortgage is achievable! You may seek legal advice and professional advice from a financial advisor regarding property purchase agreement, legal fees, property prices, property loans, loan agreement, and rent and assessment receipt.
Conclusion
Purchase property in Malaysia offers a chance to live your dream in a beautiful country with a stable economy. While navigating foreign ownership regulations can involve securing state authority’s consent, minimum purchase prices, and potential taxes, for those who are well-prepared, the purchase process can be smooth and rewarding.
With the right guidance and financial planning, you can unlock the exciting possibilities of owning a piece of paradise in Malaysia.
>> Want to invest in land in Malaysia? Be sure to see 5 steps to get you started, plus the requirements you should know when purchasing land in Malaysia! <<
Do you wish to talk to experts before making that big purchase? Chat with our professional team, a group dedicated to ensuring your purchase journey goes smoothly!
