Buying Property in Malaysia

The approval of the Foreign Investment Committee (FIC) is no longer required for foreign nationals to purchase and own freehold property in Malaysia, due to the implementation of new legislation in December 2006. This has simplified the process enormously however foreign nationals purchasing property in Malaysia must apply to the Ministry of Tourism who will then register the purchase with the FIC.

Buying Property in Malaysia

There are, however still some restrictions with regards to purchase prices as properties in Malaysia purchased by foreign nationals should have a minimum purchase price of RM 250.000 (€ 51.540 or £ 35.190) except in the state of Sarawak where the purchase price should exceed a minimum of RM 350.000 (€ 71.156 or £ 48.668)

Specific land which has been identified by the state authorities as “Malay reserved land” may not be purchased by foreign nationals. Land determined by the same authorities as “Low-cost” or “Medium-cost” can also not be sold to foreign nationals. Land and property reserved for Bumiputera quota may not be sold to foreign nationals.

The somewhat controversial “Article 153” of the Constitution of Malaysia makes the King of Malaysia responsible for looking after the rights and privileges of the Malay and other indigenous peoples of Malaysia, collectively referred to as Bumiputra.

Property in Malaysia can be either freehold or leasehold – contacting the relevant land offices to carry out a search will inform you which case applies to the property you are considering to invest in.

Malaysia is being considered for property investment by an increasing number of UK nationals each year, due to the substantial gains, the favourable climate and socio-economic factors and the similarity to the UK process. Malaysia is a member of the Commonwealth of Nations.

As with almost every overseas country, the process of purchasing a property in Malaysia is very similar however with key fundamental differences. The following guide is intended to give the buyer an overview of the basics of buying a property in Malaysia, however we always recommend retaining appropriate legal representation whenever purchasing a property abroad. Every country has its own legislation and it is important to protect your interests by making sure you are aware of your rights and responsibilities as a property investor.

SELECTING THE RIGHT PROPERTY
A competent agent will not only be able to advise you with regards to the local market, finding you the property of your dreams in the right location but they will be able to do so within a reasonable budget to suit your needs. Good agents do extensive research not only on the development you are considering purchasing in, but also on the local market, real estate trends, future projections and other factors which may affect the purchase or sale of your property, including which facilities are near the project, such as schools, restaurants, etc. Amongst the information checked by the agent with regards to the developer, a reputable agent will have ensured that the developer has planning permission, owns the land which is to be built on and is a solvent company. The contacts of an agent are very valuable, especially if you do not speak the language. All in all, you’ll also save time using an agent.

RESERVING YOUR PROPERTY
Once you have chosen a property, the main process of purchasing it is similar to France, Spain and other European countries. The buyer and seller agree on a price and an initial nominal deposit is made to withdraw the property from the market while the paperwork is prepared. The buyers legal representative then contacts the seller to discuss all of the remaining sales details, including timeframe of payments and delivery of the property, as well as all licenses and other pertaining legal issues. With this information, the lawyers of both parties agree on a sales and purchase contract which is then signed by both the buyer and the seller and a holding deposit of around 15%-35% is paid by the buyer.

FINANCING YOUR PROPERTY
Foreigners seeking to finance the purchase of their property in Malaysia will find that the conditions can be very favourable, as lending money to foreigners for investment in real estate in the country is considered good business by the financial institutions. There are various financial institutions offering a number of different mortgage products, including some which adhere to Islamic banking practices, being offered by both western and Islamic banks.

According to Sharia banking principles, the collection and payment of interest is prohibited, therefore many Islamic banks offer other “Halal” financial solutions, less like loans and more comparable to leases. This can many times make the solution more appealing than the traditional interest based mortgages, therefore it is highly advisable to speak to a financial advisor who knowledgeable of both systems to find the best option to suit your needs.

REGISTRATION
Normally, when a foreign National purchases property in Malaysia, they must have previous authorisation from the Foreign Investment Committee (FIC).

However, the Malaysian government implemented a program designed to promote the purchase of temporary residential property in Malaysia (holiday homes). The name of this programme is “Malaysia, My Second Home” and targets foreign nationals purchasing real estate in Malaysia, offering them several benefits when they do so.

Under the “My Second Home” programme, residential units are exempt from going through the process to receive this authorisation from FIC, a process which often took several months. The inheritance and sale of a residential property covered by “My Second Home” is also exempt from FIC’s approval, however to be eligible, the purchaser should register with the Ministry of Tourism as a “Malaysia My Second Home” property buyer.

LEGAL REPRESENTATION
Please bear in mind that when purchasing a property abroad, it is important to retain adequate legal representation. The property legislation in Malaysia may be different to the laws you are accustomed to and it is wise to have an advisor who can inform you of your rights and also your responsibilities during the purchasing process. Your lawyer will effectively help you avoid the pitfalls and minimize the risks associated with buying your new home. Whatever the type of property you have decided to purchase, and whatever the size and cost, you should always take safeguards to ensure that your dream remains a dream and avoids becoming a nightmare. Purchasing procedures vary from country to country and there are several procedures which your lawyer can do on your behalf.

Verify that the details on the title deeds
Advise you with regards to possibilities and incentives of "Malaysia, My Second Home"
Confirm that the seller is authorised to transfer ownership of the property
Confirm that the property is free from pending charges, outstanding mortgages or other debts
Ensure that any of the above are settled before the purchase is carried out
Carry out any survey required on the property, where applicable
Confirm building licenses are in place
Provide feedback regarding your rights and responsibilities as a land buyer and owner in Malaysia
Verify the reputation and solvency of the developer (for off-plan properties)

MONEY TRANSFER
There are several western banks operating in Malaysia, as well as numerous local banks and the transfer of funds (though subject to a charge) are not complicated to arrange and full details on procedures can be provided to you by any of the banks operating in the country.

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