Buying property in Malaysia for expats

There are more and more foreigners or “expats” that are calling Malaysia home. If you are a foreigner and reading this you obviously want to buy a home in Malaysia. But before making any quick decisions, you will need to understand certain policies and legal requirements imposed by the Malaysia Government on foreigner property purchases.

Our informational article will guide you through the types of properties available to foreigners, the minimum requirements imposed by Malaysian authorities, and how to get property financing in Malaysia.

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Can foreigners buy property in Malaysia?

The short answer to this question is yes, foreigners can purchase properties in Malaysia, however like any other country there are rules and regulations that must be followed when an expatriate purchases property in Malaysia.

How are foreigners classified when buying property in Malaysia?

To answer this question we need to know what is the definition of a foreigner in Malaysia. Here is the formal legal answer:

The definition of a foreigner can be found in the primary legislation which is the NLC 1965. Section 433A of the NLC 1965 and the Companies Act 2016, define a foreigner as follows:-

“Foreign Company” is either (a) a company, corporation, society, association or other body incorporated outside Malaysia; (b) an unincorporated society, association or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia; (c) a company incorporated with 50% or more of voting shares held by non-citizen/foreign company or by both; OR (d) a company incorporated with 50% of more of voting shares held by company in (c);

“Non-citizen” is a natural person who is not a citizen of Malaysia.

Therefore, an expat or foreigner can be summed as an individual who is a non-citizen of Malaysia or an entity that is a Foreign or non Malaysian Company.

What are the requirements for foreigners buying property in Malaysia?

In Malaysia there are specific requirements for foreigners buying property in Malaysia, which are:

The Minimum Purchase Price

This is the first and most important requirement to comply with before making any decisions.

So what does “minimum purchase price” mean? This means that a foreigner can buy a property in Malaysia if the purchase price of the property is above a certain threshold that is set by each Malaysia state. This threshold applicable will depends on each state and is set by the government of each state at a specific threshold amount.

The reason this threshold is set high is to ensure that the general property market in Malaysia is not driven up in price by foreigner buyers.

Below is a summary of the purchase price thresholds applicable to foreigners or expats who are thinking about buying property in the most popular cities in Malaysia: Kuala Lumpur , Selangor and Johor.

Kuala Lumpur

The minimum threshold for foreigners to acquire a property in Kuala Lumpur is RM1,000,000. This is a blanket requirement.

Selangor

In Selangor, the minimum threshold for foreigners to acquire a property is RM1,000,000. However, in Selangor, foreigners must take note that the minimum threshold to purchase different types of units differs from zone to zone. Here is a break down of the different zones:

Zone 1

• Petaling, Gombak, Hulu Langat, Sepang, Klang
• Minimum residential price : RM2,000,000.
• Minimum commercial and industrial price : RM3,000,000.

Zone 2

• Kuala Selangor, Kuala Langat
• Minimum residential price : RM2,000,000.
• Minimum commercial and industrial price : RM3,000,000.

Zone 3

• Hulu Selangor, Sabak Bernam
• Minimum residential price : RM1,000,000.
• Minimum commercial and industrial price : RM3,000,000.

Johor

The minimum threshold for foreigners to acquire a property in Johor is also RM1,000,000.

Off-limit Properties

The next requirement that foreigners need to be aware of is the types of property that they are allowed to purchase in Malaysia. Generally, as long as the property is above the minimum threshold set by each state, a foreigner can buy the property.

But, there are certain properties that are totally off-limits to foreigner buyers. These are the types of property that are totally off-limits to foreigner buyers:

• Low or low-medium cost houses
• Properties with a description of “Malay Reserved Land”
• Any property allocated under “Bumiputera interest” in a development project.
• Properties valued at less than RM1,000,000

In the next section, we go into more detail about the kinds of properties that foreigners can buy.

What kind of properties can foreigners buy in Malaysia?

Based on the legal requirements for foreigner property purchase, foreigners can easily own a bungalow, semi-detached house, terrace house, condominium, flat, landed property, studio unit, commercial property, industrial property, agricultural land (except Malay Reserved Land) and industrial land (except Malay Reserved Land).

It’s important to note that Malaysia works on a federal system, so the rules in states of Peninsular Malaysia (West Malaysia) differ from those of Sabah and Sarawak (East Malaysia), which have the power to implement their own ownership legislation.

Based on the restrictions of certain properties that foreigners cannot buy, mentioned above, here are the types of property that foreigners are allowed to purchase in each respective state:

Selangor

Foreigners wanting to buy a property in Selangor are allowed to purchase the following types of property:

• Residential units, which are under Strata Titles only;
• Commercial units; and
• Industrial units or land.

Kuala Lumpur

Foreigners wanting to buy a property in the capital of Malaysia are allowed to purchase the following types of property:

• Residential units, both landed (individual title) and under Strata Titles;
• Commercial units;
• Industrial units or land; and
• Agricultural land.

Johor

Foreigners wanting to buy a property in Johor are allowed to purchase the following types of property:

• Residential units;
• Commercial units; and
• Industrial units, with no restrictions as of the number of units. However, this is subject to certain criteria.
• Purchases not through a Developer or secondhand or sub-sales:-
• Residential units;
• Commercial units;
• Industrial units, with no restrictions as of the number of units. However, this is subject to certain criteria; and
• Agricultural land (however, it should be noted that foreigners are not permitted to acquire agricultural land except by way of lease).

How foreigners can buy property in Malaysia with MM2H?

Malaysia also offers a special program for property purchase via the Malaysia My Second Home (MM2H) visa. The MM2H scheme provides a renewable ten-year maximum, multiple-entry visa.

Eligibility criteria vary between Peninsular Malaysia, Sabah, and Sarawak, but requires an applicant to demonstrate a certain level of financial liquidity, either through offshore income or cash in a Malaysian bank.

The Malaysia My Second Home (MM2H) programme is a programme created for foreigners who wish to stay in Malaysia for the long term (10-years). Many foreigners who used to work in Malaysia have applied for this programme as their retirement plan in Malaysia.

The requirement for an MM2H application, is that foreigners below 50 years of age are required to prepare a minimum of RM500,000 in their Savings Account / Current Account / Fixed Deposit whereas those aged above 50 years of age need to have at least RM350,000 in similar accounts. Need to transfer funds overseas? Get quick and cheaper international transfers with Wise.com — your gateway to borderless banking and effortless money management

You will also need to be sponsored by a Malaysian citizen. In Peninsular Malaysia, a registered MM2H agent can replace a citizen sponsor.

Malaysia My Second Home visa holders also enjoy certain benefits when it comes to owning property in Malaysia. That includes discounts on certain types of properties available on the market.

What are the steps for foreigners to buy properties in Malaysia?

Ok, we have gone through the rules and regulations for foreign buyers, as well as the eligibility for property purchase. Here are the steps needed for foreigners to buy properties in Malaysia:

Step 1 – Make sure you are financially able to make the purchase, whether you are buying  the property outright or if taking a loan being eligible for a bank home loan.

Step 2 – if required and if you are eligible, apply for a home loan from the bank. The margin of finance available with Malaysian banks varies depending on your circumstances. Under MM2H, it is normally 80% of the total purchase price. Without MM2H, the maximum would be around 70%. Alternatively, sourcing your home loan overseas is also an option.

Step 3 – Engage a real estate agent to help you find the most suitable property for you to buy. You can search online and find professional real estate websites who specialise in the types of property you are interested in.

Step 4 – Do as many home viewings as possible to find your dream home or investment.

Step 5 – Once you find the right property, submit your intention to buy through a letter of offer.

Step 6 – When the deal is closed, provide your lawyer with the relevant documents — photocopy of passport, correspondence address and contact details, income tax details, as well as location of tax payments for purchase of secondary market properties.

Step 7 – If required pay the remaining balance on the property purchase price as defined under the SPA, or Schedule H Housing Development (Control And Licensing) (Amendment) Regulations 2015. If you have taken a home loan, the bank should settle this for you.

Step 8 – If the purchase is a sub-sale you can then move in after all approvals are complete, if it’s a new development project being constructed you will have to wait until the project is fully completed.

What is the cost for foreigners buying property in Malaysia?

Here are a list of costs associated with buying a property in Malaysia that would be applicable to foreigners:

• Stamp duties & Memorandum of Transfer (MOT)
• Legal Fees
• Real Property Gains Tax (RPGT)
• Tax on Rental Income
• Loan stamping fees
• Door tax & title deed
• Maintenance fee (Condominiums only)

How can foreigners get a home loan in Malaysia?

Foreigners can qualify for home loans in Malaysia. With home loans for foreigners, the Margin of Finance (MOF) can go up to 80% for MM2H holders, while non-MM2H holders would generally get 70% MOF. Loan tenure can reach until 30 years, provided the applicant is not above 70 years of age when the loan tenure ends. Loan stamp duty is around 0.5% of the loan amount. Legal fees and disbursements will be around 0.8% of loan amount. On getting home loans, foreigners are usually better off taking loans from foreign banks in Malaysia.

But there is an exception to the rule, if the foreigner has married a Malaysia citizen, the spouse will be required to take part in loan financing to enjoy MOF as high as 90%.

Conclusion

Buying property in Malaysia as a foreigner might seem like navigating through a spicy bowl of laksa, but it’s a journey well worth embarking on. With its welcoming policies, stunning landscapes, and vibrant culture, Malaysia offers a tapestry of opportunities for those looking to own a slice of this tropical haven. Whether you’re in for the bustling city vibes or the tranquil retreats, there’s a place here to call your own. So, gear up, reach out to the right folks, and take that exciting step towards your Malaysian dream home. Here’s to new beginnings in a country that’s as warm and inviting as the people who call it home. Selamat datang and happy house-hunting!