Malaysia Property Guide

Why Malaysia?

  • Malaysia is the best place to retire in Asia (International Living, 2014) and Malaysia has a programme that provides a 10-year residency visa for foreigners to enjoy living in the country.
  • Malaysia has it all, from vibrant cosmopolitan cities to picture perfect beachfront islands.
  • No visa requirements for Russians to enter Malaysia.
  • The country has open real estate laws, allowing foreigners to own freehold properties directly.
  • Quality of life in Malaysia is more affordable compared to Singapore and Hong Kong.
  • Traveling around Asia is affordable as Malaysia is home to the international low-cost carrier Air Asia.

Malaysia Fact Sheet

Capital City: Kuala Lumpur
Official Language: Bahasa Malaysia
Recognized: English Language
Government: Constitutional Monarchy
Area: 329,847 km²
Population: 29.24 million (2012)
Currency: Malaysia Ringgit
GDP (Nominal): $367.712 Billion
Geography: Two parts to Malaysia, Peninsular Malaysia to the west and East Malaysia to the east.
Climate: Tropical climate with an average yearly temperature of 27°C.

Economy

  • Malaysia’s GDP is US$ 303.5 billion in 2012 and the top 5 economy sectors are:
    1. Industry
    2. Finance and Banking
    3. Oil and gas
    4. Tourism
    5. Science and technology
  • The World Bank ranked Malaysia 6th in 2014 for their ease of doing business.
  • One of Asia’s most vibrant economies due to decades of industrial growth and political stability.

Cost of living

Items RM RUB
Avg. Price Per m² to Buy Apartment in City Centre 6,562 68,901
Avg. Price to Rent 1 Bedroom Apartment in City Centre per month 1,555 16,327
Basic Utilities (Electric, Heat, Water, and Garbage) for 85 m² Apartment 165 1,732
New Volkswagen Golf 1.4 Car 150,000 1,575,000
Gasoline (1 liter) 2.06 21.63
Simple Meal 7.5 78.75
Avg. Monthly Salary 3,228 33,894
Updated in May, data is based on 7807 entries in the past 18 months from numbeo.com

Property Ownership in Malaysia

Direct ownership is permitted and foreigners are eligible to purchase unlimited number of freehold or leasehold (99 years) properties of any type, except below:

  1. Properties valued below RM1,000,000
  2. Land or properties with “Malay Reserved” status
  3. Residential units under the category of low and low-medium cost as determined by the State Authority.
  4. Properties assigned under the Bumiputra quota, which is specifically reserved for the Malays and indigenous tribes in Malaysia to purchase.

Transparent and well-regulated Malaysian land laws and administration systems, adopted based on Torrens System, where the state will guarantee an indefeasible title to those included in the land title.

Effective 1 July 2012, foreigners are only allowed to purchase the following in the Penang state:

  1. Strata titled properties above RM1 million
  2. Landed properties above RM2 million

Stages in Property Purchase

Stages Properties Under Construction Completed Properties
Stage 1 – Offer to Purchase Purchaser offers to purchase with an earnest deposit payment; usually a fixed lump sum determined by the property developer. Purchaser offers to purchase with a 2% of property price as earnest deposit payment.
Stage 2 – Legalize Purchase
  1. Sign sale documentations – Sale & Purchase Agreement (SPA) and Deed of Mutual Covenant (DMC), if any.
  2. Cash consideration – pay balance 10% purchase price.
  3. Validate sale documents.
  4. For landed properties only – sign Memorandum of Transfer (MOT) and solicitor will send MOT for adjudication (valuation and payment of stamp duty)
  1. Sign sale documentations – Sale and Purchase Agreement (SPA) and Deed of Mutual Covenant (DMC), if any.
  2. Cash consideration – pay balance 10% of purchase price.
  3. Validate sale documents.
  4. For landed properties only (as for strata; only if title is available) – sign Memorandum of Transfer (MOT) and solicitor will send MOT for adjudication (valuation and payment of stamp duty)
Stage 3 – Property Financing
  1. Accept Letter of Offer from Bank
  2. Sign loan documentations:
    1. If title is not yet available (for strata properties only)
      • Loan Agreement
      • Deed of Assignment (some banks introduce Loan Agreement cum Assignment for stamp duty savings)
      • Power of Attorney
  1. Accept Letter of Offer from Bank
  2. Sign loan documentations:
    1. If title is not yet available (for strata properties only)
      • Loan Agreement
      • Deed of Assignment (some banks introduce Loan Agreement cum Assignment for stamp duty savings)
      • Power of Attorney
Stage 4 – Progress Payment Progress billings as per certificate of completion by project architect.
See attached Appendix A.
Not applicable
Stage 5 – Completion of Purchase
  1. Within 24 months (landed properties) or 36 months (strata properties) from date of SPA – purchase price will have to be fully paid.
  2. Vacant possession of Property.
  3. Transfer of legal ownership (for landed properties & cash purchasers only) by executing the Memorandum of Transfer (MOT); the transfer of title in favor of purchaser
Note: for strata properties, the transfer of ownership will only take place upon issuance of strata titles; is expected between 2 to 5 years from completion of properties
  1. Within 60 or 90 days from date of SPA – purchase price will have to be fully paid.
  2. Vacant possession of Property.
  3. Transfer of legal ownership (for landed properties & cash purchasers only) by executing the Memorandum of Transfer (MOT); the transfer of title in favor of purchaser
Note: for strata properties, the transfer of ownership will only take place upon issuance of strata titles; is expected between 2 to 5 years from completion of properties.

Legal Documentations

Malaysia’s land laws are very similar with the British land laws and property purchase is highly regulated in Malaysia. For properties under construction, the Ministry of Housing Malaysia (MOH) strictly controls all transactions with property developers, which is under the purview of Ministry of Finance.

  1. Sale documents
    1. Sales & Purchase Agreement (SPA) is a standard agreement imposed by MOH. Standard progress payment schedules are also indicated, and all payments are to be made directly into the Housing Developer’s Account. (Please refer to Appendix A & B for schedules)
    2. Foreigners are not required to obtain approval from Foreign Investment Committee (FIC) for purchase of properties. However, foreigners are required to obtain approval from State Authorities who consider factors such as location, property type and foreign ownership percentage in some new developments.
    3. Deed of Mutual Covenant (DMC) is an agreement of mutual undertakings between the developer and buyer. This is necessary for properties with communal facilities.
  2. Loan documents
    1. Letter of Offer is offered by financial institutions, stating all terms & conditions of the loan package.
    2. Loan Agreement (LA) / 1st Legal Charge is provided by the financial institution where mortgages are secured by purchasers. The contents, clauses and rates such a Mortgage Quantum, Period Term, Base Lending Rates (BLR) might vary between different financial institutions.

Mortgage Loan Information

Banks in Malaysia (foreign and local banks) offer loans to all foreigners. The margin of financing varies between 50% and 70%, depending on purchasers’ eligibility and relationship with the banks. The loan will be in Ringgit Malaysia and loan tenure varies from a minimum of 5 years but purchasers can opt for financing up to 65 years of age.

The housing loan package varies for completed properties and under construction. Currently, interest rate in Malaysia ranges from 4.2% to about 5.3% per annum and there are different loan packages that can be tailored to the borrower’s needs.

The following documents are usually required to process a housing loan:

  • Original and duplicate copies of passport or Identity Card.
  • Income documents – pay slips or bank book/statements showing income entries for the last six months.
  • Latest income tax assessment.
  • Official receipt of the deposit payment & a copy of the booking form.
  • Sales and Purchase Agreement.
  • Housing loan application from duly completed & signed.
  • Other supporting documents may be required in certain cases.

Acquisition Costs

  1. Down payment
    • 10% of purchase price or the difference between the loan amount and purchase price.
  2. Legal Fees
    • Loan Agreement fees are calculated based on the standard scale fee given in the table below. The disbursement fees is an additional RM1,500 to RM2,000 respectively.
      Value of loan amount Rate
      First RM150,000 1.00%
      Next RM 850,000 0.70%
      Next RM 2,000,000 0.60%
      Next RM 2,000,000 0.50%
      Next RM 2,500,000 0.40%
      Remainder Negotiable but not more than 0.40%
    • Stamp duty on Loan Agreement is approximately 0.5% of loan amount (RM5 per RM1,000)
  3. State Consent Application
    • Upon the completion of the SPA, the SPA solicitor will submit on behalf of the owner the state consent application to the state authority.
    • Application Fees:
      In Kuala Lumpur: – RM 150
      In Penang: – RM 10,000 (Individuals) +3% of the SPA Price
      In Johor: – RM20,000 or 2% of the SPA Price whichever is higher.
  4. Stamp Duty on Title
    • Payable upon issuance of title
    • Purchase Price Rate
      First RM100,000 1.00%
      Next RM 400,000 2.00%
      Remainder 3.00%

Property Maintenance Costs

Maintenance / Management / Service Charges:

  • Calculated on per square foot basis
  • Management Corp / Joint Management Body (JMB) will bill master fire insurance (once a year)
  • Sewerage charges twice a year (approx. RM50 to RM100 each billing) will be billed by Indah Water Konsortium.

Taxes

  1. Property Tax:
    • Assessment Tax (Cukai Pintu) payable to the local council on a half yearly basis and estimated to be approximately RM400 to RM1,500 each time.
    • Quit Rent (Cukai Tanah) levied by the state government payable once a year, estimated from RM100 to RM250.
  2. Income Tax
    • Applicable when property purchased is used for rental.
    • Calculated on net rental income less deductible expenses such as maintenance charges, bank interests etc.
    • Resident Individual Tax Rate varies across income bands with the maximum tax rate of 26%.
    • Non-Resident Individual Tax Rate is 26%
  3. Real Property Gain Tax (RPGT)
    • RPGT is a form of Capital Gains Tax that is imposed on the disposal of property in Malaysia.
    • Tax structure as follows:
      - First 5 years: 30%
      - After 5 years: 5%
Note: To discourage foreign speculation, the Penang state restricts resale / sub-sale within 3 years from date of purchase.

Appendix A - Schedule of Payment of Purchase Price for Landed Properties

Schedule of Payment % of Purchase Price
Immediately upon signing of Sales and Purchase Agreement 10%
Within 21 working days after receipt by the Purchaser of the Vendor’s written notice of the completion of:
a) The foundation and footing works of the said Building 10%
b) The reinforced concrete framework of the said Building 15%
c) The walls of the said Building with door and window frames placed in position 10%
d) The roofing, electrical wiring, plumbing (without fittings), gas piping (if any) and internal telephone trunking and cabling to the said Building) 10%
e) The internal and external plastering of the said Building 10%
f) The sewerage works serving the said Building 5%
g) The drains serving the said Building 5%
h) The roads serving the said Building 5%
On the date the Purchaser takes vacant possession of the said Building, with water and electricity supply ready for connection. 12.5%
Within 21 working days after the Purchaser receives the Document of Title to the said lot together with the Memorandum of Transfer that is duly executed by the Vendor or on the date the Purchaser takes vacant possession of the said building, whichever is later. 2.5%
On the date the Purchaser takes vacant possession of the said Building as in item 3 and to be held by the Vendor’s solicitors as stakeholder for payment to the Vendor as follows:
- 2.5% at the expiry of 8 months after the date the Purchaser takes vacant possession of the said Building;
- 2.5% at the expiry of 24 months after the date the Purchaser takes vacant possession of the said Building.
5%
100%

Appendix B - Schedule of Payment of Purchase Price for High-rise/strata-titled properties

Schedule of Payment % of Purchase Price
Immediately upon signing Sales and Purchase Agreement 10%
Within 21 working days after receipt by the Purchaser of the Vendor’s written notice of the completion of:
a) The foundation and footing works of the said Building 10%
b) The reinforced concrete framework of the said Building 15%
c) The walls of the said Building with door and window frames placed in position 10%
d) The roofing, electrical wiring, plumbing (without fittings), gas piping (if any) and internal telephone trunking and cabling to the said Building) 10%
e) The internal and external plastering of the said Building 10%
f) The sewerage works serving the said Building 5%
g) The drains serving the said Building 5%
h) The roads serving the said Building 5%
On the date the Purchaser takes vacant possession of the said Building, with water and electricity supply ready for connection. 12.5%
Within 21 working days after the Purchaser receives the Strata Title to the said parcel together with the Memorandum of Transfer that is duly executed by the Vendor or on the date the Purchaser takes vacant possession of the said building, whichever is later. 2.5%
On the date the Purchaser takes vacant possession of the said Building as in item 3 and to be held by the Vendor’s solicitors as stakeholder for payment to the Vendor as follows:
- 2.5% at the expiry of 8 months after the date the Purchaser takes vacant possession of the said Building;
- 2.5% at the expiry of 24 months after the date the Purchaser takes vacant possession of the said Building.
5%
100%

Malaysian My Second Home (MM2H) Programme

The MM2H Programme is initiated and promoted by the Government of Malaysia. It is a programme to encourage foreigners to stay on long term with multi entry social visit pass. The social visit pass is initially for a period of 10 years, and is renewable thereafter.

Incentives on the programme:

  • 10 year multi-entry pass.
  • Tax-free income from abroad.
  • Tax-and-duty-free from importing one personal car or purchase of locally-assembled car
  • Applicants are allowed to bring their single children, under 21 years old (students will require to apply for student pass) and one domestic helper.
  • Applicants are allowed to register or own a business, work part-time in specialized industry and for those above 55 to work not more than 20 hours a week.

Financial Requirements

Under 50 years of age Over 50 years of age

Proof of liquid assets of at least RM500,000 and offshore income of at least RM10,000 per month

Upon approval:

  • Maintain a Fixed Deposit (FD) of RM300,000 (can withdraw up to RM150,000 after 1 year for approved expenses eg house purchase, children’s education and medical purposes in Malaysia)
  • For above RM1,000,000 property owner (cash purchaser) – only need to maintain RM150,000

Proof of liquid assets of at least RM350,000 and offshore income of at least RM10,000 per month

Upon approval:

  • Maintain a Fixed Deposit (FD) of RM150,000 or proof of government approved pension fund of at least RM10,000 per month (can withdraw up to RM50,000 after 1 year for approved expenses eg house purchase, children’s education and medical purposes in Malaysia)
  • For above RM1,000,000 property owner (cash purchaser) – only need to maintain RM100,000

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