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Malaysia - Property Legal Issues

In Malaysia, there are many legal points around owning a property just as there is when you’re at home. It’s important to be aware of the legal aspects. Property buying is complex in your own country, dealing with a foreign country as a foreigner can be convoluted and detailed. Here’s a guide to some of the legal points you should be aware of.

Legal Restrictions on Property Ownership by Foreign Nationals

Foreign Nationals in Malaysia are allowed to purchase property of any kind if the property is valued at over RM 500,000. This list includes apartments, land and commercial property. This is a figure which is subject to change by local state authorities so it must be treated as a guideline only. While Malaysia encourages the purchase by foreigners of property in the country and in particular by retired people with the Malaysia My Second Home Program this threshold remains in place.

Resale Restrictions

To date there is no timeline on the resale of a property. The property buying process in Malaysia is long and drawn out. It is safe to say that if you’re intent on property flipping, (i.e. looking for a quick return on your investment) then Malaysia is not the place to be considering this. Due to the high rental market in major cities, then the buyer could find it very difficult to resell in a short space of time. Equally, demographically, Malaysia is a young population and this means that they have access to cheaper properties than yours for sale in more rural areas. If you sell the property within five years of ownership then you’ll be subject to Malaysia’s Capital Gains Tax rate.

Visa Status

There are no restrictions on living as a foreign national in your own purchased property. Work permits are required for all foreign nationals. Resident’s permits are arranged if you’re on the MMSHP and this will suffice. If you’re not on the program, you’ll have to have a work permit. Malaysia is a former British colony so for all EU and Commonwealth citizens the visa requirements are fairly liberal as long as you don’t work illegally.

Purchasing Property through a Company

It is possible in Malaysia to register a company and purchase through that company. This helps to distribute income throughout families and has tax benefits if the property is to be rented out. Foreign investors are often found to be buying property through their registered companies. Malaysia has a liberal attitude to house-buying; the only negative is the process is long.

Outstanding Debts on Properties

The only fees which are payable by the purchaser are stamp duties, valuation fees, loan arrangement fee (if applicable) and government fees. Any outstanding debt on the property is the seller’s liability.

Land Buying Legal Issues

The purchase of land and property in Malaysia is based on British property buying law. Buying land for residential purposes is as detailed as it is in Britain and it is advisable to seek an international lawyer for advice. There are restrictions on planning boundaries and this can be a lengthy process and is handled by local and regional authorities. Planning applications are slow even though the property buying process is embedded and well-established in Malaysia. There are three types of land in Malaysia, freehold, leasehold and Malay Reserve Land. The latter is unavailable to purchase to any foreigner. Leasehold lands are commonly on 99 year old contract and at the end of the tenure this reverts back to the government. Freehold land is where the purchaser owns the land outright. Freehold land is the most profitable in terms of resale value.

Further Information

Due to the complexity of buying property in Malaysia and the length of time it can take to purchase property, it is advisable to get as much as you can in place prior to looking for accommodation. There is a wide range of advice available on the internet on the property buying process in Malaysia. While the process is lengthy it is well-established and very straightforward with the right advice.

Raising finance can be done inside or outside of the country. There is usually a deposit of between 30% and 40% required on mortgages from within the country.

If you’re looking to buy from a developer, it is better to register with a developer’s company detailing your interest. A developer may well have far-off completion dates and other matters, but at least you’re through the planning aspect if all the boundaries are in place.

Please seek the advice of a property buying lawyer in any case.

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