Looking for a second home away from home? Perhaps Malaysia might be your cup of tea. With its relatively affordable property prices, the friendly country continues to attract plenty of foreign investors as well as those seeking to stay long term. In addition to indulging in the sunny climate and delicious local delicacies, the hassle-free country makes it an ideal location for foreigners to acquire a property in Malaysia, whether for retirement, long-term stay or investment purposes.
But, how can you get started in buying a house in Malaysia as a foreigner?
Well, before rushing into any major decisions, you should take your time to explore and understand what it takes to purchase a property in a foreign country first. As you learn to navigate a new country, you should also take into account the rules and restrictions that comes with foreign property ownership in Malaysia.
For instance, foreign buyers are permitted to acquire properties in Malaysia as long as they abide by specific requirements and restrictions enforced under the National Land Code (NLC), the Guidelines on the Acquisition of Properties (“EPU Guidelines”) issued by the Economic Planning Unit (EPU).
To get you started on your journey to buying a property in Malaysia, this article will briefly guide you through the minimum purchase value enforced by the government, the type of properties available to foreigners, as well as the property financing and legal procedures in Malaysia.
6 Steps in Buying a Property in Malaysia for Foreigners
1. Understand the types of properties you can buy
Malaysia is one of the most legally flexible countries when it comes to property purchasing. Foreigners are generally required to abide by the minimum property purchase value of RM1 million in order to buy a house in Malaysia. This rule is enforced on all property types in almost every state, subjected to the ruling of the individual state authorities.
For instance, the property value in majority states and federal territories in Malaysia should be at a minimum of RM1 million (S$321,800), whereas in Penang the minimum stands at RM2 million (S$657,100).
The property types that foreigners are NOT eligible to purchase:
- Properties valued below RM2 million in Penang (on island)
- Properties valued below RM1 million in KL, Penang (mainland), Perak, Malacca (for landed property), Langkawi Island, Terengganu, Labuan, Putrajaya, Kelantan, Negeri Sembilan, Pahang and Sabah
- Properties valued below RM600,000 in Kedah state
- Properties valued below RM500,000 in Perlis, Malacca (for strata property) and Sarawak
- Properties built on Malay Reserved land, bumilots, and agricultural land
- Property dedicated to Bumiputera interest
Other than certain rules and restrictions, foreigners have no limit on the amount of residential properties they can buy and own on a freehold basis. They can easily own condominiums, apartments, and landed houses such as semi-detached houses and bungalows.
2. Determine your budget
Malaysia My Second Home (MM2H) is a 10-year visa programme that allows foreigners to purchase homes at a lower price in certain states. This is catered for foreigners who would like to stay longer or plan to retire in Malaysia.
In order to leverage on the cheaper property price tags, MM2H applicants below 50 years old are required to prepare a minimum of RM500,000 in their bank account before applying. If you are above 50 years old, you are required to have at least RM350,000 in your bank account.
In addition, the MM2H scheme allows foreigners a minimum investment of only RM500,000 (S$160,888) on a property in Kelantan, Sabah and Malacca, and a much lower amount at RM350,000 (S$112,622) and RM300,000 (S$96,538) in Perak and Sarawak respectively.
Overall, the minimum property purchase price for foreign buyers is based on three main factors:
- The state where the property is located in
- Whether the property has strata or individual title
- Whether the buyer is an existing MM2H visa holder
Despite requiring the relevant state authorities’ consent, foreign buyers will generally not need the additional approval of the EPU for any acquisition of residential units valued at RM1 million and above.
3. Choose a mortgage package that suits your needs
As a foreigner, it is important to find a suitable home loan that fulfils your requirements in Malaysia. Once you explore your home loan financing options, decide which mortgage is a better fit for you. You will then need to prepare for your trip to the bank in person to get approval with your application and other necessary paperwork.
Each bank will operate slightly differently, so call to check if you need to make an appointment in advance. Obtain an offer in principle so you have a budget in mind. Without it, you may not secure the sale.
Usually, the Margin of Finance (MOF) increases to 80% for MM2H holders, while non-MM2H holders would generally only obtain a 70% MOF. This is why foreign buyers should consider applying for loans from foreign banks in Malaysia instead. But, this changes once the foreigner gets married to a Malaysian citizen, as the spouse will need to take part in the loan financing to enjoy a higher MOF at 90%.
Bank Limit for Foreigners
- MOF increases to 80% for MM2H holders
- Non-MM2H holders would generally obtain a lower MOF at 70%
4. Hire a local property lawyer
If you’re purchasing a property in Malaysia, it’s important to have a local qualified real estate lawyer to help in the transaction. The lawyer will later create a Letter of Offer/Acceptance for both you and the seller to sign, once you settled on a property and the seller has agreed on your offer.
The lawyer has an important role in drawing up the contracts, performing searches to confirm details of the property and its ownership and making sure the property won’t imminently be affected by any major infrastructure projects. The lawyer is also responsible for due diligence checks on the seller and will liaise directly with the developer’s lawyer, which can ensure you’re not a victim of a scam.
You will need to provide the following documents to the lawyer:
- Photocopy of your passport
- Correspondence address and a contact number
- Income tax number and the place of submission of the income tax (applicable for sub-sale purchase only)
5. Secure the property
After you have settled on your purchase, secure the property either by signing the developer’s sales form or the offer to purchase form with the seller for sub-sale transactions. Prepare your offer in principle for many sellers will not accept your offer to purchase without it. It expires after six months and can be renewed when necessary.
Within 14 days from the date of signing of the sales form (or offer to purchase), you will exercise the option by signing the Sales and Purchase Agreement (SPA) with the seller, deed of the mutual covenant (if applicable) and other transactional documents. This purchase agreement is then stamped at the Stamp Office, and the purchase price is verified.
As you reserve the property exclusively for you as the buyer, you will then pay the 10% deposit to the developer or seller, and establish deadlines in place for other necessary payments including taxes. As the buyer, you will also be liable for stamp duty at up to 3%-4% of the price.
In addition, the lawyer will need to apply for state authority consent, as you hand the following documents over to the lawyer:
- One certified true copy of the SPA
- One certified true copy of the foreign buyer’s passport
- Latest quit rent and assessment receipt of the property
- Application form under Section 433B of the NLC
6. Completion of Sale
The last step involves paying the balance purchase price according to the Third Schedule of Schedule H Housing Development (Control And Licensing) (Amendment) Regulations 2015 (“Schedule H”) or the SPA. From the date of the signing, you will have a maximum of three months to make full payment.
After the property’s change of ownership has then been registered at the Land Office Registry, the developer shall ensure vacant possession of the property within 36 months from the date of the SPA, or otherwise approved by the relevant authority. After which, the developer will deliver the strata title and certificate of completion and compliance to the foreign buyer.
On the other hand, the seller will deliver vacant possession to the foreign buyer according to terms of the SPA during a sub-sale transaction.
Whether you opt to buy a residential property in Malaysia either as a second home or for retirement purposes, this is the process that you have to go through when buying a property in Malaysia as a foreigner.
With a fairly well-regulated property law, Malaysia continues to experience both ongoing economic and policy transformations to welcome foreign investments in various sectors including the property market.
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