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Buying property in Malaysia
There are a few restrictions on foreigner’s purchasing of land in Malaysia, but overall the purchase process is reasonably simple. Foreigners may not own Malay Reserve Land, which is reserved for Malay citizens. Unfortunately, a lot of prime beachfront land is reserved, but there are still many opportunities to buy. Foreigners must apply to the Foreign Investment Committee (FIC) for permission to purchase unless the purchase has been approved under the My Second Home plan.
In addition, foreigners may purchase property that is above MYR 250,000 (~£37,000), and they may purchase two properties without additional permission from the government. For all of these reasons, it is a good idea to employ a local lawyer or solicitor to help the buyer with the process and to file the necessary forms.
Off plan property is quite popular in Malaysia these days, but there are usually extra fees involved above the listed purchase price. Often, the developers include extra transaction costs which can be as much as 5% of the listed purchase price. Also, it can be a good idea to invest in an IDIP, or International Developer Information Pack, to have some research on the developer before signing any papers.
Estate agents are often used when purchasing properties in Malaysia and they usually charge the buyer. The buyer should make sure to understand the fees that will be charged which are up to 3% of the purchase price. It is a good idea to withhold some or all of the payment of this until the transaction is complete.
When the buyer has found a property, then he or she makes an offer via letter. If it is accepted, a 10% non-refundable deposit is paid, an option to purchase contract and a non-completion statement signed. This means that if either side pulls out of the purchase, then they have to pay the other side the 10%. Once signed, the buyer has three months to complete the sale, including all financing and inspections.
Getting a mortgage in Malaysia can be time consuming, so it is important to either plan ahead or plan for an extension of the three months. Upon closing, the Sale and Purchase Agreement is signed by both parties and the funds are transferred. The Sale and Pruchase Agreement needs to be stamped at the Stamp Office and a stamp duty of 1%-3% paid. The agreement is then sent to the Land Registry along with a Memorandum of Transfer Form 14A to transfer the deeds into the buyer’s name.
Properties sold within five years of purchase are subject to a 30% tax, but if they are sold after five years then they are taxed at a flat 5% rate.
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