Buying Property in Malaysia as a Foreigner: Legal Checklist

What types of real estate ownership exist in Malaysia?

Malaysia recognises several forms of real estate ownership, mainly freehold, leasehold, and strata titles, all recorded in a central register. In Peninsular Malaysia, these interests are governed primarily by the National Land Code 1965, while Sabah and Sarawak operate under their own land laws. Your rights, obligations, and resale value depend heavily on which type of title you hold.

Main categories of property ownership

• Freehold
  • Ownership in perpetuity, subject to restrictions in interest (for example, Malay Reserve, category of land use).
  • Generally more attractive for buyers and financiers due to perceived long-term security.
  • Still subject to state powers of compulsory acquisition (for public purposes) and planning/zoning controls.
• Leasehold
  • Ownership for a fixed term, commonly 60 or 99 years in Peninsular Malaysia.
  • Value and financing options tend to decrease as the unexpired term falls, particularly below 40-50 years.
  • Extension or renewal usually requires premium payment and state approval under the National Land Code or relevant state policies.
• Strata Title
  • Applies to multi-storey or subdivided properties such as condominiums, apartments, offices, and some landed gated communities.
  • Governed by the Strata Titles Act 1985 and Strata Management Act 2013.
  • Owners hold individual parcels plus undivided share in common property, and must pay maintenance charges and sinking fund.
• Master Title vs Individual/Strata Title
  • Master title: land remains in the developer's name; purchasers only have contractual rights until separate titles are issued.
  • Individual/strata title: issued in the buyer's name and registered at the Land Office or relevant land registry.
  • Subsale properties with individual or strata titles are generally safer and easier to transact.
• Category of Land Use (under the National Land Code)
  • Common categories: "building", "industry", "agriculture".
  • Using land contrary to its category (for example, operating industry on "building" land) can attract enforcement or require conversion and premium payment.
• Special classes
  • Malay Reserve Land: restricted to Malays or persons meeting specific criteria; foreigners and many non-Malay entities cannot buy.
  • Bumiputera lots: created under state policies; resale usually restricted to Bumiputera purchasers and may require state consent.
  • Customary/native lands in Sabah and Sarawak: governed by local ordinances and native customary rights, with strict restrictions on transfer to non-natives.

How does the property purchase process work in Malaysia?

The property purchase process in Malaysia typically runs from initial booking to completion over 3-6 months, depending on whether the property is freehold or leasehold, and whether state consent is required. You usually pay a 10% deposit, sign a Sale and Purchase Agreement (SPA), secure financing, and complete when the balance is paid and the transfer is registered. The National Land Code, Housing Development (Control and Licensing) Act, and bank requirements shape each stage.

Step-by-step process for a subsale (completed) property

1. Pre-offer checks
   • Engage a real estate agent registered under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981, or search listings yourself.
   • Do basic due diligence: visit the property, check access, condition, surrounding developments, and indicative market values (for example, JPPH transacted data).
   • Inform your banker early to check borrowing capacity and indicative margin of finance.
2. Offer, earnest deposit, and letter of offer
   • Buyers usually pay an earnest deposit of 2%-3% of the purchase price to the seller's agent or lawyer.
   • Sign a simple letter of offer/intent setting out key terms: price, vacant possession date, included fixtures, and SPA signing deadline.
   • Ensure deposit is paid to a client account of a law firm or registered estate agency, not directly to an individual.
3. Appointment of lawyers
   • Each party normally appoints its own solicitor to draft, review and negotiate the SPA.
   • In some transactions, one firm acts for both parties if there is no conflict and both consent, but independent advice is safer for higher-value deals.
4. Signing the Sale and Purchase Agreement (SPA)
   • SPA is usually signed within 14-21 days from the letter of offer.
   • On signing, the buyer tops up the deposit to 10% of the purchase price, with the remaining 90% payable on completion.
   • The SPA will set a completion period, typically 3 months from the date of relevant consents or from stamp date, plus a 1-month extension with late payment interest.
5. Loan application and loan agreement
   • Once you have the SPA, you finalise your housing loan application with a bank or Islamic finance institution.
   • The bank appoints its panel lawyer to prepare the loan agreement and security documents (for example, charge or deed of assignment).
   • Loan documentation is stamped and, where relevant, the charge is registered at the Land Office.
6. State consent and other approvals (if required)
   • Leasehold land, Bumiputera lots, foreign ownership and certain categories of land require "consent to transfer" from the State Authority or relevant body.
   • Obtaining consent can add 1-3 months or more, depending on the state and any backlog.
7. Completion, transfer, and vacant possession
   • On or before the completion date, the buyer's bank (and/or buyer) pays the balance purchase price via the lawyers' client accounts.
   • The seller executes the transfer form (for example, Form 14A under the National Land Code) and relevant discharge or reassignment documents.
   • Lawyers lodge the transfer and charge at the Land Office or Land Registry; vacant possession is usually handed over upon receipt of the balance monies.
8. Post-completion
   • Lawyer collects the registered title and forwards it to the bank (if charged) or to the buyer.
   • Utilities, assessment rates, and quit rent are transferred into the buyer's name or account.

Buying properties under construction (developer units)

• Governed by the Housing Development (Control and Licensing) Act 1966 and its Regulations.
• Developers must use standard form SPAs:
  • Schedule G - landed housing (build-then-sell, controlled completion timelines).
  • Schedule H - strata housing (apartments, condominiums, serviced residences).
• Payment is based on progressive billing tied to construction stages certified by the architect.
• There are statutory defect liability periods (typically 24 months for building defects) and liquidated damages for late delivery (subject to current regulations and any exemptions).

What legal documents and contracts are involved in a property transaction?

The key documents in a Malaysian property transaction include the Sale and Purchase Agreement, title documents, loan agreement, security instruments (charge or deed of assignment), and where applicable, state consent letters and strata management-related documents. For rentals, the main document is a tenancy agreement. Each document carries legal and financial consequences, so precise drafting and proper stamping and registration are critical.

Core documents for a purchase or sale

• Title documents
  • Issue document of title or strata title: shows registered proprietor, land description, category of use, restrictions, and encumbrances (charges, caveats).
  • For unissued titles (master title still in developer's name), you will rely on the SPA chain and developer's undertaking.
• Sale and Purchase Agreement (SPA)
  • Sets out parties, property description, purchase price, payment schedule, completion date, conditions precedent, and remedies on default.
  • Key clauses: representations and warranties, vacant possession, apportionment of outgoings, risk and insurance, indemnities, and dispute resolution.
  • For properties under construction, statutory Schedules G/H forms are mandatory and cannot be altered except as allowed by regulations.
• Transfer instrument
  • For titled properties in Peninsular Malaysia, transfer is effected by Form 14A under the National Land Code.
  • For unissued strata titles, transfer is often via a deed of assignment and/or novation of the original developer SPA.
• Loan agreement and security documents
  • Loan/facility agreement with the financing bank, including repayment terms, interest/profit rate, events of default.
  • Charge over the property (registered at Land Office) or deed of assignment (for master title properties) in favour of the bank.
  • For company borrowers, may include corporate guarantees, director guarantees, and debentures.
• State consent and related approvals
  • Consent to transfer or charge leasehold land or restricted lands under the National Land Code and state enactments.
  • Approval letters for foreign purchases where required by state authorities.
• Tax and compliance documents
  • Real Property Gains Tax (RPGT) forms (CKHT forms) filed with Lembaga Hasil Dalam Negeri (LHDN).
  • Stamping forms and payment receipts for SPA, loan agreement, and tenancy agreement.

Documents in a rental/tenancy arrangement

• Tenancy Agreement
  • Sets out rent amount, term, renewal options, security deposit, utilities deposit, use of premises, repair obligations, and termination rights.
  • Peninsular Malaysia currently relies on Contracts Act 1950; there is no unified residential tenancy statute governing deposits, eviction, and notice procedures.
• Handover documents
  • Inventory list for furniture, appliances, and fittings.
  • Condition report with photographs to manage expectations around deposit refunds.
• Stamping
  • Tenancy agreements must be stamped at LHDN; stamp duty is shared by agreement but often paid by tenant.
  • Unstamped agreements may be inadmissible as evidence in court until properly stamped with penalties.

What are the main costs and taxes when buying or selling property in Malaysia?

For buyers, key costs include legal fees, stamp duty on the SPA and loan, valuation fees, and disbursements, typically totalling about 3%-5% of the purchase price. For sellers, the main cost is Real Property Gains Tax (RPGT) on any profit, plus agent's commission and legal fees. Both sides must also consider assessment rates, quit rent, and service charges for ongoing ownership.

Typical transaction cost components for buyers

Real Property Gains Tax (RPGT) for sellers

• RPGT is imposed under the Real Property Gains Tax Act 1976 when you dispose of real property or shares in real property companies at a gain.
• Rates depend on your status and the holding period. As at recent reforms:
  • For Malaysian citizens/permanent residents: higher rates (for example around 30%-15%) for disposals within the first 5 years, and a 0% rate from the 6th year onward.
  • For companies and non-citizens: different rate structures often with lower or no reduction after 5 years.
• Common reliefs:
  • Once-in-a-lifetime RPGT exemption for disposal of a private residence by an individual.
  • Exemption for transfers between spouses, parents and children, or grandparents and grandchildren by way of love and affection (treated as no gain, no loss).
• Procedural points:
  • Buyer's lawyer usually withholds 3% of the purchase price and remits it to LHDN as RPGT retention on behalf of the seller.
  • Seller files CKHT forms to declare actual gain and claim any refund or pay any shortfall.

Ongoing ownership costs

• Assessment rates (cukai taksiran)
  • Charged by local authorities (PBT) such as DBKL, MBPJ, MBPP, etc.
  • Based on annual rental value or other formulas set by local by-laws.
• Quit rent (cukai tanah)
  • Charged by state land offices to landowners annually.
  • Usually a modest amount but must be paid to avoid penalties and complications at sale.
• Maintenance charges and sinking fund (for strata)
  • Collected by Joint Management Body (JMB) or Management Corporation (MC) under Strata Management Act 2013.
  • Rates vary widely based on facilities, location, and age of building.
• Insurance
  • Building insurance is often arranged by JMB/MC for strata; landed owners arrange their own coverage.
  • Mortgage reducing term assurance (MRTA) or takaful is often required by banks.

How are strata and condominium properties regulated in Malaysia?

Strata and condominium properties are regulated mainly by the Strata Titles Act 1985 and the Strata Management Act 2013, which govern subdivision of buildings, issuance of strata titles, and management of common property. Owners must comply with by-laws, pay maintenance and sinking fund contributions, and participate in the Joint Management Body or Management Corporation. These laws provide a clear framework for resolving many common disputes in multi-owner developments.

Key features of strata governance

• Issuance of strata titles
  • Developer must apply for strata titles within prescribed timelines after completion.
  • Purchasers should follow up to ensure individual strata titles are issued and transferred into their names.
• Joint Management Body (JMB) and Management Corporation (MC)
  • JMB is formed shortly after vacant possession is delivered for mixed developer-owner managed stages.
  • MC takes over when strata titles are issued and audited accounts meet statutory requirements.
  • Both bodies can sue and be sued, collect charges, and make by-laws.
• Maintenance charges and sinking fund
  • Charged per share unit as stated on the strata title or provisional schedule of parcels.
  • Mandatory sinking fund contributions (usually at least 10% of maintenance charges) for long-term capital expenses.
  • Arrears can lead to interest, facility access restrictions, and legal action including attachment of movable property.
• By-laws and house rules
  • Default by-laws under Strata Management (Maintenance and Management) Regulations, plus additional by-laws passed by owners at general meetings.
  • Cover issues like short-term rental, renovations, use of facilities, pets, and noise.
• Dispute resolution
  • Strata Management Tribunal provides a relatively quick and cost-effective forum for disputes over charges, by-laws, and management decisions.
  • More complex issues may still go to the civil courts.

What should landlords and tenants know about rental property in Malaysia?

Landlords and tenants in Malaysia operate mainly under general contract law, as there is currently no comprehensive residential tenancy statute in force in Peninsular Malaysia. A clear, detailed tenancy agreement and strict handling of deposits, repairs, and notice periods are vital to avoid disputes. Eviction and rental recovery typically require court proceedings if negotiation fails.

Key commercial terms in a tenancy

• Rent and term
  • Residential tenancies commonly run 1-3 years; commercial tenancies may be longer.
  • Include clear terms on rent review, increment, and renewal options.
• Deposits
  • Typical residential structure: 2 months security deposit + 0.5 month utilities deposit, paid on signing.
  • State that deposits are refundable subject to deductions for unpaid rent, utilities, and damage beyond fair wear and tear.
• Repairs and maintenance
  • Common practice: landlord responsible for structural and major system repairs; tenant for minor repairs and day-to-day maintenance.
  • Include thresholds (for example, landlord pays for repairs above a certain amount per incident).
• Use of premises and restrictions
  • Specify permitted use (residential only, no business) and restrictions (no subletting without consent, no illegal activities).
  • For strata properties, ensure tenant agrees to comply with house rules and by-laws.
• Termination and eviction
  • Set out events of default (non-payment of rent, illegal use, breach of terms) and grace periods.
  • Self-help eviction (changing locks without due process) can expose landlords to legal risk; court orders may be required.

Stamping and tax for rental income

• Tenancy agreements must be stamped at LHDN within 30 days of execution in Malaysia or within 30 days of being brought into Malaysia if signed abroad.
• Stamp duty is calculated on the total rent over the term at rates set under the Stamp Act.
• Landlords must declare rental income in their annual income tax returns; allowable deductions include assessment rates, quit rent, interest on loan, minor repairs, and some management expenses.

How do foreign individuals and companies buy property in Malaysia?

Foreigners can usually buy and own property in Malaysia (except in certain restricted categories), but each state sets minimum price thresholds and requires consent for many transfers. Foreign buyers must also comply with central bank rules on fund remittance and reporting. Professional advice is important to navigate state-specific rules and future exit strategies.

Key restrictions on foreign ownership

• Minimum price thresholds
  • Most states impose a minimum purchase price for foreigners, often between RM600,000 and RM1,000,000 or higher.
  • Some states (for example, Penang, Selangor, Johor) have higher thresholds for landed properties or island locations.
  • Foreigners under Malaysia My Second Home (MM2H) may benefit from different thresholds in some states.
• Prohibited or restricted properties
  • Foreigners are usually prohibited from buying:
    • Low-cost or low-medium-cost housing.
    • Malay Reserve land.
    • Properties designated as Bumiputera lots.
  • Mission-critical to check state guidelines and title restrictions before paying any deposit.
• State consent
  • Transfer to a foreigner often requires consent from the State Authority, even for freehold properties.
  • Processing time varies by state; factor this into your SPA timeline and conditions precedent.

Financing and currency rules for foreigners

• Bank financing
  • Local banks may offer housing loans to foreigners, typically at lower margins of finance (for example 60%-70%) than for citizens.
  • Some foreign buyers purchase cash to avoid financing delays.
• Fund remittance and repatriation
  • Bank Negara Malaysia oversees foreign exchange administration rules.
  • Maintain clear records of fund inflows for property purchase to facilitate repatriation of sale proceeds later.
  • Use official banking channels, not informal transfers.

How is real estate used for investment and development in Malaysia?

Real estate in Malaysia is commonly used as an investment asset for rental income, capital appreciation, and development projects. Investors must consider land use zoning, planning approvals, tax treatment, and financing structures. Developers operate under a separate regulatory regime that includes licensing, planning permission, and strict obligations to purchasers for residential projects.

Investment strategies for individuals

• Buy-to-let residential
  • Focus on areas with strong tenant demand (near MRT/LRT, universities, commercial hubs).
  • Analyse net yield after deducting loan interest, maintenance, and taxes, not just gross rental.
• Commercial properties
  • Shops, offices, industrial units often have different tenant profiles and longer lease terms.
  • Subject to different financing and valuation considerations compared to residential.
• Land banking and redevelopment
  • Purchasing land for future development or rezoning can be lucrative but high-risk.
  • Requires deep understanding of state structure plans, local plans, and zoning rules under planning laws.

Real estate development framework

• Planning and land matters
  • Obtain planning permission from local authorities under the Town and Country Planning Act (for Peninsular Malaysia).
  • Change of land use or conversion may require approval and premium payment to State Authority under National Land Code.
• Developer licensing
  • Residential developers must obtain a housing developer's licence and advertising permit from the Ministry of Housing and Local Government (KPKT) under the Housing Development Act.
  • They must comply with standard SPAs, progress billing, defect liability, and account segregation (housing development account).
• Structures for larger investors
  • Use of property holding companies, joint ventures, and real estate investment trusts (REITs) for larger portfolios.
  • Tax and regulatory considerations include stamp duty on share transfers, RPGT on disposals, and securities regulations for REITs.

When should you hire a lawyer or other real estate expert in Malaysia?

You should engage a lawyer as early as possible, ideally before paying any significant deposit or signing binding documents. Professional support from lawyers, tax advisors, valuers, and licensed estate agents reduces the risk of title problems, regulatory breaches, and unexpected tax costs. For higher-value or complex transactions, independent legal advice is essential rather than optional.

Situations where legal advice is strongly recommended

• Before signing any SPA, option, or letter of offer with legal effect
  • To ensure the conditions (for example, subject to financing, state consent) protect you adequately.
  • To identify unfair or one-sided clauses and negotiate changes.
• Leasehold, restricted, or unusual titles
  • Where land is leasehold with short remaining tenure or where restrictions in interest appear on the title.
  • Where the land is agricultural, industrial, Malay Reserve, or Bumiputera lot.
• Unissued strata titles or properties still under master title
  • To ensure proper assignment of rights and clear undertakings from the developer and existing chargee bank.
  • To manage risks around late issuance of strata titles and complications with charges.
• Foreign buyer or seller, or corporate structures
  • To navigate state consent, foreign exchange rules, and tax implications for cross-border transactions.
  • To structure deals via companies, joint ventures, or group reorganisations efficiently.
• Disputes and enforcement
  • Evicting tenants, recovering arrears, or dealing with trespass.
  • Disputes with developers, neighbours, or strata management bodies.

Other useful experts

• Registered estate agents - pricing strategy, marketing, and negotiation, especially in slower markets.
• Registered valuers - independent valuations for buying, selling, financing, or legal disputes.
• Tax advisors - structuring ownership, advising on RPGT, stamp duty reliefs, and income tax on rental or development profits.
• Engineers and building inspectors - pre-purchase inspections and defect assessments, especially for older buildings or large industrial assets.

What are the practical next steps if you are planning a real estate transaction in Malaysia?

The most effective next steps are to clarify your objectives, assemble a basic advisory team (agent, banker, lawyer), and line up your financing before committing to any specific property. You should then shortlist properties, conduct targeted due diligence, and only sign binding contracts once your lawyer has reviewed the documentation. For sellers, preparation of title documents, tax records, and property presentation will speed up the sale and reduce renegotiation.

Action plan for buyers

1. Define your goals and budget
   • Decide whether you are buying for ownstay, rental yield, or long-term capital growth.
   • Obtain an indicative approval or pre-qualification from your bank to know your borrowing capacity.
2. Build your support team
   • Identify a lawyer experienced in the state and property type you are targeting.
   • Engage a reputable, registered estate agent if you prefer guided sourcing and negotiation.
3. Shortlist and compare properties
   • Use recent transactions and rental data to benchmark prices and yields.
   • Check title type, tenure, restrictions, and strata management condition before making offers.
4. Make conditional offers and insist on proper documentation
   • Ensure your offer and SPA are conditional on key items such as loan approval and state consent where needed.
   • Pay deposits only into client accounts of law firms or registered estate agencies.
5. Monitor the transaction timeline
   • Keep track of deadlines for loan approval, SPA signing, consent applications, and completion.
   • Work closely with your lawyer and banker to clear conditions and ensure timely disbursement.

Action plan for sellers

1. Get your documents in order
   • Locate original title, previous SPA, renovation approvals, and latest bills for assessment, quit rent, and maintenance.
   • Clarify any encumbrances and outstanding loans with your bank.
2. Set a realistic price
   • Obtain agent opinions and, for higher-value properties, consider a formal valuation.
   • Factor in estimated RPGT, agent's commission, and legal fees when fixing your bottom line.
3. Engage a registered agent and lawyer early
   • Agents can pre-qualify buyers and manage viewings and negotiations.
   • Lawyer can prepare a clean draft SPA and advise on special conditions to protect you as seller.
4. Plan for completion and handover
   • Plan where you will move and by when, especially if you are still occupying the property.
   • Prepare an inventory list and condition report to reduce disputes at handover.