• How to Buy Land in Malaysia: A Complete Guide

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    Most property buyers prefer to own a house or an apartment. My personal guess is that it’s due to tradition and that people think that the risks are lower compared to when investing in land.

    Of course, people tend to buy houses to live in, or to rent the units to tenants.

    The land investment opportunities are often overlooked as the yields can be significantly high when buying land. Land values can increase exponentially over the years and you also have the opportunity to develop and rent out the land.

    In this article, I go into deeper detail about how it works when buying land in Malaysia.

    Topics covered in this article:

    • Can foreigners buy land in Malaysia?
    • General Conditions when Buying Land
    • Can I reduce the minimum investment requirement?
    • What land categories exist in Malaysia?
    • The process when Buying Land in Malaysia
    • Can I get a loan to buy land?
    • Are there other Asian countries where I can buy land?
    • Land titles in Malaysia

    Can foreigners buy land in Malaysia?

    Malaysia is the only Southeast Asian country where foreigners can directly buy and own land. I don’t count Sentosa Cove in Singapore as the area is small and land prices obscure.

    Other countries in the region have comparably stringent foreign ownership regulations, including Thailand, Vietnam, Cambodia, and the Philippines.

    Even if foreigners can seek approval to buy and own land in Singapore, it’s not as straight forward as in Malaysia.

    In fact, foreigners need to be permanent residents for a minimum period of 5 years, or make a significant financial contribution, in order to buy land in Singapore.

    So: it might not come as a surprise that many foreigners turn to Malaysia when looking for land investments. The country has a transparent title-system.

    General Conditions when Buying Land

    Even if Malaysia has some of the most preferable foreign property ownership regulations, there are some general conditions you should be aware of.

    In short, foreigners cannot own real estate that falls into any of the following definitions:

    • Properties that are valued below RM 1 million in most of the major states
    • Properties that are constructed on Malay Reserved land
    • Low and medium cost residential units, as defined by the authorities in each state
    • Properties that are allocated for Bumiputera interest in any development project, also determined by state authorities

    Can I reduce the minimum investment requirement?

    Yes, it is possible to reduce the required capital when making a purchase. This can be done with the help of Malaysia’s long-term visa, referred to as Malaysia-My-Second-Home (MM2H).

    For more information about the MM2H visa, I recommend you to check my separate article where I have made a comprehensive interview with Andy Davison.

    What land categories exist in Malaysia?

    It’s important that you plan and decide what your goals are with your land investment and what type of land you want to buy.

    Prices vary between different land types, the maintenance and time you need to input will also differ.

    There are 4 different land types that are of interest to many foreigners when buying overseas, namely: Residential land, commercial land, agricultural land, and vacant land.

    Let’s have a look at each one.

    Residential land

    The sole purpose of residential land is to build housing, such as single-family houses, multi-family houses, condominiums or apartment buildings.

    In comparison to vacant or agricultural land, residential land is more sought after and more expensive.

    Besides, agricultural and vacant land can be converted or amalgamated into residential land, which can result in great yields.

    Amalgamation simply means that two or more pieces of land are merged and included in the same land title. The original title will thereafter cease to exist.

    To convert or amalgamate land into residential land usually requires more work and time, as you won’t buy the “end result”.

    buying-land-malaysia

    Commercial land

    If you buy commercial land, it will be dedicated to parks, businesses or parking lots for example. You’ll also be able to open a gym or a restaurant if that’s your goal.

    But, you don’t necessarily need to build anything on that commercial land yourself. You can also lease the land to a company, bringing you good rental yields.

    If you plan to buy commercial land that will be used for a project developer, it’s important that you confirm their credibility and history beforehand.

    Preferably, work with medium to large-sized firms that have track records of completing a dozen of projects, at least. The company should be in a stable financial situation without the risk of going bankrupt or being heavily indebted.

    As explained in many of my previous articles, working with a credible Malaysian solicitor earliest possible is advised to avoid any unforeseen pitfalls later.

    Agricultural land

    Foreigners need to meet certain conditions when buying agricultural land. Most agricultural land can’t be purchased by foreigners, in accordance with the National land Code 1965. Therefore, I won’t cover this land type in great detail.

    Many Southeast Asian countries rely heavily on agriculture and exports of products such as palm oil, rice and sugar, just to mention a few.

    It’s a protectionist measure from the governments to not allow foreign ownership of agricultural land as this could disturb the local economies and food production.

    Vacant land

    Vacant land is cheaper compared to residential and commercial land but brings both benefits and drawbacks.

    For example, vacant land is easier to maintain and you’ll be able to buy a significantly larger area, compared to residential land. This due to the lower price of vacant land.

    However, it’s important that you choose a location that is still sufficiently central or where developments are planned for the future nearby.

    Preferably, you should also have access to water and electricity. You don’t want to buy a piece of land in the middle of nowhere and where you have no chance to populate the land area.

    In addition, you generally won’t have the opportunity to earn rental incomes.

    Process when Buying Land in Malaysia

    Many investors ask about the buying process for land purchases in comparison to residential properties, like condos, villas, and apartments.

    Below you can find the steps involved when you buy Malaysian land. Keep in mind that this is just a general overview and that additional steps might be needed.

    This will be confirmed by the seller, agent, and/or solicitor.

    Where and what land type will you buy?

    As explained, you need to plan carefully before you decide to buy land.

    It might come across as easy to some people, but the location is significantly important of the land plot.

    You must be able to develop the land (if needed) and confirm the potentials for future price apprecations.

    Issue the document of the title

    The same as for apartments and houses, you must check the title before engaging in any property transactions.

    Find a credible solicitor early in the process to help you check the title and to register the property in your name at the Land Registry.

    Make a survey of the land

    Don’t skip to make a survey of the land to confirm its quality. This is one of the most important parts of the buying process, I would say.

    If the land is contaminated for some reason, you can get rejected to build residential or commercial buildings on that land.

    The Malaysian government can offer help if you want to make a survey of the land.

    Get a survey plan of the land

    You should also get a survey plan of the land, which is provided by the Survey and Mapping Department.

    The survey plan will show the exact boundaries of your property and where buildings and other physical features are located on the land.

    It’s of importance as it shows the borders of your property and will act as legal proof with relation to the title. This will assure that you’re entitled to the exact land area as stipulated and to minimize the risks for disputes with neighbors.

    Sign the contract

    When you’ve confirmed that the land is of good quality and managed the above-mentioned steps, it’s time to sign the contract with the seller.

    Consult with your solicitor to make sure that nothing is missing, before signing the contract.

    Include a private caveat

    Don’t forget to include a caveat to protect your interest in the property, before it’s registered at the land registry.

    Simply put, a caveat is used to prevent another person from registering the property in his or her’s name, before you’ve managed to go to the land registry to register the property in your name.

    Can I get a loan to buy land?

    It’s not easy to get a local loan as a non-resident foreigner if you intend to buy land. The same it goes in the US, where the down payment is significantly higher when buying land, even for locals.

    Simply, the banks think that land purchases are riskier. This is particularly the case if you’re a foreigner and not a resident in Malaysia.

    Generally speaking, most international banks that grant overseas loans will only do so for residential properties in cities in Japan, Australia, and the UK, for example.

    Land titles in Malaysia

    In addition to the different land types, you also need to understand the different land titles that exist in Malaysia.

    There are 3 different land titles in total: leasehold, freehold, and Bumiputera reserved. Let’s have a look at each one of them.

    Leasehold

    If you won’t be able to get freehold ownership, leasehold will be your only option as a foreigner.

    The leasehold period lasts from 60 to 99 years. When getting close to the expiry time, the person who owns the property will need to renew the leasehold contract.

    This can be done at the land office and will cost you some money. For information regarding the costs to renew a leasehold contract, I suggest that you turn directly to the land office for up to date information.

    The property value will increase in value once you’ve managed to renew the leasehold period, on the contrary, the value will appreciate less the closer you get to the expiry date (similar to when a bond gets closer to its expiry date).

    Freehold

    Freehold is by far the best ownership you can get of real estate.

    Even if you need approval and make an application to transfer the property in another person’s name, freehold means that you’re the full owner permanently. There’s no need for renewal of leasehold contracts, which can be relieving to many investors.

    However, developments in infrastructure (such as new railways or roads) will, maybe not surprisingly, be prioritized over your freehold ownership, meaning you might need to sell the property.

    Properties that have this type of title will be more expensive and bring higher rental incomes compared to a leasehold title.

    Some other Asian countries, including Vietnam, Indonesia, and China, for example, don’t offer freehold titles to foreigners at all.

    Just taking into consideration that you can own Malaysian land on a freehold basis as a foreigner is kind of amazing.

    Bumiputera reserved

    Malaysia has a system that favors local Bumiputera (Indian Malays and Chinese Malays are generally excluded to buy Bumiputera reserved property).

    This is the least preferable option to you, as a foreigner, as the approval time is longer and more complicated compared to the two other titles explained.

    Bumiputera can also get up to a 15% discount when buying land, which brings an advantage to non-Bumiputera.

    Are there other Asian countries where I can buy land?

    Japan and Korea are the only countries that allow foreigners to purchase land if excluding Australia and New Zealand from the list.

    With that said, purchasing land in Korea and Japan can be a bureaucratic mess, and locals oftentimes don’t speak English. That’s not the case in Malaysia where English is widely spoken.

    If you primarily aim to secure a land plot, perhaps for future development or so that you can build a house for your retirement, then Malaysia is most likely one of your best options in Asia.

    Conclusion

    Buying land is overlooked by many investors. My personal guess is that there’s a general misconception that land is difficult to buy and mainly bought by corporations, or wealthy investors, that are keen to take on some risks to earn higher yields.

    In addition, people usually tend to buy a house or an apartment, to own a structure that can be used by themselves, or rented out easily.

    However, land can bring you great yields, if you do your research thoroughly and study the buying process well in advance.

    It’s also important that you choose a trusted solicitor, real estate agent, the right land type, and figuring out beforehand what your main goal is to buy a plot of land.

    I hope that this article has been helpful to you and wish you all success when buying land in the future.

    You can also read my separate article that explains in which countries where foreigners can buy land.

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      • 1 Responses to “How to Buy Land in Malaysia: A Complete Guide

        1. Sam Andrews at 7:17 pm

          It’s good to know that you should get a survey of land that you want to buy. My wife and I are wanting to buy land to build our dream home on. I’ll let her know that we should have the land surveyed before purchasing it.

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