• Investing in Malaysia REITs: The Ultimate Guide

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    Malaysia has one of the most developed REIT markets in Asia where most are centered around Kuala Lumpur.

    At the moment, there are 18 REITs listed on the stock exchange in Malaysia that have attracted many local and foreign investors in the past years.

    In this article, we review how you can invest in Malaysian REITs and why this type of asset has become increasingly popular. This is not only the case in Malaysia but in Thailand, Australia, and Vietnam.

    Topics covered in this article:

    • Can foreigners buy REITs in Malaysia?
    • The Process to Buy REITs in Malaysia
    • What are the benefits of buying REITs in Malaysia?
    • List of REITs in Malaysia

    Can foreigners buy REITs in Malaysia?

    Foreigners have no particular restrictions on buying REITs or other securities in Malaysia.

    With that said, many foreign individuals and institutions trade Exchange Traded Funds (ETFs) as these are available on most major stock exchanges globally.

    Simply put, ETFs have various securities in their baskets and are popular as you diversify your risk.

    If you want to trade individual Malaysian stocks or REITs directly on the Malaysian stock exchange, you have to open a trading account with a local brokerage firm and a bank account with a local bank.

    The Process to Buy REITs in Malaysia

    The process to start trading is fairly simple. Below I have listed the main steps you should be aware of.

    1. Find a Brokerage Firm

    If you’re a resident in Malaysia or want to avoid the high transaction fees that come with international brokers, a common option is to work with a local brokerage firm.

    Some examples of brokerage firms include TD Ameritrade, eToro, UOB Kay Hian, Macquarie Group Limited, and Interactive Brokers.

    As mentioned, you can also trade ETFs on major stock exchanges with the help of international brokers. Just keep in mind that your options will be limited by comparison and you’ll be subject to higher transaction fees.

    While it can cost USD 50 for a single transaction through international brokers, local brokerage firms typically charge transaction fees of RM 8 – 28 (USD 2 – 7).

    2. Open a Central Depository System account (CDS)

    Before you can trade stocks and REITs, you have to open a Central Depository System account. The cost is RM 10, which is almost negligible.

    As explained on Bursa Malaysia’s website, for foreigners to trade securities on the stock exchange, you first have to get in touch with an Authorised Depository Agent (ADA), also referred to as stockbroking companies.

    The securities you buy (e.g. the units in REITs) will be deposited into the CDS account.

    Documents Needed to Open a CDS

    You can open the CDS as an individual investor or as a corporate investor. You have to provide the following documents and pay the following fee:

    Individual Investor:

    • A ‘Complete the Opening of Account’ form and two Specimen Signature Cards
    • Pay the Account Opening fee and submit two certified true copies of your passport

    Corporate investors:

    • Complete the Opening of Account form and two Specimen Signature Cards
    • Submit the documents along with two copies of all necessary supporting documents. Such documents can include a Certificate of Incorporation, Board Resolution, and more
    • Pay the account opening fee

    Your stockbroker will then open the CDS on your behalf and provide you the account number. You will then receive a confirmation from Bursa Malaysia by ordinary mail.

    What other fees do I have to pay?

    In addition to the transaction and account opening fees, you pay a 0.03% clearing fee per contract, where the maximum amount charged is RM 1,000.

    You also pay a stamp duty of RM 1 for each transaction worth RM 1,000 (up to RM 200 per contract).

    3. Open a Malaysian Bank Account

    Bank Negara requires that you have a local/Malaysian bank account if you work with a local brokerage firm. It’s not easy to open a local bank account unless you’re a resident in Malaysia.

    Documents Needed:

    • Resident permit or MM2H visa documents
    • Photo ID (typically passport)
    • A minimum deposit which differs between banks
    • Your fingerprints (sometimes used by banks for identification)
    • Employment details (e.g. a letter from your employer or other proof of business activity)

    With that said, you don’t necessarily have to be a resident in Malaysia to open a bank local account. If you work with a bank in your home country, you can even start the process from overseas first.

    What are the benefits of buying REITs in Malaysia?

    Foreigners have no particular issues to buy real estate in Malaysia. The country is well-known for having some of the most foreign-friendly ownership policies and there are only limitations to ownership of certain land types.

    It also has a developed REIT market that gets increasingly popular as locals and foreigners want to diversify their portfolios and profiting from this growing region.

    Below I have listed some of the main benefits of investing in Malaysian REITs.

    1. Market Access

    REITs offer unrivaled opportunities to invest in any type of property, including large-sized shopping malls and hotels in upscale areas like KLCC.

    You have no issues enjoying continuous distributions of dividends that arise from rental incomes from industrial properties, office buildings, warehouses, and more.

    One of the obvious benefits of buying REITs is access to local and commercial real estate which is often beyond your reach.

    2. Overcoming Foreign Ownership Regulations

    As mentioned, Malaysia has comparatively relaxed foreign-ownership regulations, but acquiring real estate can still be bureaucratic and complex to some investors.

    Besides, it’s difficult to acquire certain land types such as Bumiputera reserved and agricultural land.

    REITs can invest in any kinds of properties and you’ll therefore overcome foreign ownership regulations

    3. Liquidity

    REITs are liquid and you can buy or sell units with just a click. This is not the case when buying physical structures as you’ll have to view the unit first, perform an inspection, manage the transfer of the title, and the list goes on.

    Another benefit of buying REITs is that you can buy and sell easily.

    4. Low Minimum Capital Required

    If you want to invest in real estate in Malaysia as a foreigner, you have to meet local minimum investment requirements first. For landed structures on Penang Island, the minimum amount is as high as MYR 3 million (USD 750,000).

    If you buy REITs, on the other hand, you’re not subject to obscurely high minimum investment requirements. You can get started with a few hundred US dollars on hand.

    5. High Dividend Yields

    REITs have to distribute at least 90% of the net profits to their shareholders. This is a universal requirement for REITs to exist. Thus, these assets are well-known for providing exceptionally high dividend yields.

    List of REITs in Malaysia

    Malaysia has 18 REITs in total that are listed in Bursa Malaysia. Below I have listed some of the top REITs, sharing information about their history, dividend yields, and portfolios.

    Sunway Real Estate Investment Trust

    Sunway REIT is one of the biggest REITs in Malaysia and was listed in 2010. It’s one of the most diversified REITs in the country with award-winning integrated townships in Penang, Klang Valley, and Perak.

    With an initial capital of MYR 2.4 billion, its portfolio now has a value of RM 4.8 billion, including 17 units. The properties are distributed in the following industries:

    • Retail malls: 4
    • Offices: 4
    • Hotels: 6
    • Education asset: 1
    • Medical center: 1
    • Industrial property: 1

    The REIT has generated the following dividend yields in the past years:

    • Aug 2020: 6.24%
    • Aug 2019: 5.21%
    • Aug 2018: 5.70%

    IGB Real Estate Investment Trust

    IGB REIT is another popular REIT that was listed in 2012 and primarily invests in retail properties.

    The REIT currently has two units, namely The Gardens Mall and Mid Valley Megamall. The Gardens Mall is located in Mid Valley City and is a 6-level high-end shopping mall with more than 200 shops.

    The mall is the home to many international luxury brands such as Versace, Louis Vuitton, Burberry, and Hermes. There’s also a large fitness center, spas, and department stores here. Mid Valley Megamall, on the other hand, is one of the biggest shopping malls in Malaysia (!). The mall has 457 stores located over a net lettable area of 1.8 million square feet.

    In previous years, the REIT has generated the following dividend yields:

    • Aug 2020: 4.30%
    • Aug 2019: 4.76%
    • Jul 2018: 5.73%

    Capitaland Malaysia Mall Trust

    Capitaland Malaysia Mall Trust is managed by the renowned Singaporean property developer Capitaland and owns several retail properties in Malaysia.

    At the moment, CMMT has around 3.1 million square feet of net lettable area and an average occupancy rate of 86.4%. The units managed by the REIT are:

    • Gurney Plaza
    • Sungei Wang
    • The Mines
    • East Coast Mall
    • 3 Damansara

    The units attract millions of shoppers each year and are located in Kuala Lumpur, Selangor, Penang, Petaling Jaya, and Pahang.

    In the past years, the REIT has generated the following dividend yields:

    • Sep 2020: 6.62%
    • Aug 2019: 6.73%
    • Aug 2018: 7.94%

    Other REITs Available in Malaysia

    The REITs above are just three of the eighteen available in Malaysia, The remaining fifteen are:

    • AMFIRST REAL ESTATE INVESTMENT TRUST
    • AMANAHRAYA REAL ESTATE INVESTMENT TRUST
    • MRCB-QUILL REIT
    • KLCC REIT
    • AXIS REAL ESTATE INVESTMENT TRUST
    • PAVILION REAL ESTATE INVESTMENT TRUST
    • HEKTAR REAL ESTATE INVESTMENT TRUST
    • ATRIUM REAL ESTATE INVESTMENT TRUST
    • UOA REAL ESTATE INVESTMENT TRUST
    • AL-SALAM REAL ESTATE INVESTMENT TRUST
    • KIP REAL ESTATE INVESTMENT TRUST
    • AMANAH HARTA TANAH PNB
    • AL-`AQAR HEALTHCARE REIT
    • TOWER REAL ESTATE INVESTMENT TRUST

    For more information, I recommend you to check Bursa Malaysia’s website.

    Disclosure: This information is intended for educational purposes. It does not constitute investment advice and should not be considered as a recommendation for investment. The writer of the article and the owners of the website don’t own any of the securities/REITs mentioned in the article. Note that the value and income of investments can go up, as well as down (resulting in a loss).

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