REAL ESTATE – Buying a Property in Malaysia
Sunway Serene Project
While the government seems to want to attract foreign capital to invest in the real estate sector, what about the purchase of property in Malaysia by an individual? The constraints that will have to be faced, the costs of buying and a policy that seems to put a brake on the real estate bubble that was being created.
Sunway Serene Petaling Jaya, developed by one of the most reputable developers in Malaysia – Sunway Integrated Properties Sdn Bhd, is a leasehold development built over 17 acres of land. It is located off Jalan SS7/4, opposite Western Digital, and it is a serviced residence that carries a commercial land title but is governed by the HAD law. This means that residents will be charged a residential utility rate, which is estimated to be 30% lower than commercial rate.
Above all, be aware that you will face limitations and quotas. According to the regulations of the Foreign Investment Committee, foreigners have the right to appropriate “any category of residential property apart from low-cost and medium low-cost units determined by the federal state, properties built on land reserved for Malaysian, units reserved for the Bumiputera quota, and agricultural land. “The constraints are also financial. If the government officially has the power to set the floor price for purchases of real estate, it is in fact at the discretion of the federal state to apply it. These amounts therefore range from 350,000 ringgits in Sarawak to two million in Selangor. The floor for Kuala Lumpur being one million, but the laws can quickly change. The capital gain on the sale of your property is taxed at 30% during the first five years, 6% from the sixth.
If you have a visa from the MM2H program, and you are the owner of a property in Malaysia and provide proof, the financial guarantee necessary to obtain a visa will be of a lower amount. What type of property to buy?
If you wish to acquire a property already built, three categories emerge. The most suitable route for foreigners is to buy lots off plan in a project under development or under construction. It will be necessary to ensure that the project is certified Housing Development Act, in other words your capital will go only to finance construction and the developer will not fly with your money. The first buyers often benefit from discounts, because the manufacturer is in need of raising funds, which will reduce after a certain sales milestone reached. You can also buy recently constructed real estate that is still listed. Attention, in Kuala Lumpur, a residence quickly becomes obsolete because of the colossal offer present on the market. Two other caveats regarding modern residences: the units are often small, less than 100 square meters, and the charges can be very expensive, up to 80 cents per square foot. There is also the option of purchasing from older residences. The apartments are often larger, and the security staff paradoxically more rigorous. But renting your property can be difficult, and charges can increase significantly in case of renovations. In any case, pay attention to the areas announced, they are often greater than reality. This is all the more problematic when the loads are calculated per square foot.
There remains the option of buying land, but the prices are high and there is a squat phenomenon in Malaysia. This is why it is better to buy the plot of land owned by a developer to avoid this problem. Finally, remember to check if you buy a free hold or lease hold property, in French: full ownership and / or fixed term, which is fixed at 99 years in Malaysia, and can be extended by an additional payment.
How is a purchase made?
After leaving a security deposit which often amounts to 2% or 3% of the purchase price, you will have to pay 10% of the total amount when signing the Sales and Purchase Agreement. Various costs will then be generated. The legal fees, on which the lawyer who drafted the contract is paid, range as follows:
A Downward Curve
Faced with a real estate market that is running at full speed, Putarajaya has taken rigorous measures to avoid the formation of a bubble and preserve housing for the locals. The government anticipates permission requests for developers wishing to sell more than four units en bloc and has included property transactions in the scope of the GST which will come into force in April 2015. National Bank has also introduced a stricter mortgage policy. Finally, banks are not authorized to grant credits via Developers Interest Bearing Projects, which allow the developer to pay the interests of the buyer. According to the Real Estate and Housing Developper’s Association Malaysia, in the first half of 2014, the number of apartments for sale increased by 9% and the number of buyers decreased by 4%.