Real Property Investment Pitfalls in Malaysia
Issue 35 - Oct 07

With the suspension of real property gains tax (RPGT)
in respect of transfers of real property in Malaysia, the
Malaysian government is seeking to encourage more
transactions on the real property scene in Malaysia. Some
general issues need to be considered by foreign purchasers
acquiring real property in Malaysia.

approvals from relevant authorities
Foreign parties looking to acquire real property in Malaysia should bear in mind that the approvals of the Foreign Investment Committee (FIC) and the relevant
State Authority (SA) will be required to enable the purchaser to be registered as the legal owner of the Property.

The FIC is a committee charged with implementing the National Development Policy (NDP) of the Malaysian government. The NDP’s objective is to ensure that
businesses or companies in Malaysia should be owned by at least 30 percent Bumiputras (the indigenous people of Malaysia). The FIC policy set out in its
guidelines, provides for certain minimum thresholds of the value of the property which a foreign purchaser is allowed to acquire and requires that any foreign
purchaser shall obtain FIC approval when acquiring real property in Malaysia. With respect to residential properties, the FIC has granted a blanket approval in
respect of properties having a consideration in excess of RM250,000.

The Malaysian National Land Code further provides that the approval of the relevant SA is required when foreign purchasers seek to acquire real property
(save for properties with the category “industry”) in Malaysia. SA approval may also be required for transfers if there are express conditions found on the title to the property. The SA will typically require that the FIC approval is first obtained. Once the SA approval has been obtained, the approval is required to be presented to the relevant land office or registry when effecting the transfer of the real property. If the
SA approval is not obtained, the transfer presentation will be rejected.



A purchaser would be well advised to include a condition precedent in the purchase agreement that the acquisition is subject to the FIC and SA approvals
being obtained. This is often overlooked as a large number of the booking forms provided by property developers (particularly for residential properties) for
new developments do not address this issue. In the absence of an agreement in writing, the developer may require the purchaser to proceed notwithstanding
that the SA approval cannot be obtained, in which case the foreign purchaser may be unable to be registered as the legal owner.

timeline for completion of acquisition
Foreign purchasers will also need to consider issues which impact the timing for completion of an acquisition. The time required to obtain the FIC and SA approvals will need to be taken into account as the approvals may take up to six weeks and nine months respectively or longer to obtain. Further, the time period to adjudicate the stamp duty payable on a transfer of the property or assignment of the
rights to the property (where the property is without title) needs to be considered. It is common for the process to take approximately two months or longer. This is generally the purchaser’s obligation and where the memorandum of transfer cannot be adjudicated and thereafter stamped in time, completion of the
acquisition transaction will be delayed and interest could become chargeable on the purchaser for late completion.

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