Sale & Purchases of Houses in Malaysia
Sale & Purchase of Houses
1. Who can buy houses in Malaysia?
Any Malaysian can buy houses in this country.
Only Malaysian citizens may buy low-cost houses. A buyer must apply to the State Authority. Only those from the lower income group can buy low-cost houses.
Only Malays can buy houses built on Malay Reservation Land.
Every housing developer must reserve 30% of its houses for “bumiputeras” [Malays and other natives]. Bumiputeras enjoy a certain percentage of discount.
A foreigner can buy any industrial land and factories.
A foreigner has to apply for consent from the State Authority to buy residential houses and shophouses or commercial lots in a complex.
A foreigner must also inform the Foreign Investment Committee [FIC] – a planning unit in the Prime Minister’s Office – if he wants to buy landed property below the value of RM5 million. If the property is worth more than RM5 million, he has to obtain the approval from the FIC.
2. Buying a house from a developer
When a housing developer sells its residential houses in its housing development project, it has to use the standard agreements known as Schedule G and Schedule H in the Housing Development (Control and Licensing) Act 1966.
Schedule G is to be used for the sale of land with a building to be erected on it. Schedule H is to be used for the sale of units in a building intended for subdivision, where strata titles are yet to be issued.
According to either of the standard agreements, a buyer has to pay progress instalments to the housing developer as and when they are due.
The housing developer must produce its architect’s certificate certifying the completion of each stage of construction, before it claims the progress instalment due.
The final 5% of the purchase price must be kept by the seller’s solicitor as stakeholder for 18 months [after completion of the building] before it is released to the housing developer.
3. Buying a completed house
If you are buying a completed house, there is no standard agreement. If a housing developer sells a completed house to a buyer, the standard agreement need not be used. A normal sale and purchase agreement will do.
In a normal sale and purchase agreement, you have to pay 10% of the purchase price as deposit.
The balance of the purchase price has to be paid to your solicitor. He will use part of the money to redeem the title from the seller’s bank. 5% of the purchase price has to be retained to cover the real property gains tax payable by the seller.
The agreement usually provides for completion of the transaction within 3 months plus one further month with interest. Agreed interest has to be paid for late payment of the purchase price in the 4th month, calculated from day to day.
Both parties have to sign a transfer form. This is meant for transferring the house to the buyer in time to come.
4. Buying a flat or apartment [without strata title]
If the housing developer has yet to obtain a strata title for a flat or apartment it sells to you, it will sign a deed of assignment [instead of the transfer form] and it undertakes to deliver you the title when it is issued.
You may re-sell [assign] the flat or apartment to a sub-purchaser. The housing developer must give you the consent to re-sell, but it has the right to collect 0.5% of the purchase price as administrative fee [up to a maximum of RM500].
When the strata title is issued, the housing developer will sign the transfer form in order to transfer the flat or apartment to you.
5. Documents of Title
There are 2 types of documents of title:
- freehold – a permanent title
- leasehold – e.g. a term of 99 or 60 years.
[Upon expiry of the leasehold, it may be renewed. If it is not renewed, the land reverts back to the State Authority.]
Generally, every house has a title. An apartment or a flat has a strata title. A search in the Land Registry or Land Office will show whether the land is encumbered [e.g. caveated or charged to a bank].
6. Housing loans
You may obtain a loan from a bank or finance company. A bank may grant you a term loan [fixed loan] or overdraft facilities.
Under a term loan, you have to pay back by monthly instalments. The overdraft facilities are normally given to those who engage in business activities.
You may also apply for withdrawal from the Employees’ Provident Fund [EPF] if you are an EPF contributor. EPF will allow 30% of your EPF savings to be used for buying a house.
You may also –
- withdraw 30% of your EPF savings to settle your housing loan obtained from a bank or finance company; or
- use your EPF savings to settle the balance of your bank loan, whichever is lower.
For example, if 30% of your EPF savings amounts to RM9,000, and the balance of your bank loan is only RM6,000, you may only withdraw RM6,000 from his EPF savings. This is because the balance of your loan [RM6000] is lower than the 30% of your EPF savings [RM9,000].
7. Stamp duty
Every transfer of property attracts stamp duty. The stamp duty is based on the value of the property:
| Value of property | Stamp Duty | |
| a. | First RM100,000 | 1% |
| b. | Next RM400,000 | 2% |
| c. | Above RM500,000 | 3% |
8. Legal fees
There is a scale fee for every transfer of property, based on the value of the property:
| Value of property | Legal Fees | |
| a. | First RM100,000 | 1% |
| b. | Next RM4,900,000 | ½% |
| c. | Above RM5,000,000 | ¼% |
A solicitor can only act for one party only. He can only collect legal fees from one party only.
For transfer of property worth RM100,000 and below, and bought from a housing developer, you are entitled to 25% discount.
For every transfer of property worth RM30,000 and below, and bought from a housing developer, you have to pay a flat rate of RM120 only.
9. Real property gains tax
Every seller must fill in the real property gains tax form [CKHT1]. Every buyer must also fill in a similar form [CKHT2]. It must be submitted to the Inland Revenue Board within 30 days from the date of the signing of the agreement.
The rates of real property gains tax payable by the seller are as follows:
| Sale of Property | Rate of Tax | |
| a. | within 1 year | 30% |
| b. | within 2 years | 30% |
| c. | within 3 years | 30% |
| d. | within 4 years | 15% |
| e. | within 5 years | 5% |
| f. | after 5 years | 0% |
But for a company, a minimum tax of 5% is payable even after 5 years.
The real property gains tax is based on the gain from the sale. 5% of the purchase price must be retained normally by the seller’s solicitor for payment of the real property gains tax.
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