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clock 03-07-2019
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Here’s a Beginner’s Guide to Buying Land in Malaysia

Are you prepared to take your very first dive into the world of land ownership in Malaysia, and reap its many benefits — including high potential profits on your investment and the legal space to build a home that is truly your own from scratch? Read our guide so that you can answer both these questions.

 Step 1: What am I buying land for? 

The best thing you can possibly do for yourself, before buying a piece of land, is to question the purpose for which you want it. Do you plan to use it for agriculture, or would you like to rent it out? Are you planning to build a home or some apartments on it to be sold at a later date?  

Identifying this purpose will not only help you devise a long-term management plan for a piece of land but will also help you recognise the category of land you should be buying. Common choices include Residential Land, Agriculture Land, Commercial Land, or Bungalow Land.  

Each category of land is governed by a unique set of rules, which is why the permits you would need to use agriculture land for agricultural purposes would be very different from those needed to develop properties on a piece of development land, for instance. The earlier you figure out which category you’d like to invest in, the better!  

Step 2: What kind of land am I looking for? 

Now that you know why you want a piece of land and the category you’re looking for, you can begin highlighting the key details of your desired purchase.  

These include the physical features of the terrain, such as the specific size of the land you’re looking for in hectares, acres or in square feet, the suitability and fertility of the land if it is meant for agricultural purposes, and the exact location of the land. 

You should also consider if you’re in need of leasehold or freehold land. The former can only be owned for a fixed amount of time — usually, 99 years — before it is returned to the government, while the latter gives you complete ownership of the land for all time until the title to the land is officially transferred to someone else. 

Bear in mind that all these details will affect the purchase price that you eventually settle for when purchasing the land. For example, a piece of land in the middle of Kuala Lumpur could easily cost you RM2000 per square feet, but a land of similar size in Bentong would be cheaper as it can cost as low as RM7 per square feet.  

Step 3: How do I buy land at the right price?  

Always remember that buying land isn’t like shopping during the Malaysia Mega Sale, which translates to say that you shouldn’t rush and pounce on the first offer you find. 

Once you’ve completed Step 2, browse around and survey your options. Visit various plots of land and take note of their prices — especially on a per-square-feet basis — so that you can determine for yourself what the average market rate is and whether or not your budget needs to change. Do not hesitate to negotiate with sellers either. 

Seeking the help of a real estate or property agent at this stage is a popular option too. These agents can help you find plots of land that match your needs and negotiate deals with sellers, in exchange for a commission or fee of up to 3pc of the land’s sale price. 

Step 4: How do I finance my decision to buy land? 

Not in a position to fork up the exact amount of money you need to purchase the piece of land you’ve chosen? Fret not — or, as we say in Malaysia, “Chill la bro.” 

This is the point at which you can consider obtaining land financing loans to assist you with your upcoming purchase. Many banks and financial institutions in Malaysia offer land financing. Loanstreet is happy to compare them for you so that you can find one that best suits your need and financial capability. 

The size of these loans usually depends on the margin of financing (MOF) — that is, the percentage of the purchase price of a piece of land that you can borrow as a loan — offered by an institution. For instance, if you’re buying a piece of land for RM300,000, and the MOF of a loan from Bank X that you’re considering is 70pc, you will receive up to RM210,000 from Bank X through that loan. 

Here’s something to keep in mind: You also may have heard of a rumour saying that you’re allowed to use your Employees Provident Fund (EPF) to buy land, even before your retirement. This, unfortunately, is not true. Your EPF can be used to purchase a house or even build a house, but the buying of land using the money in this fund is strictly prohibited. 

Step 5: What documents do I need to buy land? 

Naturally, when it comes to landing a sizeable deal involving the purchase of land, documents will be involved to make sure that the deal is official and that it is agreed upon by all involved parties.

The most important document in transactions involving plots of land would be the Issue Document of Title, which indicates who the actual owner of the land is and the rights that he or she is entitled to in the eyes of Malaysian law.  It is also referred to as the Land Title. 

Once you and your seller have reached an agreement and the purchase is complete, you must inform the Malaysian Land Registry that a transfer of ownership has happened and that the Land Title should be changed to reflect your new status as the land’s owner. This should be accompanied by copies of the Identification Cards of both you and the seller, as well as a Stamp Duty that has been paid for. If all the necessary documents are present during this registration, the process can be completed within one day. 

Here’s a fun fact: You don’t necessarily need a lawyer to facilitate the purchase of a piece of land  

However, conveyancing lawyers will ensure that all aspects of the purchasing process are done in a legal manner, thus preventing you from running into trouble with the law in the future. 

Anyway, there you have it! A basic guide which you can use to familiarise yourself with some important elements of the process of buying land in Malaysia, or a stepping stone from which you can choose to further develop your knowledge on the matter.  Just remember that buying a piece of land is a massive commitment, regardless of how small that land may be. 

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