February 2009 Newsletter

Buying and Selling of a Property in Malaysia

The following is the usual process and relevant information on buying and selling of a property by private treaty in the secondary market or more commonly referred to as sub-sale in Malaysia.

Who can buy property in Malaysia?

All Malaysian citizens are free to buy properties in Malaysia except low-cost houses or flats and low-cost shops which can be applied for through the relevant land offices or registries based on the relevant rules for eligibility. Basically, Article 13 of the Federal Constitution entrenched rights to property; everyone has the right to own property.

Properties built on Malay Reserved Land can only be purchased and owned by Malays. On the other hand, usually 30% of each property project is to be reserved for Bumiputra purchasers who enjoy 5% to 10% discount on the purchase price depending on which State the project is location. The Bumiputra quota and discount vary from State to State.

Foreigners are permitted to buy and own properties in Malaysia. However, foreign ownership is subject to restrictions laid out in the guideline of the Economic Planning Unit (EPU) under the Prime Minister’s Department. The clear set of guideline on foreign ownership can be obtained from the official website of EPU.

Freehold vs. Leasehold

There are two types of ownership of interest in the properties:-

Freehold   - which gives the owner perpetual ownership;

Leasehold - for a period of up to 99 years - which allows the owner to own properties only for a specified period. When the period expires, ownership reverts back to the State Government which issued the titles. This type of ownership usually requires consent of State Government when owners want to transfer the ownership, lease or charge the titles for financing.

Real Estate Agent Involvement

In sub-sale, there will usually be involvement of real estate agents in the early stage of the process. In major cities in Malaysia, particularly Klang Valley, we estimate over 90% of property transactions involve real estate agents.

Real estate agents are usually appointed by sellers to secure buyers and therefore involve in the preliminary negotiation stage to conclude the salient terms and conditions as well as collection of earnest deposit. Legal real estate agents registered with The Board of Valuers, Appraisers and Estate Agents Malaysia use prescribed forms recommended by the Board in closing deals. The form, Agreement To Purchase stipulates clearly identifications of the property and salient terms and conditions which include purchase price, payment terms, amount of earnest deposit, delivery of vacant possession, date of completion, execution of legal documents, payment of stamp duty, legal fee and other conditions.

Solicitors for both sellers and buyers will then take over to conclude all details of sale and purchase agreement within a prescribed time agreed by the parties (usually 14 or 21 working days from the day both parties enter into contract). Make sure you only deal with legal real estate agency firms to protect your interests in real estate transactions. You can verify whether a real estate agency firm is registered with the Board online. Visit www.lppeh.gov.my to find out more.

Real estate agency fee for sale or purchase is provided in Seventh Schedule (Rule 48) of Valuers, Appraisers and Estate Agents Act 1981 and Rules 1986.

Sale or Purchase - 3% of the sellling/purchase price          


If the buyer borrows to finance the purchase, he/she can borrow from banks, insurance companies and government for civil servants. House buyers can also withdraw from Account 2 of their Employee Provident Fund (EPF) for this purpose. For further details, please visit the official website of EPF.

Acquisition Cost

The following are acquisition costs involved in the buying and selling of a property.

Stamp Duty

Stamp duty is levied on the document of transfer. It is levied based on the purchase price or market value of the property (whichever is higher) as ascertained by the Valuation and Property Services Department under the Ministry of Finance. Item 32(a) of the Stamp Act 1949 does not mention either buyer or seller is liable to pay the duty. However, in market practice, buyers usually pay the stamp duty.

Property Value

Stamp Duty Payable

First RM100,000/-


Next RM400,000/-


Excess of RM500,000/-


Legal Fee

Usually, both buyers and sellers will engage their own solicitors to represent them in negotiation and completion of the sales and purchase agreements and other relevant documents. They shall therefore bear their own legal fee. Legal fee for sales and purchase agreement in accordance with the Solicitors’ Remuneration Order 2006 under the Legal Profession Act 1976 is as follow:

Consideration/ Adjudicated Value
(whichever is the higher)

Scale Fees

For the first RM150,000/-

1.00% (min RM300.00)

For the next RM850,000/-


For the next RM2 million


For the next RM2 million


For the next RM2.5 million


Excess of RM7.5 million

Negotiable - not exceed 0.4%

Real Property Gain Tax (RPGT)

Gains from the disposal of real property are subject to tax under the Real Property Gains Tax (RPGT) Act 1976. The rate of RPGT levied on all sellers is as follows:-

Sale/ Disposal from theDate of Acquisition/ Purchase

Citizens/ Permanent Residents

Non-Citizens/ Non-Permanent Residents


Within 2 Years




In the 3rd Year




In the 4th Year




In the 5th Year




In the 6th Year & Subsequent Years




Begining 1 January 2010, a flat rate of 5% of the gains from disposal of real property within 5 years of ownership are subject to RPGT. Exemption up to RM10,000/- or 10% of the gains (which ever is higher) is given to individuals..

 Written by Dennis Yong, Principal of Fivestar Properties

Happy investing! For enquiries related to real estate,

call 603-6201 1988 or email to fiveprop@streamyx.com




All contents copyright © Fivestar Properties. 2009 All rights reserved.