Tuesday, December 20, 2011

Buying and Selling Houses in Malaysia

Buying and Selling Houses in Malaysia

As long as your are Malaysian citizens, you are eligible for buying and selling houses within Malaysia which you are able to apply from the relevant land offices or registries depended on the relevant regulations for qualification.

1. Who is eligible to purchase houses in Malaysia?

- Any Malaysian is eligible to purchase houses in Malaysia but only Malaysian citizens can purchase low-cost houses. All low-cost houses buyers need to submit their application to the State Authority. And the low-cost houses are only offer to the lower income group.
- There are also houses that only available to Malays which are built on Malay Reservation Land.
- All the developers in Malaysia need to preserve 30% of their houses for “bumiputeras” (Malays and other native Malaysian). For those Bumiputeras they will enjoy a certain percentage of discount for buying houses as well.
- Industrial land and factories are open to all foreigners to purchase.
- Foreigners need to get approval from the State Authority if they intended to purchase residential houses, shop houses or commercial lots in a mall.
- Foreigners will as well need to inform the Foreign Investment Committee (FIC) which is a planning unit that under the Prime Minister’s jurisdiction. If foreigners wish to purchase landed property that have the value of below five million Ringgit Malaysia. In case the landed property value is over five million Ringgit Malaysia, foreigners will need to seek the approval from the Foreign Investment Committee.

2. Purchasing a house from housing developer

- At the time residential houses are on sales by housing developer with its housing development project, the housing developer need to make use of the standard agreement that is known as Schedule G and Schedule H under the Housing Development (Control & Licensing) Act 1966.
- The purpose of Schedule G is to be used for the sale of land with a construction is going to be built on the land while Schedule H is to be used for the sale of units in a building intended for subdivision, where strata titles are pending to be released.
- By following any of the standard agreements, a home buyer will need to pay progress instalments to the housing developer as and when they are due.
- The housing developer is required to produce its architect’s certificate to certify the completion of each stage of development, prior for it claims the progress instalment due.
- The final 5% of the buying price need to be kept by the seller’s solicitor as stakeholder for 18 months (right after the completion of the building) prior for it to released to the housing developer.

3. Buying a completed property

- You will not finding any standard agreement if you’re purchasing a completed property. The standard agreement is not necessary in case a housing developer is selling a completed property to a home buyer, they will only need a normal sale and purchase agreement instead.
- As a buyer, you will need to pay deposit of 10% of the buying price according to the sale and purchase agreement.
- You then need to pay the remaining amount of the buying price to your solicitor. The solicitor will use portion of that money to redeem the title from the seller’s bank. And the 5% of the buying price need to get remained in order to cover the real property gains tax payable by the seller.
- The agreement normally provides for completion of the transaction within 3 months plus one additional month with interest. Agreed interest has to be paid for late payment of the buying price in the fourth month which is calculated each day.
- Buyer and seller will need to sign a form of transferring to transfer the name of the house from seller to buyer.

4. Purchasing an apartment or a flat with no strata title

- In case the housing developer still on the way pending for getting the strata title for an apartment or a flat it intend to sells to you, the housing developer will need to sign a deed of assignment rather than a transfer form that undertakes to provide you the title when it been released.
- You are eligible to resell the apartment or flat to any sub-buyer. However, you will need the approval from the housing developer for you to resell it and the housing developer possess the right to ask for 0.5% of the buying price as administrative fee which is limited to a maximum of RM500.
- At the time the strata title is released, the housing developer is going to sign the form of transferring so that the apartment or flat will transfer to you.

5. Documents of Title

You will find 2 types of documents of title:
- freehold – a permanent title
- leasehold – for example a term of 60 or 99 years.
For the leasehold title, it need to be renewed once it get expired. The land is going to transfer back to the State Authority if it isn’t get renewed.
Typically, each and every house will has a title. A flat or an apartment also has a strata title. You can carry out a search in the Land Office or Land Registry and you will know whether the land is encumbered, caveat or charged to any bank.

6. Getting Housing loans

You may get a housing loan from a financial institution or bank. If you choose a bank, you may granted with a fixed loan or overdraft facilities.
You will need to repay the loan with monthly instalments if you get a fixed loan. While the overdraft facilities are generally offered to people who are engaging in business activities.
You can as well withdraw from the KWSP or EPF if you happen to be an EPF contributor. EPF will permit you to withdraw up to 30% of your account II from your EPF savings for purchasing a house.
Besides, you can as well –
  1. withdraw 30% or total amount from your account II of your EPF savings to settle your bank housing loan; or
  2. use your EPF savings to settle the remaining amount of your bank housing loan, whichever is lower.
For instant, if your account II having saving amounts of RM10,000, and your remaining amount of your bank housing loan is just RM8,000, you are only allow to withdraw RM8,000 from your account II. This is due to the remaining amount of your bank housing loan which is RM8,000 is lower than your account II saving which is RM10,000.

7. Stamp duty

Each and every property transferring will incurred with stamp duty. The stamp duty is depends on the property value:

Property Value Stamp Duty



1.
First RM100,000 1%
2.
Next RM400,000 2%
3.
Above RM500,000 3%

8. Legal fees

Buyer need to pay for scale fee for on every property transferring depends on the property value:

Property Value Legal Fees



1.
First RM100,000 1%
2.
Next RM4,900,000 ½%
3.
Above RM5,000,000 ¼%
A solicitor can only act for and collect legal fees from one party only.
For property transferring that you bought from a housing developer with the value of RM100,000 and below, you are going to entitle for 25% discount.
For every property transferring you bought from a housing developer with the value of RM30,000 and below, you are only required to pay for a flat rate of RM120 only.

9. Property gains tax

Each and every property seller need to fill the real property gains tax form (CKHT1). And all buyers need to as well fill a similar form(CKHT2). The form then need to submit to the Inland Revenue Board within 30 days from the date when the agreement is signed.
The property gains tax rates that need to pay by the property seller are listed below:

Sale of Property Tax Rate



1.
within 1 year 30%
2.
within 2 years 30%
3.
within 3 years 30%
4.
within 4 years 15%
5.
within 5 years 5%
6.
after 5 years 0%
This is not apply to company as for a company, they will need to pay for a minimum tax of 5% even after 5 years.
The property gains tax is depends on the profit gain from the sale of the property. Generally, a 5% of the buying price need to be retained by the seller’s solicitor in order to pay for the property gains tax.
 

The current home loan rates is not that attractive when compare to rates that banks offer last year during the recession. During that time, you can get the rates as low as BLR – 2.5%.
The table below shows the current home loan package that banks in Malaysia offer as in February 2010 for comparison purpose. The package may change, so for confirmation, you can check with the bank.
Bank Package Type Interest Rate (%) Package Information
Alliance Bank Flexi Loan from BLR – 1.8
  • Non ZEC
  • No minimum loan amount
  • Minimum lock-in period 5 years
  • Exit penalty 3% on loan amount or RM3,000 which ever higher
  • No fixed interest rates
AmBank Flexi Loan from BLR – 1.9
  • Non ZEC
  • No minimum loan amount
  • Minimum lock-in period 5 years
  • Exit penalty 3% on loan amount
  • No fixed interest rates
CIMB Bank Home Flexi from BLR – 1.9
  • Non ZEC
  • Minimum loan RM150,000
  • Minimum lock-in period 5 years
  • Exit penalty 3% on loan amount
  • No fixed interest rates



EON Bank Super Easi 123 Flexi from BLR – 1.8
  • Non ZEC
  • Minimum loan RM50,000
  • Minimum lock-in period 3 years
  • Exit penalty 3% on loan amount
  • No fixed interest rates
Hong Leong Bank Flexi Mortgage from BLR – 1.85
  • Both ZEC and Non ZEC
  • Minimum loan RM100,000 (ZEC)
  • Minimum loan RM50,000 (Non-ZEC)
  • Minimum lock-in vary 3, 5 or 7 years
  • Exit penalty 3.5% on loan amount
  • No fixed interest rates



Maybank MaxiHome from BLR – 1.8
  • Non ZEC
  • Minimum loan RM50,000
  • Minimum lock-in period 3 years
  • Exit penalty 3% on loan amount
  • Option for fixed interest rates for 3,5 or 7 years
OCBC Bank Home Loan from BLR – 1.9
  • Non ZEC
  • Minimum loan RM100,000
  • Minimum lock-in period 5 years
  • Exit penalty 3% on loan amount or RM3,000 which ever higher
  • No fixed interest rates
Public Bank Home Save from BLR – 1.9
  • Non ZEC
  • Minimum loan RM150,000
  • Minimum lock-in period 5 years
  • Exit penalty 3% on outstanding amount
  • No fixed interest rates
RHB Bank Flexi Loan from BLR – 1.8
  • Non ZEC
  • Minimum loan RM100,000
  • Minimum lock-in period 5 years
  • Exit penalty 3% on outstanding amount
  • No fixed interest rates








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