Can Foreigner Buy Commercial & Industrial Property in Malaysia

Malaysia has become a top destination for foreign investors in its growing property market.

With its strategic location, investor-friendly policies, and strong infrastructure, opportunities abound, especially in the industrial property sector.

However, can foreigners buy commercial or industrial property in Malaysia?

Foreign investors should be aware of 'foreigner consent,' required for property purchases, and the protection of Malay reserved land to maintain its intended use.

Foreigner Consent Regulations in Malaysia

Foreigner consent refers to Malaysian regulations for non-citizens buying property.

These rules balance local and foreign market involvement, protect national interests, and support Malaysia's economic goals.

National Land Code (NLC) is the basis of land ownership and transactions in Malaysia. It outlines rules for property acquisition, including leasehold and freehold titles, and classifications like agricultural land and industrial land.
Industrial Coordination Act (ICA) 1975 regulates foreign ownership of industrial properties to promote balanced growth, fair pricing, and protect local industries from foreign competition. It outlines a clear process for obtaining consent, ensuring a sustainable industrial landscape.
Malaysian Investment Development Authority (MIDA) manages foreign investments in Malaysia. As the main agency for approving and facilitating these applications, MIDA ensures property acquisitions align with the country's economic goals. For foreign investors, partnering with MIDA is key to securing approvals and guidance.
Foreign Investment Committee (FIC) oversees foreign investments in Malaysia to ensure they serve national interests. It focuses on industrial property acquisitions, assessing their effects on jobs, technology transfer, and the local economy.
Land Acquisition Act 1960 allows the Malaysian government to acquire private land for public use. Foreign investors should note its impact on land ownership and minimum property purchase prices, especially for industrial properties linked to government projects.

Guidelines for Foreigners Buying Commercial & Industrial Properties

industrial, commercial, and residential properties

These guidelines outline the application procedures, eligibility criteria, and conditions for using state authority properties and obtaining foreign consent.

State Authority Consent

Foreign buyers must get consent from the state authority where the industrial property is located. To apply, you need to provide:

Application Form: submit the completed and signed form.
Passport Copy: provide a clear, valid copy of your passport.
Proof of Legal Presence: submit documents proving your company’s legal presence in Malaysia, such as a visa or work permit.
Industrial Property Details: include the property's location, title, description, and any lease or tenancy agreements.
Business Information: provide company registration documents, a profile, and financial statements.
Source of Funds: submit proof of funds, like bank statements, to meet anti-money laundering rules.
Project Proposal (if required): some applications may need a plan outlining the property's intended use, such as investment or job creation.

The state authority will review your application, which may take several weeks or months, and might request additional information or perform due diligence.

Minimum Purchase Price

Unlike local buyers, foreigners face minimum purchase prices when buying property in Malaysia.

The national guideline is generally RM1 million, but since land is a state matter, this amount can vary quite a bit depending on where you look.

For instance, in Selangor, the minimum investment is RM3 million for industrial property.

To avoid any issues, you must check the specific minimum threshold in your target state before you start the buying process.

minimumpurchasepriceconditionsforforeigners

Low Cost Consent

Low-cost consent only applies to properties officially designated as low-cost, though this is often not stated on the property title. To confirm, check the original Sale and Purchase Agreement.

In Selangor, low-cost properties are common, and consent applications go through Lembaga Perumahan dan Hartanah Selangor (LPHS).

LPHS sets rules for buying or transferring these properties to support ownership for low and middle income groups.

Bumiputera Consent

The Malaysian property market has some unique rules you can't ignore, like Bumiputera quotas and special land titles.

In new property developments, a portion of commercial and industrial units, known as "Bumiputera Lots", sold at a discount.

Only Bumiputeras can buy these units, and they usually cannot be resold to non-Bumiputeras. However, a Bumiputera unit can be sold to a non-Bumiputera if:

The owner gets State Authority consent, with valid reasons like being unable to sell to Bumiputeras after trying.
The owner repays the developer for the Bumiputera discount.

Even after being sold to a non-Bumiputera, the property restriction remains, and future sales to non-Bumiputeras will still need State Authority consent.

Additionally, foreigners cannot purchase land classified as Agricultural Land or Malay Reserve Land, so these land types cannot be used for industrial purposes.

You absolutely must hire local legal help to perform a thorough land title search to confirm that the property you want is legally available for foreign ownership.

Buying Through a Local Company (Sdn. Bhd.)

Many international investors choose to buy commercial and industrial properties through a locally incorporated company, known as a Sendirian Berhad (Sdn. Bhd.).

This approach helps them navigate the rules around foreign ownership.

Threshold Mitigation: When you buy property through a Malaysian-registered Sdn Bhd, it's legally considered a domestic corporate purchase. This can sometimes help you get around the higher minimum purchase prices set for foreigners, opening up a wider range of properties.
Tax Efficiency: Operating through a company allows you to claim corporate tax deductions. You can legally deduct expenses like maintenance, payroll, and capital allowances from the company's taxable income, which is more tax-efficient than owning the property as a foreign individual.

Conditions and Restrictions

The respective state authorities may impose conditions on property acquisitions:

Foreign buyers can purchase commercial property under RM10 million for personal use without forming a local company.
Foreign buyers can acquire land or buildings for commercial redevelopment. For non-personal use, the property must be registered under a local company and meet conditions.
Foreign buyers can purchase industrial land without price limits, but it must be registered under a local company and meet conditions

Sectoral Restrictions

Some industries may have extra restrictions on foreign ownership of industrial properties to protect national security, key sectors, and local participation.

Foreign investors should check sector-specific regulations that could affect property acquisition.

Exemptions

Manufacturing companies licensed by the Ministry of Investment, Trade and Industry (MITI), or those exempt from needing a licence, are allowed to acquire industrial property.

Loan and Debt Constraints

Getting a loan in Malaysia as a non-resident comes with its own set of challenges. Local banks are stricter with foreign applicants, which affects how much you can borrow.

Restricted Margins of Advance: While a local business might get a loan for 85% or 90% of a commercial property's value, foreigners and foreign-owned companies usually get a lower Margin of Finance (MOF), typically between 50% and 70%. This means you'll need to prepare a larger down payment.
Debt Service Ratio (DSR) Scrutiny: Banks look very closely at the Debt Service Ratio (DSR) of foreign applicants. If your income is from outside Malaysia, banks often value it at a discount. You'll need to show a strong, verifiable financial history or use the local income from your Malaysian Sdn Bhd to get a better loan deal.

Transfer of Property and Acquisition

For the transfer of property to foreign buyers or the acquisition of commercial and industrial properties by foreign buyers, each application must include:

Form FIC A/2004
A copy of the relevant agreement
A copy of the purchaser’s Passport or Identity Card
A copy of the vendor’s Passport or Identity Card
A copy of the Master Title
A copy of the Individual Title
Declaration Letter FIC SA/2004, signed by:

a) For individuals: the purchaser.
b) For companies: an authorised representative such as the Chairman,
Managing Director, CEO, or a Board member.
Any additional documents required by the Foreign Investment Committee (FIC).

Execution of the Sale and Purchase Agreement

After approval, seek legal advice to finalise the Sale and Purchase Agreement (SPA) with the seller.

This document covers the property price, payment schedule, and ownership transfer. Consult a lawyer to review the SPA to protect your interests.

RPGT and Stamp Duty

As a foreign investor, you need to be aware of the specific taxes on commercial property transactions, as they differ from those for domestic buyers.

Real Property Gains Tax (RPGT): The Malaysian government uses RPGT to prevent property speculation. If a foreigner sells a commercial or industrial property within five years of buying it, they have to pay a flat 30% tax on any profit. After the fifth year, the rate drops to a fixed 10%.
Stamp Duty: Foreign buyers pay the standard progressive stamp duty on the Memorandum of Transfer (MOT). For properties valued over RM1 million, the rate goes up to 4%. It’s important to include these upfront costs in your financial planning.