Frequently Asked Questions - Buying Property In Penang, Malaysia

I have never bought a house before where do I start?
The first step is to determine your property location you want and affordability (budget), as most people need to buy with the help of a mortgage loan. As a general guide, the monthly loan repayment should not exceed about 35% of your gross monthly income. (More general questions about buying property in Penang.)

What is the difference between an apartment, a condo or a flat ?
In Malaysia, apartment and condo are the same meaning. Most condo or apartment will have condominium facilities and security services. Flats generally means medium or low cost flat and in most cases would not have the facilities unlike condominium.

Can I buy property if I am not a resident of Malaysia?
Yes. Non-Malaysian & Foreigners intending to purchase a property in Malaysia needs to obtain the respective state consents which the property is situated before the purchase is considered valid and lawful.  ( In most cases, your solicitor would submit the application on your behalf). For Penang State Consent, the property purchased must be valued RM250,000 (ringgits) and above.
 

How does the actual buying process work?
Once you have agreed on the terms with the seller, arranged the financing if required, you need to engage a lawyer to advise and act on your behalf when signing the Sale and Purchase Agreement and making payments until the transaction is completed. The money is paid to the solicitor who will forward the money to the seller when the transaction goes through.


How do I pay for the purchased unit and when should I pay?
You pay a 2% earnest deposit to secure the property when you first decide to buy the property.  (This is the booking deposit and will become part of the deposit after the legal Agreement is signed). Once the vendor signed the Letter of Intent and accept this deposit, he cannot sell the said property to any other party. The Sale and Purchase Agreement (SPA) to be drawn up by the solicitor and upon signing of SPA, pays 10% of the purchase price (minus the earnest deposit). The remaining 90% is paid within the next 3 months from the signing date of the SPA. An extension of 30 days is allowed, with an interest of approximately 6% per annum on the balance sum. This is the normal basic framework of the agreement subject to your lawyer's advice and the usual practice. Once your legal representative has finished their searches and investigations, and all monies are paid over, the title transfer are finalized, and the property is all yours.

(For property under construction, there is a progress payment schedule for those condominiums that are still under construction).
 

How do I open a bank account in Malaysia?
Opening an account in Malaysia is relatively easy. Once you decided to purchase the property your lawyer will introduced to you a bank of your choice or if you prefer, one recommended by us so that you can open a local banking account. With the internet banking you can access your account in English at all times from anywhere, check balance, transfer funds and even pay utilities bills - all done online through the internet. Read Testimonial

What are the fees are associated with buying property?
a. Legal fees.
b. Gov't Stamp duties
c. Loan agreement fee
d. Valuation fee
e. Agent's fee

*Fees subject to 5% GST.

How much is the legal fees?
The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees based on the purchase price of the property as follows:-

1.5% on the first RM150,000
0.7% on the next RM4,900,000
0.25% on the remainder

For the schedule for legal fees it is advisable to consult your lawyers for the present calculation of the legal fees.


What is stamp duty and how much is it?
All transfer of property is subject to Government Stamp Duty. Rate of Stamp Duty is based on the value of property.

1% on the first RM100,000
2% on the next RM400,000
3% on the next RM1,500,000

For the schedule for stamp duty it is advisable to consult your lawyers for the present calculation.

How much is the loan documentation charges? (Applicable only if you require bank financing).
Preparation of the Loan Agreement of the property and attending to stamping and registration.

1% of the purchase price on the first RM100,000
0.5% on the next RM4,900,000
0.25% on the next RM4,901,000 and above

Do I need a valuation and how much is the valuation cost?
For those who need financing from banks, a report by a Valuation firm is required by the bank. The financial institution requires a valuation to ascertain whether the property provides sufficient security for the loan given. It also provides an indication that the property is worth what you are paying for. The fees would depends on the value of the property. A rough estimate of the fees is of RM300 - RM800 for a normal apartment valued. Please consult your valuation firm for the present calculation of the fees.


What about yearly local tax?
All property owners have to pay local council assessment tax. Rate of assessment is based on the value of property. An average property taxes are approximately RM200 (ringgits) per half yearly for an apartment of RM300,000 value. All assessment rates bills are issued & posted twice a year, at the end of December / June and must be paid in full not later than February / August, respectively.


What documents do I need to apply for a housing loan?
The following is a checklist of the documents you will need to provide:-

1) Identification Card (IC) or Passport for foreigner
2) Latest two months latest salary slip / Letter from employer
3) Latest Form J/ EA (income statement) / EPF statement
4) Sales & Purchase Agreement / Booking receipt
5) 3 months’ bank statements (Savings / Current)
6) Business Registration / Form 24 & 49 (if-self employed)

Can a foreigner obtain loan to finance the purchase?
Financing / bank loan is available up to 70% for foreigner from local banks.

Do I need consent from the developer for the sale and assignment of his apartment unit to me?
If the strata title for the property has not been issued, the vendor shall apply to the Developer for consent to the sale and assignment of the apartment unit to you. All administrative fees for obtaining the consent is borne by the vendor. In the event written consent is refused by the developer to the vendor, the vendor shall refund the deposit (if any) without interest to your solicitor and the Sale and Purchase Agreement between you and the vendor shall forthwith be null and void.
 

What is the Real Property Gains Tax (RPGT)?
Real property gains tax is a form of capital gains tax. Only gains / profits arising from the disposal of property are subject to RPGT. The gains (if any) will be assessed based on a set percentage at 30% only if you sell within 5 years from the date of acquiring the property. The taxable amount is based on the duration you held the property. For Malaysian, if you disposed the property after 5 years, the RPGT is waived. 

Rates Of Tax : Real Property Gains Tax (RPGT)

An individual who is not a citizen and not a permanent resident is subject to the following rates:-

RPGT :Source http://www.hasilnet.org.my/english/eng_index.asp

Latest news: Malaysia scraps property gains tax from April 1st 2007

Got a question? Speak to our friendly, informative and efficient lawyer or banker.

If you are interested in seeking financing to facilitate your property purchase , we will forward you the email and telephone contacts of several banks - and queries can be initiated. Financing of up to 70% can be arranged for, provided that income documents can substantiate the margin. We will also forward to you contacts of lawyer who can assist you with any of your questions you may have.
 

Expatriate's Commonly Asked Questions About Buying Property In Penang

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