Can Foreigners buy Penang Property?
Investing in property has become an activity which people would strive to do. This does not concern the locals alone in Malaysia, as foreigners have also recognised the potential benefits in buying property in this tropical country. It has one of the most affordable properties in Asia and good growth.
A foreigner in Malaysia is defined as a person who does not have a Malaysian citizenship, that is, a person who is not from this country. Therefore, an important question is asked. Can foreigners buy Penang property? Penang is commonly viewed as a state rich in culture, food and history, bringing both locals and foreigners together.
As a matter of fact, foreigners are able to purchase property in Penang. However, there are several conditions and recommendations tied to the aforementioned transaction.
Firstly, it is important to check which category of titles does the property fall under. There are two which are available for foreigners in Malaysia. Freehold enables the owner to have a permanent ownership of the property while leasehold only allows a limited ownership. Leasehold titles last about a century and they can be extended by paying an additional sum.
Secondly, a real estate lawyer should be hired to assist with the entire transaction. The following steps would occur in chronological order:
- The selected property would be accompanied by a Letter of Offer/Acceptance (also known as a Letter of Intent). It should be signed between the buyer and the seller. The buyer is expected to pay a 1-3% earnest deposit.
- Within 14 to 30 days, the Sale and Purchase Agreement (SPA) would be drawn up and executed by both parties, solidifying the transaction. A 7-9% deposit would be added to make up a 10% down payment.
- From the date of the signing, the buyer has to pay the remaining 90% within 3 months. An extension up to 30 days is permitted, but this would be subjected to an interest of 6% per annum on the balance sum.
Thirdly, there are existing restrictions that limit foreigners regarding their purchase. For instance, there is a minimum of RM2 million for the purchase of landed property on the island side. For the mainland, there is a minimum of RM1 million or else they are not permitted to make the following transactions. Additionally, land reserved for the Bumiputera cannot be purchased as well. Bumiputera is a term used to refer to any Malay or aboriginal individual who is living in Peninsular Malaysia, Sarawak and Sabah. It carries the meaning ‘son of the soil’ in the Malay language.
Fourthly, taxes cannot be forgotten. Foreigners are also required to pay tax of rental income for their property if it is used for these purposes. Tax on rental income for foreigners depends on the status of resident or non-resident in Malaysia.
Nonetheless, as a foreigner, there are factors to consider before owning a property in another country (in this case, Malaysia). The purchase of a landed property versus a condominium unit should be based on convenience, use and overall cost. Location also has its significance, especially when it concerns the community one is living in. Malaysian property would require their buyers to play the waiting game for raised prices and beneficial transactions.
In conclusion, the purchase of Penang property by foreigners is possible despite being tied to several conditions.
Written By : Katherine Khaw Ze Yun
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