Real Estate 2025 Comparisons

The Federal Constitution (FC) is the supreme law of Malaysia and prevails over all regular statutes. It provides that land matters generally lie within the jurisdiction of the state authority of each state in Malaysia. Each state in turn has enacted its own subsidiary legislation pertaining to land, such as various land rules, enactments and ordinances to supplement the operation of the FC.

Land matters relating to the three federal territories of Kuala Lumpur, Putrajaya and Labuan fall under the purview of the federal government, which has the power to enact laws to achieve uniformity between the States.

In Malaysia, there are four main sources of statutes governing real estate.

• For Peninsular Malaysia, the two principal statutes are the National Land Code 1965 (Revised 2020) (NLC) and the National Land Code (Penang & Malacca Titles) 1963, which apply to all land matters in Peninsular Malaysia (including the Federal Territories of Kuala Lumpur, Putrajaya and Labuan).
• The state of Sarawak administers its land laws separately under the Sarawak Land Code (Cap 81).
• In a similar manner, the state of Sabah has enacted the Sabah Land Ordinance (Cap 68) to govern its land laws.

Malaysia practises the Torrens system of land registration or derivatives thereof for Sabah and Sarawak; see 2.3 Effecting Lawful and Proper Transfer of Title for more information.

In this Guide, reference to “land” refers to the physical land itself, while “property” refers to buildings or structures developed on the land, which can be either landed properties or strata properties, and “real estate” refers to either land or property.

Strata properties possess their own unique legislative framework and are governed by the Strata Titles Act 1985 (STA). The STA applies to buildings that are intended for subdivision (eg, apartment blocks, commercial malls and gated communities) and governs and facilitates the subdivision or stratification of buildings or land into individual parcels. In turn, the maintenance and management of strata buildings and common property is regulated by the Strata Management Act 2003 (SMA).

Unless otherwise stated, all references to laws, regulations and statutory reforms in this Guide pertain exclusively to Peninsular Malaysia, and do not apply to Sabah and Sarawak, which operate under separate legal frameworks for land and housing matters.

Malaysia's property transaction volume and value in 2024 reached the highest levels in a decade, according to the National Property Information Centre, with volume rising 5.4% year-on-year, to 420,525 transactions. The total transaction value surged 18% to MYR232.3 billion compared to 2023.

Growth is seen across multiple sectors, driven by the domestic economy and increasing foreign investments. The rising demand for data centres is a major growth driver. Johor’s real estate market is gaining traction due to the near completion of the Rapid Transit System (RTS) linking Johor Bahru with Singapore and the development of the Johor-Singapore Special Economic Zone (JS-SEZ).

Significant transactions in 2024 include the following.

• Bandar Malaysia land sale – the Ministry of Finance sold the 486-acre piece of prime land in Jalan Sungai Besi, Kuala Lumpur (site of the former Royal Malaysian Air Force base), to KLCC (Holdings) Sdn Bhd (KLCCH), a unit of national oil and gas company Petroliam Nasional Bhd (Petronas), for an estimated MYR12 billion. The sale is probably the largest single transaction in the country’s history to date.
• IOI Properties Group Bhd’s acquisition of the seven-storey Tropicana Gardens Mall from Tropicana Indah Sdn Bhd for MYR680 million.
• Microsoft Payments (M) Sdn Bhd’s acquisition of two pieces of industrial land in Johor – a 123-acre piece of land in Eco Business Park VI in Kulai for MYR402.3 million and a 1.1 million sq ft plot in Pulai for MYR132.47 million.
• Another notable data centre-related transaction is Sunway Bhd’s sale of 64 acres in Sunway City Iskandar Puteri, Johor, to Equalbase Pte Ltd for MYR380 million.
• Bridge Data Centres Malaysia IV Sdn Bhd acquisition of two pieces of land totalling 67 acres in Plentong, Johor, for MYR337.3 million from developer Paragon Globe Bhd.
• Senibong Island Sdn Bhd’s purchase of 960 acres in Tebrau, Johor, for MYR64 million from S P Setia Bhd.

On the real estate investment trust (REIT) front, notable transaction include KIP REIT’s acquisition of DPulze Shopping Centre in Cyberjaya, Selangor, for MYR320 million and the sale of 163 Retail Park in Mont’Kiara, Kuala Lumpur, with a net lettable area of 255,535 sq ft, to Sunway REIT for MYR215 million.

Overall or at least on the macro scale, it appears that inflation and interest rate hikes have not significantly affected the property sector insofar as large deals are concerned.

In Malaysia, there is no specific legislation regulating the use of digital instruments or “tokens” for land transactions. The NLC only recognises the registered proprietor listed on the land title as the legal owner.

The adoption of proptech solutions by real estate agencies and property developers has increased. The emergence of new proptech firms that appeal to niche market segments has improved user experience by providing personalised property recommendations and virtual property excursions.

The federal government plans to table the Real Property Development Bill for Peninsular Malaysia in Parliament in 2025. The existing Housing Development (Control and Licensing) Act 1966 primarily regulates residential properties, but the market now includes a mix of residential, retail and commercial units. The new bill aims to provide a more comprehensive, transparent and accountable framework for the industry.

The federal government is also looking to amend the Housing Development (Control and Licensing) Act 1966 in 2025 to enforce stricter measures against developers involved in fraud and abandoned projects. Proposed changes include penalties such as imprisonment for up to three years, fines ranging from MYR250,000 to MYR500,000, or both. In addition, a special government guarantee fund of MYR1 billion has been established to support ailing projects and provide relief to affected buyers.

In Malaysia, proprietors of land generally hold their land in perpetuity (freehold) or under a state lease (leasehold).

The key legislation applicable to conveyancing in Peninsular Malaysia are as follows:

• the NLC;
• relevant State Land Rules, which supplement the NLC and may impose additional requirements or procedures specific to the state in which the property is located;
• the Stamp Act 1949, relating to stamp duty payable;
• the Real Property Gain Tax Act 1976 (RPGT), relating to RPGT payable;
• the Contracts Act 1950 (CA1950), for contractual liabilities;
• the Local Government Act 1976, in respect of change of ownership for the purposes of assessment;
• the Housing Developers (Control and Licensing) Act 1966, which applies if purchasing from a licensed developer;
• the STA, which applies to the subdivision and transfer of strata properties, including apartments and condominiums;
• the Pengurusan Danaharta Nasional Berhad Act 1998, which is relevant in conveyancing involving distressed or foreclosed properties; and
• the Environmental Quality Act 1974 (EQA), pertaining to industrial lands.

As noted in 1.1 Main Sources of Law, Peninsular Malaysia practises the Torrens system governing land ownership and dealings through the NLC. The Torrens title system operates on the principle of “title by registration”.

The cornerstone features of the Torrens system as applied and enforced in Peninsula Malaysia are as follows.

• It ensures that the land registry and the land titles registered accurately reflect all vital details about the land’s registered owner and any interests or encumbrances affecting said land. The NLC does not recognise the English law principle of adverse possession.
• The title of the land and all particulars contained therein are conclusive of the ownership of said land and any encumbrances affecting it.

A lawful and proper transfer of title in Malaysia is effected through the following steps.

• Agreements, whether a sale and purchase agreements (SPA), deed of gift or other form of agreement, should comply with the legal requirements under the CA1950.
• The execution of transfer documents – once the agreement is signed and the conditions fulfilled, the prescribed memorandum of transfer form under NLC (Form 14A) will be executed by the parties. Form 14A must be stamped according to the Stamp Act 1949.
• Lodgement with the Land Office or Registry – Form 14A is then lodged with the relevant State Land Office or State Land Registry for registration. The submission must include the original land title and other relevant documents, and proof of the payment of stamp duty.
• Registration and endorsement – the State Land Office or State Land Registry will then process the transfer. If all formalities and requirements are met, the title will be registered in the name of the new proprietor. The land register is updated, and an endorsement is made on the land title to reflect the new ownership.

Typical conveyancing due diligence includes:

• land searches on the land title, either conducted online or at the respective State Land Office or State Land Registry, to ascertain ownership, express conditions of the title (if any) and any existing encumbrances;
• bankruptcy searches if the vendor is an individual, or winding-up searches if the vendor is a company, which can be conducted online via the Insolvency Department’s website;
• asearch on the vendor (if the vendor is a company) can be done online via the Companies Commission of Malaysia’s website;
• a valuation report on the land or property (by a registered valuer); and
• physical inspection of the real estate.

In Malaysia, common warranties in a typical commercial real estate transaction would include:

• title and ownership;
• legal compliance;
• condition of real estate;
• no pending litigation; and
• leases and tenancies (if applicable).

These warranties are negotiable but tend to focus on the fundamental aspects of title, legal compliance and condition of the property.

Seller’s Warranties Provided Under Statute

There are some statutory provisions in the CA1950, the STA and the NLC that may imply warranties regarding the sale of real estate.

However, specific warranties about the state of the building or environmental conditions (eg, asbestos) are generally addressed through express contractual representations and warranties, rather than statutory obligations.

Buyer’s Remedies Against the Seller for Misrepresentation

The typical buyer’s remedies for misrepresentation or breach of warranty in Malaysia include:

• damages;
• rescission of contract; and
• specific performance.

In practice, the SPA will often outline the specific remedies available to the buyer, including indemnities and procedures for addressing breaches.

Security for the Enforcement of Remedies

In commercial real estate transactions in Malaysia, security for the enforcement of remedies is usually provided through:

• escrow arrangements;
• bank guarantees; or
• indemnities.

However, it is not uncommon for buyers to rely heavily on the seller’s representations and warranties in the SPA itself rather than seeking third-party security.

Survival Period of Representations and Warranties

The parties usually agree to a survival period, balancing the seller’s interest in limiting liability and the buyer’s need for a reasonable timeframe to identify potential issues.

Cap on Seller’s Liability for Breach of Representations and Warranties

It is customary for the seller’s liability to be capped in commercial real estate transactions in Malaysia. The cap is often negotiated.

Use of Representation and Warranty Insurance

Representation and warranty insurance is increasingly being used in larger commercial real estate transactions in Malaysia, particularly for international buyers and sellers, but it remains rare in more typical domestic transactions.

Investors should focus on the following key areas of law.

Eligibility and Restrictions for Foreign Investors

Foreigners are permitted to purchase property in Malaysia, although the following restrictions apply.​

• Minimum purchase price – foreign investors are generally required to purchase properties valued at MYR1 million or higher. ​
• Types of properties – foreigners are typically restricted from acquiring properties that are classified as low or medium-cost housing, Malay reserved land, or agricultural land unless converted for other uses.
• State authority approval – prior approval from the relevant state authority is mandatory for foreign property acquisitions. ​

Legal Documentation and Procedures

Please see 2.3 Effecting Lawful and Proper Transfer of Title and 2.10 Taxes Applicable to a Transaction.

Compliance with Land Laws and Regulations

Please see 2.2 Laws Applicable to Transfer of Title, 2.3 Effecting Lawful Transfer of Title, 2.4 Real Estate Due Diligence and 2.5 Typical Representations and Warranties.

Financial Considerations

Financial aspects such as financing options and RPGT should be considered.

Legal Fees and Other Costs

Costs associated with property transactions should be considered – eg, legal fees, stamp duty and valuation fees.

Engaging with legal professionals experienced in Malaysian real estate law is highly recommended to navigate these complexities effectively.

Generally speaking, specific laws concerning pollution or contamination impose strict liability upon the proprietor of any land. If the proprietor is prosecuted, the burden of proof of the cause of such pollution generally lies with the proprietor.

Under Malaysian environmental law, the buyer may be held liable for pollution or contamination even if they did not cause it, particularly in cases where:

• the contamination is present at the time of the transaction; or
• the buyer takes possession of the property and uses it in a way that may lead to further contamination.

Relevant legislation includes the EQA and environmental impact assessments (EIAs).

To ascertain the permitted uses of a parcel of real estate under applicable zoning or planning law in Malaysia, the following steps and considerations are typically involved.

Consult Local Authority's Town Planning Department

The primary source of information regarding zoning and planning laws is the local authority or municipal council (Kuala Lumpur City Hall, Penang Island City Council, etc). Each local authority has its own set of zoning regulations, which may differ based on location.

You can approach the relevant local authority to request information regarding the zoning classification of a land. The zoning plan will outline what types of developments are permitted on that land (residential, commercial, industrial, mixed-use, etc).

Zoning regulations are typically available in the form of planning laws, development orders or local plans, which detail land use and other planning restrictions.

Review Local Plan and Development Order

Malaysia has a system of “Local Plans” and “Development Orders” that dictate land use and development controls for specific areas. Local Plans are prepared by the local authorities to guide land development and zoning, and these plans will specify:

• the zoning classification of the land;
• the types of permissible land use within each zone; and
• setback requirements, building height and other design constraints.

Land Title Search and Restrictions

In addition to zoning laws, the land title itself may contain restrictions or conditions that limit the types of development that can occur on the land.

Consult a Town Planner or Property Consultant

It is common to consult with a professional town planner and lawyers to help interpret zoning regulations, review development feasibility, and provide advice on compliance with local planning laws.

Development Agreements with Public Authorities

It is possible to enter into specific development agreements with the relevant public authorities in Malaysia to facilitate a project. These agreements are generally negotiated between the developer (private party) and the local authorities (government), and typically include the following components:

• specific land use;
• infrastructure and utility provisions;
• development conditions and approvals;
• incentives or support;
• community engagement or environmental mitigation; and
• compliance and penalties.

In Malaysia, compulsory acquisition of privately owned land by the relevant governmental authorities is regulated by the Land Acquisition Act 1964 (LAA); see 6.22 Termination by a Third Party for the process.

RPGT

Malaysia imposes RPGT on gains arising from the disposal of real property, including corporate real estate. The RPGT rates for companies incorporated in Malaysia (as of 15 April 2025) are as follows:​

• disposal within three years: 30%​;
• disposal in the fourth year: 20%;​
• disposal in the fifth year: 15%​; and
• disposal after five years: 10%​.

The RPGT rates for foreigners are as follows:

• disposal within five years: 30%​​; and
• disposal after five years: 10%​.

The RPGT rates for local individuals are as follows:

• disposal within three years: 30%;​
• disposal in the fourth year: 20%​;
• disposal in the fifth year: 15%​; and
• disposal after five years: 0%​.

Who pays RPGT?

The seller (disposer) of the property is responsible for paying RPGT on the chargeable gain from the disposal of the property.​

Exemptions and reliefs

Certain exemptions and reliefs may apply to RPGT – eg, in cases of compulsory acquisition by the government. It is advisable to consult tax professionals to assist in understanding specific exemptions.​

Property Transfer Tax (Stamp Duty)

In addition to RPGT, stamp duty is levied on instruments of transfer for real property. The rates (as of 15 April 2025) are progressive, based on the property value, as follows:​

• 1% on the first MYR100,000;​
• 2% on MYR100,001 to MYR500,000;​
• 3% on MYR500,001 to MYR1 million; and
• 4% on any amount exceeding MYR1,000,001.

Who pays the transfer tax?

The buyer is responsible for paying the stamp duty.

Exemptions and reliefs

Disposals without consideration between spouses, parents and children, grandparents and grandchildren are waived for the first MYR1 million in value only.

Stamp duty for foreigners (individuals and companies) buying real estate is 4% on the property value or the purchase price, whichever is higher.

Restrictions on foreigners are provided by regulations that vary slightly between Peninsular Malaysia, Sabah and Sarawak.

Minimum Purchase Price

Foreigners can only buy real estate above a certain minimum threshold, which varies by state (as of 15 April 2025), as follows:

• Kuala Lumpur: MYR1 million (some areas may have different thresholds);
• Selangor: MYR2 million (strata) (some areas may have different thresholds);
• Penang: MYR1 million (strata) or MYR3 million (landed property on the island);
• Johor: MYR2 million (landed), MYR1 million (strata) (some areas may have different thresholds); and
• Sabah and Sarawak: these states have separate rules and require additional state approvals.

Types of Property Foreigners Cannot Buy

Generally, foreigners cannot purchase:

• low and medium-cost residential units as classified by the state;
• properties built on Malay Reserved Land; or
• properties under Bumiputera quotas (reserved for ethnic Malays and indigenous groups).

Landed Property Restrictions

While foreigners can buy landed property, this is usually limited to designated developments, such as:

• gated and guarded communities; and
• luxury developments.

Some states may not allow it at all unless it is under a specific development plan.

RPGT

See 2.10 Taxes Applicable to a Transaction.

Foreign Investment Committee (FIC) Guidelines

While the FIC no longer directly approves individual property deals, its guidelines still influence policy, especially for large-scale or strategic investments.

Acquisitions of commercial real estate are generally financed by loans from banks or financial institutions. Common financing options include:

• conventional financing;
• Islamic financing;
• private equity and joint ventures;
• acquisition via share purchase (companies holding real estate); and
• REITs.

The real estate will usually be placed as security or collateral (by way of charge or assignment) for the repayment of the loan. Depending on the circumstances of each case and the credit history of the borrower, the lender may also require additional security, such as personal guarantees from the directors of the borrower and/or corporate guarantees from the borrower, the borrower’s parent company or its associated company.

According to the Foreign Exchange Policy Notices of Bank Negara Malaysia (the Central Bank of Malaysia), a resident entity is allowed to borrow up to MYR100 million in foreign currency equivalent in aggregate from a non-resident financial institution (NRFI).

Although Malaysian companies may provide real estate as security to NRFIs, any deed or instrument executed by the NRFI under a power of attorney in respect of any land or interest shall be void and, in the case of an instrument of dealing, be incapable of registration under the NLC.

NRFIs' lending activities to Malaysian companies are further regulated by the Moneylenders Act 1951 and the Financial Services Act 2013 (on exchange control).

When a legal charge (mortgage) is created over real estate, the following costs typically apply.

• Stamp duty – ad valorem stamp duty applies to the principal or primary security instrument (eg, the loan agreement or charge document), at a rate of 0.5% of the loan amount secured.

• Registration fees are payable to the Land Office when registering a charge over the property, and differ by state.

• Legal fees are payable according to the fee scale under the Solicitors’ Remuneration Order 2023).

• State consent fees – if state authority consent is required, a processing fee for the consent to charge will apply, with the amount varying from state to state.

If enforcement is done via court proceedings (eg, foreclosure), court filing fees and legal costs apply. These can vary widely based on the property value and the duration of proceedings. Auctions through court may involve auctioneer fees and advertisement costs. No stamp duty or sales and service tax (SST) is payable upon such court fees.

In Malaysia, notarisation is not required for the execution or registration of real estate security documents. However, if a foreign lender requires notarised or apostilled documents, this may incur notary public fees, which are typically MYR100 to MYR300 per document.

The Companies Act 2016 (CA2016) generally prohibits a company from providing financial assistance to acquire its own shares or shares of its holding company, with limited exceptions.

The CA2016 also generally prohibits company directors from entering or putting into effect any arrangement or transaction for the acquisition or disposal of an undertaking or property of substantial value or the disposal of a substantial portion thereof. However, exceptions and exemptions to financial assistance do apply – eg, bona fide purpose and approval by shareholders.

When a borrower defaults, the lender will typically issue a formal letter of demand for the outstanding amount before any enforcement action. Further actions include:

• issuing a formal default notice under the NLC;
• appointing a receiver and manager (if applicable); or
• initiating foreclosure (sale of property).

Lenders should expect the following potential obstacles:

• disputes over default, including the filing of stay of execution or debt restructuring arrangement under the CA2016 or the Insolvency Act; or
• competing creditors.

To ensure priority over other creditors, the lender must ensure that the charge is properly registered under the NLC. The time needed to enforce and realise security will vary depending on which enforcement proceeding is taken.

Most pandemic-related restrictions on foreclosure actions and court procedures have been lifted. Nevertheless, the residential auction segment has shown an increase since the pandemic.

There is an active market for the sale of non-performing loans in Malaysia, particularly for banks and financial institutions seeking to offload distressed assets.

Insofar as debts secured with registered charges on land are concerned, the priority of charges is usually based on date of registration, not just creation. The first registered charge on the land generally takes priority over any subsequent charges. 

While multiple charges are possible, the order in which they are registered determines their priority. A subsequent charge can be registered, but its effectiveness is subject to the terms of the first registered charge. 

In the event of the chargor's insolvency, the priority of registered charges is generally maintained, with the first chargee having the highest claim on the property. 

Malaysia does not typically recognise “subordination by conduct” or implication. Subordination must be clear and intentional, either contractually or via a court process.

In Malaysia, the principal legislation governing environmental pollution is the EQA.

While the provisions of the EQA primarily targets polluters, lenders can be indirectly liable in certain scenarios, especially if they take control of or participate in the management of a polluted site.

If a lender exercises the remedy of possession of contaminated land when enforcing its rights under a charge (eg, via foreclosure or enforcement), they may become the legal occupier or controller of the land, and consequently may be deemed responsible for environmental compliance, including clean-up obligations or ongoing mitigation.

Regular security documents for a loan will likely contain a clause that allows the lender to recall the facility and sell the security by way of public auction if the borrower becomes insolvent. A charge that is registered on the title of a property will allow the lender to foreclose it regardless of the insolvency of the borrower.

However, a floating charge created within 12 months before the commencement of winding-up is void unless the company was solvent immediately after the creation of the charge, or unless it is proven that the charge was created in good faith and for value.

Stamp duty is payable on the loan agreement at 0.5% of the loan amount in accordance with the provisions of the Stamp Act 1949; this is normally borne by the borrower.

In Malaysia, property development, planning and zoning are governed by a mix of federal legislation and state/local-level regulations, due to Malaysia’s federal structure where land matters are under state jurisdiction (per FC, Ninth Schedule, List II – State List).

The Town and Country Planning Act 1976 (TCPA) is the principal law applicable to planning and zoning in Peninsular Malaysia. Sabah and Sarawak have their own laws, namely the Town and Country Planning Ordinance 1950 and Land Ordinance (Sabah Cap 68) of Sabah and the Sarawak Land Code and Sarawak Planning Ordinance 1962.

The planning system is hierarchical (national, then state, then local). On the state level, each state authority has its own land rules and guidelines, typically under a Land Rules Enactment or Planning Enactment.

The NLC governs usage categories for land, under the three categories of residential, agricultural and commercial.

The TCPA governs land use and zoning, planning control over the use of land or buildings, and development plans. The Street, Drainage and Building Act 1974 (SDBA) governs the construction, refurbishment and maintenance of buildings and infrastructure. The SDBA’s subsidiary legislation, the Uniform Building By-Laws 1984 (UBBL), delineates the minimum building standards, fire safety, access, building design and amenities. While the UBBL is intended to be a national standard, many states have adopted their own variations or building by-laws.

Under the TCPA, the local government is a planning authority responsible for regulating the development and designated use of individual parcels of real estate; see 4.4 Obtaining Entitlements to Develop a New Project for further detail.

The TCPA gives local authorities wide powers and responsibility for the managing and carrying on of the daily administration of land use, such as planning, decision-making and development controls. This legal framework takes population density and environmental and heritage factors into account, among others. The TCPA applies to all lands, structures and buildings within their local authority area of responsibility.

The TCPA applies to all states in Peninsular Malaysia, except for the Federal Territory. Other planning law legislation includes:

• the Federal Territory (Planning) Act 1982 for the Federal Territories of Kuala Lumpur, Putrajaya and Labuan;
• the Town & Country Planning Ordinance 1952 of Sarawak; and
• the Town & Country Planning Ordinance 1950 of Sabah.

Under the TCPA, a developer must ensure compliance with zoning and local plans. Planning permission or development order and approval for building plans must be obtained from the local authorities prior to the commencement of any construction of a building on land.

Under the TCPA and local regulations, developers must notify the public of the proposed project as part of the public consultation process. Public objections may be raised at such meetings.

For large-scale developments, an EIA must be carried out, which will be reviewed by the Department of Environment. The EIA is also available for public comment.

An aggrieved party has a right to appeal to the Appeals Board of the state authority. The Appeals Board is established by each state authority to hear appeals against decisions made by a local planning authority.

In addition to obtaining statutory approvals and permits, it is customary for developers to enter into formal agreements with governmental authorities, local councils and utility providers to facilitate and implement development projects.

These agreements may be required by law, or may arise as conditions of development approvals, particularly for larger or complex developments like mixed-use projects, townships or planned unit developments.

Planning permission may be approved with conditions such as requiring the developer to build public amenities and surrender the same to the local authorities.

Restrictions on development and designated land use are strictly regulated and enforced through a multi-layered framework of federal, state and local laws. Enforcement mechanisms involve a combination of statutory powers, local authority oversight, planning permissions and land title conditions, with potential penalties including fines, demolition orders and criminal liability.

Instances of enforcement include planning permission or zoning violations that are usually dealt with via stop-work orders or demolition orders under the TCPA, fines or imprisonment. Similar legal action is applied to breaches of building construction guidelines under the UBBL.

Other violations include breaches of land category use under the NLC, such as building commercial properties on agricultural land. The land can be forfeited to the state authority if the breach remains uncured after notice is served under the NLC.

Breaches of environmental quality are dealt with under the EQA.

Real property in Malaysia can be registered under the names of individuals, corporations or entities having a legal personality.

In Malaysia, private companies and REITs have constitutions that govern their operation and structure. Private companies are governed by their constitution, which outlines their purpose and powers, and the rights of shareholders. REITs, on the other hand, are structured as trusts, requiring a management company, a trustee and a trust deed.

For the assessment year 2024, Malaysian companies with paid-up capital of not more than MYR2.5 million and gross business income of not more than MYR50 million are taxed progressively from 15% to 24%. Companies other than the above category are taxed at a flat rate of 24%.

Malaysian listed REITs may qualify for tax exemptions on property acquisitions and disposals, including stamp duties and RPGT; see 5.3 REITs for more detail.

REITs are available in Malaysia. Presently, Malaysia has 19 publicly listed REITs on Bursa Malaysia.

All REITs, whether public or private, are regulated by the Securities Commission of Malaysia, under the Capital Markets and Services Act 2007 and the Guidelines on Real Estate Investment Trusts. Additional regulations on listed REITs are also provided in the Main Market Listing Requirements.

There is no restriction on foreign ownership of units in publicly listed REITs, but foreigners cannot hold more than 70% of the equity in the REIT’s management company. Private REITs may only target sophisticated investors.

Listed REITs are generally exempt from income tax if at least 90% of their total income is distributed to unit holders, and enjoy exemptions from stamp duties and RPGT when acquiring or disposing of properties. 

The minimum capital required to set up an entity for real estate investment in Malaysia varies depending on the type of entity, as follows:

• Sdn Bhd (private limited company) – the minimum paid-up capital is MYR1; 
• public limited liability company – the minimum share capital is MYR2 million; 
• trustee (for REITs) – a trustee must have a minimum issued and paid-up capital of MYR500,000 and minimum shareholders' funds of MYR1 million; 
• REITs – for listing on Bursa Malaysia, a REIT may need to meet minimum asset value requirements, as well as requirements for the number of unit holders and the minimum offer size; and 
• limited liability partnership (LLP) – there is no minimum contribution to form an LLP in Malaysia.

Private companies require at least one director, while public companies need at least two. The minimum number of directors must ordinarily reside in Malaysia by having a principal place of residence in Malaysia. For REITs, see 5.3 REITs.

Annual entity maintenance and accounting compliance costs vary depending on the complexity of the business, the services needed and the service provider chosen.

Tenancy/Lease (Recognised Under the NLC)

A tenancy lasts for up to three years. It is enacted through a simple agreement, or even an oral agreement, and is not registerable. A lease lasts for more than three years and requires a written agreement to be concluded. A lease must be registered under the NLC.

The key features are as follows:

• right to exclusive possession;
• can be for residential, commercial or industrial use;
• can include renewal rights, rent reviews and maintenance obligations; and
• leases give the tenant legal interest in the land (if registered).

Licence to Occupy (Governed by Common Law/Contract Law)

Licences to occupy have the following key features:

• they do not confer legal interest in the land – they only grant permission to use the premises, rather than possession;
• they are revocable, and can typically be terminated more easily than leases; and
• they are common for kiosks, short-term retail set-ups, concession stands and temporary offices.

Licences to occupy are not registrable under the NLC.

Temporary Occupation Licence (TOL) (Governed by the NLC)

The features are as follows:

• granted by the state authority;
• usually for a duration of one year, which is renewable;
• for the temporary use of state land (eg, farming, storage, parking, stalls): and
• no proprietary interest – it is purely a licence, not a lease.

Concession or Concession Agreement

These are usually for public utilities, infrastructure or government-linked developments, and have the following features:

• they allow the use of land or assets for long-term operation (eg, toll roads, water supply systems);
• they are contractual, not leasehold, and may involve land use but governed by contract and statute rather than the NLC alone; and
• they involve significant obligations relating to construction, operation and eventual handover (BOT model).

There are different types of commercial leases, and they can vary based on the duration, structure, purpose and terms of responsibility between the landlord and tenant. They are not rigidly defined in legislation but are commonly used in practice and guided by the NLC, contract law and commercial norms.

Generally, a lease is the letting out of property or a part thereof for a period between three and 20 years, and must be registered upon the title of the land in question for it to be effective.

An unregistered lease is not valid as a statutory lease and does not enjoy the statutory protections and cannot bind third parties or successors in title to said land. Nonetheless, an unregistered lease is still enforceable between the tenant and the landlord in accordance with the agreement between them, or may create an estoppel therein.

Rents and lease terms are generally freely negotiable between the landlord and tenant. There is no statutory rent control or regulation governing commercial leases, and there is no mandatory code that parties must follow.

The term of a private lease is more than three years and up to 20 years. Rent is typically payable monthly.

Most if not all lease agreements would specify that the tenant (or lessee) will keep the leased premises in a tenantable condition and that, upon the expiry of the lease, the tenant shall deliver the premises free of encumbrances and in a tenantable condition, with reasonable wear and tear accepted.

This is a matter of contract that is agreed upon between the landlord and the tenant.

There is no set formula for rental increase, with business trends, market rates, good will and other commercial factors usually being taken into account.

Malaysia does not have VAT, but it has an SST regime. Only the service tax component is relevant for rental.

Service Tax on Rental

Service tax on rental does not apply to residential properties; it only applies to commercial property rentals, and only if the landlord is a taxable person under the Service Tax Act 2018. The service tax rate is 6% (increased to 8% for some services in March 2024, but rental remains at 6%).

A landlord must be registered for service tax if:

• they provide taxable services, including the leasing of commercial property;
• their annual taxable turnover exceeds MYR500,000; or
• they lease out office spaces, shops, warehouses and retail outlets.

Income Tax on Rental Income

Rental income is taxable under the Income Tax Act 1967. Individuals and companies must report rental income as part of their annual tax filings. Tax rates are as follows:

• individuals – based on progressive rates of up to 30% for residents; and
• companies – a flat rate, currently 24%.

Withholding Tax (for Non-Resident Landlords)

Withholding tax may be applicable to a non-resident individual or entity.

Legal fees, stamp duty on the lease agreement, utility and lease deposits are generally payable by tenant at the start of a lease.

In Malaysia, for stratified property, the landlord shall pay the maintenance and sinking fund of the property and the management will handle the maintenance and repairs of the stratified property.

Some landlords will install individual meters for the property and the tenant will pay based on usage. Utility bills for the common area shall be borne equally among the tenants.

If no individual meter is installed, the tenants will negotiate and agree amongst themselves on the utility bills.

Landlords are typically responsible for the real estate taxes – eg, quit rent and assessment, unless otherwise agreed in the tenancy.

Usually the landlord will purchase fire insurance and insure the property against fire damage. There is no publicly verifiable data on whether tenants have recovered rent payments costs under business interruption insurance policies as a result of office closures and clean-up costs incurred during the COVID-19 pandemic.

Landlords will typically impose permitted uses and restrictions in the tenancy agreement.

The SMA, which governs stratified property, may impose further restrictions on the use of common areas, etc. Local authorities may have zoning laws and building usage restrictions.

The tenant is permitted to alter or improve real estate with the landlord’s prior approval. Further conditions may be imposed by the management if the property is stratified. If the improvement involves structural change, approval from the local authority is required.

For Malaysia, all leases are generally covered by:

• the NLC, which governs the creation, registration and termination of leases over land;
• the CA1950, which governs the lease agreement as a contract; and
• the Specific Relief Act 1950, which is relevant for the enforcement of lease rights.

Leases over residential properties may be subject to the Housing Development (Control and Licensing) Act 1966. While primarily for sales, this act indirectly affects residential leasing of strata-titled properties by imposing obligations on developers (eg, maintenance and delivery of common areas).

Management corporations set up under the SMA may affect tenants’ rights and obligations on common properties (eg, use of facilities, payment of service charges).

Tenancy laws are largely unregulated. Residential tenants have limited statutory protection unless such protections are contractually agreed upon. The market is largely landlord-driven.

For offices/industrial properties/retail or shopping malls, there are no industry-specific leasing laws; leasing is subject to the contracts made between the parties.

For hotels/hospitality assets, leases or management agreements are influenced by the Tourism Industry Act 1992 or any licensing regulations made by the Ministry of Tourism. Most hotel operators do not “lease” the property in the traditional sense, but operate under hotel management agreements or franchise arrangements.

Most leases or tenancies include insolvency clauses, allowing the landlord to terminate the lease in situations such as the tenant becoming bankrupt or insolvent, the appointment of a receiver or liquidator, or the tenant entering into a voluntary arrangement or compromise with creditors.

If the landlord re-enters or terminates due to insolvency, they may claim unpaid rent up to the date of termination, damages for early termination, and possession of the premises. However, landlords cannot distrain for rent (ie, seize a tenant’s goods) once winding-up has commenced, unless allowed by the court.

A tenant does not have an automatic legal right to continue occupying commercial premises after the expiry or lawful termination of a lease. However, certain circumstances may allow the tenant to remain temporarily, and landlords must take specific steps to avoid unintentionally creating a new tenancy or allowing a tenant to overstay.

If a tenant remains in possession and the landlord accepts rent (without objection), the NLC may consider this a monthly tenancy known as a “tenancy by holding over”, which can be terminated by either party with sufficient notice (usually one month).

It is advisable for a tenancy agreement to include a clause that the tenant must vacate at the end of the term and that no holding over is allowed without written consent of the landlord, in order to prevent the implication of a new tenancy if the tenant stays.

It is also advisable to send a written notice to the tenant before lease expiry, stating that the lease will not be renewed and that the tenant is required to vacate by a specific date. The landlord should not accept rent after the lease ends.

In Malaysia, whether a tenant can assign its leasehold interest or sublease all or part of the leased premises depends largely on the terms of the lease agreement and, in some cases, on statutory or regulatory conditions depending on the type of land.

Such a right is not automatic and is usually dependent upon express terms of the lease agreement, the landlord’s consent (which is usually required) and any statutory restrictions.

If the lease is registered under the NLC (eg, for leasehold properties over three years), consent from the state authority might be required for assignments. This is especially relevant for long-term leases or leases of government or industrial land.

Generally, the use of the premises by the subtenant or assignee must conform to the original permitted use. A formal Deed of Assignment or Sublease Agreement is typically required.

The right of either the landlord or the lessee to terminate a lease would depend upon the lease terms.

The common causes for a landlord to terminate the lease are:

• non-payment of rent after the issuance of a termination notice or notice to quit;
• breach of lease terms – eg, unauthorised subletting, illegal activities or property damage;
• abandonment of premises;
• the insolvency or bankruptcy of the tenant; or
• force majeure.

A tenant may terminate the lease if:

• there is breach of the agreement by the landlord;
• the property becomes uninhabitable;
• there is a constructive eviction;
• there is an early termination clause in agreement; or
• force majeure (if applicable).

Leases are subject to certain legal registration requirements and execution formalities, especially when they relate to real property.

Under the NLC, the lease must be in the prescribed form (Form 15A) and executed before a witness. It must be stamped under the Stamp Act 1949 before it can be registered. The lease is then endorsed on the issue document of title in the Land Register maintained by the Land Office.

Stamp duty for rental is payable based on the length of the rental period and the rental amount. Varying registration fees are imposed by the relevant Land Office depending on the state, the type of land and the lease term. Typically, the lessee (tenant) pays the stamp duty and registration fees, but terms can be negotiated in the lease agreement.

A tenant can be evicted in the event of default, but it is not automatic. The remedy of self-help for a landlord wishing to evict a tenant that holds over on the property after the termination of a lease or tenancy is no longer applicable by virtue of the Specific Relief Act 1950. The landlord would generally need to resort to eviction proceedings by way of a court action.

There are currently no active eviction moratoriums in Malaysia specific to COVID-19. During the peak of the pandemic (2020–2021), there were temporary measures and financial assistance schemes to support tenants and landlords, but these are no longer effective. The courts have applied a strict approach to such moratoriums.

Tenants and landlords are still encouraged to negotiate in good faith if a tenant is facing hardship. The government previously provided a COVID-19 Mediation Centre to help resolve such disputes amicably, but this is no longer active.

The actions of a third party (particularly governmental authorities) may amount to frustration of the lease. Such termination is conducted primarily through the process of compulsory land acquisition. This process is governed by the LAA, which allows the state authority to acquire land for purposes including public use, economic development beneficial to the public, or mining, residential, agricultural, commercial, industrial or recreational developments.

The compulsory acquisition process involves several stages.​

• Preliminary notice (Form A) – the state authority issues a notice indicating the intent to acquire specific land.​
• Declaration of intended acquisition (Form D) – upon deciding to proceed, a formal declaration is published in the Gazette.​
• Public enquiry (Form E) – the Land Administrator notifies interested parties and conducts an enquiry to assess compensation.​
• Compensation award (Form G) – after the enquiry, a written award detailing the compensation amount is prepared.

The duration of this process can vary, depending on factors such as the complexity of the case and any objections raised.

Affected parties, including lessees, are entitled to compensation aimed at restoring them to a position as if the acquisition had not occurred. The compensation is typically paid by the acquiring authority, usually the state authority or relevant government body overseeing the acquisition. Compensation considerations include:​

• market value;
• severance damage; and
• incidental expenses.​

See 6.19 Right to Terminate a Lease and 6.21 Forced Eviction.

There is no specific statute that capsthe amount ofdamages a landlord can claim after a tenant breaches a lease in Malaysia. Instead, it falls under the tenancy/lease agreement, the Specific Relief Act 1950, the CA1950 and common law principles. Excessive penalty clauses may be deemed unenforceable under the CA1950. Nevertheless, a landlord would have a duty to mitigate and minimise its losses.

A landlord typically holds security deposits by the tenant either in cash or via a bank guarantee.

In Malaysia, construction projects are typically priced using several common contract structures, depending on the nature of the project, client requirements and risk allocation. The most prevalent pricing structures include:

• lump sum/fixed price contract;
• measurement contracts (remeasurement/unit price contracts);
• cost-plus contracts;
• design and build contracts; and
• turnkey contracts.

Assigning responsibility for the design and construction of a project would depend on the type of contract used, which would then provide how those responsibilities are typically allocated.

Traditional Procurement (Design–Bid–Build)

The employer appoints consultants (eg, architect, engineers) to design the project. After design completion, the project is tendered, and a contractor is selected to execute the works.

The responsibilities are as follows:

• the employer is the owner, who funds the project;
• the consultants are fully responsible for the design; and
• the contractor is responsible for construction only.

Design and Build (D&B)

The employer engages a single contractor to handle both design and construction.

The responsibilities are as follows:

• The employer provides performance/output specs; and
• the D&B contractor is responsible for the design and construction.

Engineering, Procurement and Construction (EPC)/Turnkey

This is common for infrastructure and energy projects where the contractor delivers a fully operational facility that is ready to use.

The responsibilities are as follows:

• the employer sets the functional specs; and
• the EPC contractor is responsible for everything, including design, construction, procurement and commissioning.

Risk allocation tools include indemnifications, warranties, limitations of liability, and waivers of certain types of damages. These devices are used in Malaysian construction projects as follows, with relevant legal considerations.

• Indemnities – courts in Malaysia generally uphold indemnity clauses unless they are deemed unfair, unconscionable or against public policy.
• Warranties – express warranties are enforceable but contractual disclaimers may limit implied warranties. Courts typically enforce express warranties unless they are proven to be misleading or fraudulent.
• Limitations of liability – these are generally enforceable, but must not be ambiguous and cannot exclude liability for fraud or gross negligence, and must not be unlawful or against public policy.
• Waivers of damages – these are valid if they are unambiguous and clearly worded. They are not allowed if fraud or illegality are involved, or if they violate public policy.
• Liquidated damages clauses – these are valid if they are unambiguous and clearly worded. They are not allowed if fraud or illegality are involved, or if they violate public policy.
• Performance bonds – these are standard practice.
• Insurance requirements – these are contractually required and are enforceable.

Generally, an employer will likely impose liquidated and ascertained damages (LAD) upon the contractor for delays attributable to said contractor. Contractors and employers may come to an agreement on LAD quantum.

In Malaysia, it is essential and standard practice that the contractor provides a performance bond to protect the interests of the employer in the event the contractor fails to comply with its obligations under the contract. Performance security may comprise bank guarantees, corporate or parent company guarantees or retention securities.

The concept of a “lien” as used in other jurisdictions – where contractors or designers can automatically register a lien on a property for unpaid work – does not exist in the same form in Malaysia. No such right of lien exists in a contractor-principal relationship unless expressly provided for in the contract.

Obtaining a Certificate of Completion and Compliance (CCC) is mandatory before a property or building project can be inhabited or used for its intended purpose in Malaysia. It is illegal to occupy or use a building without a valid CCC.

The sale of real estate or property is exempt from SST. This includes the sale of residential, commercial and industrial properties.

Acquiring large real estate properties in Malaysia can incur significant tax liabilities, including stamp duty and RPGT. While there are limited avenues to mitigate these taxes, certain strategies and relief provisions may be considered, such as:​

• stamp duty relief and RPGT exemption for corporate restructuring; and
• transfer of property between associated companies.

It is advisable to consult tax professionals for tailored strategies.

Municipal taxes related to business premises are typically referred to as “assessment” in Malaysia. Assessment is essentially taxes levied by local authorities on the occupation of business premises for the provision of public services like waste management, road maintenance and street lighting.

The assessment rate is imposed on all property owners, including those with business premises. The rate is calculated based on the annual rental value or the capital value of the property. Assessment rates vary between local councils, with each council setting its own assessment rate.

Property owners are generally responsible for paying the assessment rates but, in some cases, it may be stipulated in lease agreements that the tenants (business operators) are responsible for the payment.

Certain exemptions or reductions are available under specific circumstances. These can vary depending on the local council, but general examples include:

• charitable organisations;
• vacant properties; and
• government buildings.

See 6.7 Payment of VAT.

Depreciation deductions are not available for land, but capitalallowances might be available for improvements to commercial properties.

For RPGT exemptions, see 2.10 Taxes Applicable to a Transaction.

For REITs, see 5.3 REITs.