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The Blind Spots (Or Hidden Costs) When Buying A Home In Malaysia

The Blind Spots (Or Hidden Costs) When Buying A Home In Malaysia

Is one of your new year resolutions for 2023 purchasing a house of your own? Pretty confident that you’ve done the math? We hate to be your party-pooper, but as much as we are proud of you making that leap in life, we believe that you need to be made aware of homeownership costs that may have fallen under your radar. So, we have listed down different hidden costs that we wish we knew when purchasing our first property:

1. Upfront costs & legal fees

By now, you should be made known that our banks can provide financial assistance of up to 90% of the property’s price for your first two residential properties. For those purchasing your first one, the Rumah IDAMAN should be in your list! With the 90% covered for, we will still need to set aside a 10% down payment to cover the remaining property’s price. For instance, the Rumah IDAMAN has a starting price of RM250,000, and so, the down payment in this case will be RM25,000.

The following are the items you need to find out the cost of and are dependent on your property price:

Sale & Purchase Agreement (SPA)

This consists of legal fees, stamp duty and legal disbursement fees.

Loan agreement

This comprises of legal fees, stamp duty and legal disbursement fees.

Transfer of ownership better known as memorandum of transfer (MOT)

Tax on legal agreements

These are expenditures that need to be paid there and then, so it is an absolute must to have the said sum at hand upon making the decision to purchase a home.

 

2. Home Insurance

To be fair, home insurance is a topic that deserves its very own article no thanks to the sheer amount of information that you need to get your hands on, so we will only be covering on this topic very briefly here.

Similar to having insurance for your health is equally important as getting a health insurance to protect yourself against unforeseeable events. Buying a home is also a form of investment and just like any other investments, you will want to have proper protection in place to cover your property.

Here are some common home insurance policies that you should know about;

Basic fire insurance: Loss or damage of the house and/or its contents due to fire, lightning, and/or explosion.

Houseowner insurance: Similar to Basic Fire Policy, with extended coverage such as floods, burst pipes, natural disasters, and theft for residential properties.

Householder insurance: Similar to Houseowner Policy, with extended coverage on fatal injuries caused by the insured items.

3. Utility charges

To ensure that your future home is ready-to-stay you will need certain basic utilities and services, such as:

  • Electricity – Tenaga Nasional Berhad (TNB)
  • Water
  • Indah Water – Sewerage
  • Internet connection

 

4. Maintenance fee and sinking funds

If the home that you are eyeing for holds a strata title, such as high-rise units where you share common public facilities like the swimming pool and the gym, you have to set aside some cash for monthly maintenance fees, which will be used for regular upkeeping of the shared facilities and services, including security and garbage disposal.

You will also need to set aside money for sinking funds. The fee is collected by your residential Joint Management Body (JMB) and will be used for expenses such as building repair works. We’ve covered this topic more extensively on our previous topic here. 

 

5. Makeover, Renovation, & Aftercare

Regardless the condition of the property you intend to purchase, you need to consider both the immediate costs for personalizing it to your liking and the maintenance of it.

Of course, with a larger property, comes a larger price tag for furnishings. So, perhaps, bigger may or may not be necessarily better, it all boils down to your needs.

Do allocate certain amount for renovation, but for LBS Bina homebuyers and homeowners, you are in luck, as LBS has officially launched the LBS Bina Home Makeover with Goodnitecampaign. In this campaign lucky LBS homeowners will win themselves a home makeover for a part of your home that you desire, from the Living to Bedroom area worth a total of RM25,000 each!

Should you be buying a subsale property that also includes furniture as part of the package, make sure you are okay with everything that comes with it, because should that particular piece of furniture happen to become an eyesore down the road, it will cost you some cash to hire someone to move it away later on.

All these lingos might be overwhelming, but what’s most important is not to be afraid from these expenditures but to be aware that they exist. Treat all of the above more as a checklist and tick it off every time you’ve gotten a proper understanding of each expenditure.

With every item checked off your list, your finances will definitely be more well-structured. A very important element of a dream home is to have a homeownership experience that is free from expenses that will take you off guard and we hope for those of you who’ve read till this point, you will achieve just that and we wish you the very best on your homeownership journey!

New Year, New Goals

NEW YEAR, NEW GOALS!

LBS IS SET TO ACHIEVE GREATER POSSIBILITIES AND BEYOND IN 2023

According to Johnson, (2022), there is no cut-off date for when you should officially stop wishing people a Happy New Year. However, as January rolls around and you bump into people you didn’t see over the new year, you may find yourself wishing them a Happy New Year.  Although this frequently happens, you’ll probably find that you stop naturally saying it as the first month of the new year comes to an end.

LBS Bina Group Berhad kick-started the new year 2023 with a successful annual media briefing spearheaded by Corporate Communication, Media & Digital Department. It was announced that in the year 2023, LBS is planning to launch 12 new projects which will cover the Klang Valley, Johor, Pahang, and Perak states, with a total GDV of RM2.09 billion and 4,021 cumulative units.

The Group is looking forward to achieving greater possibilities and beyond amidst global challenges as they welcomed 2023 with their annual town hall held at the LBS headquarters to share the company’s objectives and direction for the year 2023.

The theme for this year’s Town Hall meeting is (Tu) Possibilities & Beyond!, which depicts the eagerness to embrace growth and look out for new strategies in expanding LBS. The Group believes there are boundless possibilities and opportunities that will be achievable if one works harder and smarter. The Chinese word “兔” sounds alike to “To” and the Rabbit zodiac represents smart, clever an agile, aligned with the year of rabbit.

In line with the theme, LBS plans to continue embracing digitalisation as they have continued seeing great success and growth in this aspect, particularly prior to the pandemic outbreak and is one of the elements which aid LBS to pull through during the most difficult national outbreak. Today, the Group is set out to spearhead digitalisation in the property developer market.

The management of LBS, led by our beloved Executive Chairman, Tan Sri Lim Hock San, is confident that with the staff’s continuous support and by consistently offering exciting projects to customers, the Group will be able to achieve the sales target of RM2 billion they have set for this year.

Meanwhile, our LBS Iron Lady, Dato’ Cynthia Lim, highlighted that LBS will continue to improve on company culture in 2023. She understands that an organisation that is multi-generations looks great on paper but is bound to have inevitable communication barriers. Company culture is a vital aspect for LBS and they have made it a point to understand all generations of employees. The Group look forward to keep on progressing and growing beyond their imagination as LBS continues to embrace the differences between generations and learn to cohesively work together.

“Write in your heart that every day is the best day in the year.”  (Emerson)

Happy New Year 2023!

– End –

Huffing A Breath Of Newness Into Brinchang, Cameron Highlands

Planning a weekend getaway with your loved ones? Or just to relax while sipping on your favourite cup of latte, simply enjoying the cold breeze on the top of the hillside, with a twist of modernity? Start your engine and let’s go!

Located at approximately 5,000 feet above sea level, Cameron Highlands, Pahang is a highly-visited holiday spot where tourists from all around the world come to experience a serene and peaceful get-away from the hustle and bustle of the city. Over the years, famous tourist attractions include tea plantations, fresh fruits and vegetables farmlands, gardens and nurseries, and of course hotels and resorts. Cameron Highlands is easily accessible by car via two routes – Simpang Pulai and the original road through Tapah. The Tapah road is great for travellers who want to enjoy the great view of scenery where you can take a quick stop at the Lata Iskandar Waterfall for a picture or two. 

To give Cameron Highlands a breath of newness, the latest attraction, Cameron Centrum is brought here to offer a whole new commercial experience to the locals as well as tourists. The new English Tudor-style development suited to the cool climate in Cameron Highlands of 22 to 25 degree Celsius during the day and 15 to 22 degree Celsius at night is also very promising to give its customers a feeling of being abroad. Cameron Centrum is located close to many famous tourist sites and attractions in Cameron Highlands, making it very accessible and convenient for its tourists. It is an establishment that currently consists of shoplots, with hotels and residential buildings in the near future. This is definitely a haven for shopping and sightseeing with breathtaking views of the natural surroundings. Another most recent tourist attraction in Cameron Highlands is a new floral park that has recently opened in November. Located in Kea Farm, Cameron Flora Park, is a visual treat for the eyes, and is definitely a picturesque spot that is perfect for those who love to take pictures for their Instagram. Walking into the Cameron Flora Park is like walking into a paradise of all kinds of colourful flowers featured in every corner of the garden. This is also a great spot for picnics – an all-girls’ picnic trip, family and friends’ picnic – you’ll find yourselves surrounded by the beauty of the floral garden, not to mention the floral scent that you’ll be sniffing throughout! Be sure to stop by Cameron Flora Park the next time you make a trip to Cameron Highlands.

In the past, tourists came to Cameron Highlands for a more laid-back environment with mostly natural surroundings, but recently, since the inception of Cameron Centrum, tourists can now enjoy nature with a modern twist. Major brand names can now be found at the property, such as Family Mart, MarryBrown, McDonald’s, Starbucks, Billion Shopping Centre, The Coffee Bean & Tea Leaf and Baskin-Robbins, just to name a few. A giant clock tower is located in the center of the shoplots, kind of giving the Big Ben feels for its visitors. If Big Ben sounds unfamiliar to you guys, Google up okay? For those who love taking photos for Instagram, Cameron Centrum is definitely voted for being Instagrammable! The Centrum is developed in a way that much of its Highlands’ character remains unchanged, where most of the English charms from its colonial past are still seen in the buildings. This is made so to preserve the historical value of the town, where it is almost like bringing their visitors to the nostalgic olden colonial days in a more modern setting. The vibrant lights, cool weather and English architecture of the building will give local tourists the little European atmosphere with a touch of magic right here at Cameron Centrum. 

Visitors and locals can now enjoy an upgrade in nightlife actions at Cameron Centrum. On its own, Cameron Highlands is not a hotspot for tourists if they are looking for a wild nightlife, though there are spots that cater to night drinking like pubs and bars. More business establishments are coming to the Centrum, and this is a new opportunity opening up for locals, visitors, as well as business operators. Really, what can beat a night of sipping a cup of hot chocolate with your loved ones with the cold breeze slightly blowing in your face, with your hands against the cup to find warmth, while you savour each sip of your favourite drink? After all, life is to be celebrated!

Cameron Centrum is going to be very hard to miss in the town of Brinchang. With an open boulevard concept, Cameron Centrum is set to be a benchmark for style, elegance and urban modernity in the town. The development is created to cater to these modern-day requirements, master-planned to attract both local and foreign tourists for a contemporary, modern and trendy destination for work, play, food and drinks, retail and more. It will be an all-in-one establishment – trendy stays at hotels and residential areas, shops, while open spaces and nature complement the other, carefully and mindfully built to attract and retain tourists. For a weekend getaway with friends and family, Cameron Centrum is the perfect place and it does not matter if you are in Cameron Highlands for a breath of nature or for an Insta-worthy holiday treat.

As the year 2022 is coming to an end with the Christmas season near, a short holiday trip to Cameron Highlands sounds like the perfect plan for a family and friends gathering. The year end season also means that sales are in full swing, so now is the time for all of you to splurge and pamper yourselves with a little of something good this year (Everyone deserves a treat for themselves every now and then!) Taking a holiday in Cameron Highlands is actually quite affordable compared to other holiday spots in the country. Cheap and good food is easily accessible in Brinchang Town, and in an end-of-the-year rainy season, hot pot steamboat dinner is highly sought after by tourists. If you do go to Cameron Highlands, please remember to treat yourselves to a hot pot steamboat dinner to mark your holiday. If you’re feeling a bit expensive and are looking for something grander and more exquisite, go to Cameron Centrum for a fancy treat. 

Lego On Steroids?

Just like the headline, that was my first impression on Industrialised Building System (IBS) or more often known as precast. As much it sounds like the future of housing, IBS has actually been in the Malaysian market for the past four decades! So why exactly is it now that IBS is beginning to be the in thing and becoming prevalent? Aside from the ever-growing need for a home and price of housing materials, one key factor would be our dire need for manpower. From laying bricks to spreading the cement, these are all manual labour that requires precision both in execution and quality control. Simple economics tells us that with a decrease in supply comes an increase in demand, and with that up goes the price of manpower. The pandemic is basically a wake-up call for the property industry, with the lockdown, the shortage of manpower was the major issues. 

Affordable housing whilst maintaining an efficient and sustainable construction progress is among the reasons that made LBS Bina Group Berhad, the household name that it is today. This is also possible thanks to its construction-arm, MGB Berhad, that specializes in our very topic today, IBS. Among the projects that utilizes our precast systems are:

  • Rumah Idaman MBI
  • SkyLake Residence
  • Prestige Residence
  • Residence Bintang Bukit Jalil
  • KITA Impian

We’ve talked about some benefits of IBS, namely reduced manpower and reduced cost. The many other benefits of it are increased quality, efficiency, sustainability and a more streamlined process. This means that with IBS, houses can be built faster without compromising in built quality and affordability, which all translates to a house that is reliable and of a longer lifespan.

Well, if it is so great, why isn’t every developer using this high-end system? Instead of having materials being sent to the construction site, the precast are pre-constructed parts that are designed, measured, tested and produced in sections within a designated measurement and specification, in a factory. This can include parts such as walls, ceilings, staircases and with more advanced technology, even a whole unit can be pre-casted!

So, the benefits are clear, every piece of wall or staircase churned out can be QC-ed right away by batches, defects are reduced and thus, there will be less labour needed to fix the defects, should there be any. Here comes the big ‘but’, setting up a precast factory is no small feat and is a costly facility to set up in the beginning. IBS is only truly feasible for buildings with several identical components which when combined forms a large structure, for example a high-rise building like a condo or serviced apartment. Keen to put in heavy renovating or extension works in your new home? Unfortunately, IBS homes may be limited with renovation potentials no thanks to the way the homes are built. Above all, albeit it being a rather stable piece of innovation in the property industry, it is still very important to opt for a reputable developer that is not only renowned for building homes but also homes with IBS to ensure that peace of mind years after you collect your keys.

Here’s a little extra bonus on benefits of IBS beyond its nature of construction. The Construction Industry Development Board (CIDB) has been encouraging implementation of IBS by giving exemption that incorporates more than 50% of IBS components, in short, with IBS there will be more savings channeled down to us future homebuyers. The future of homebuilding is an interesting one and while IBS sounds like the new kid in town, it is definitely one that has been tried and tested. Love what you have been reading? There is no better time than now to shop with us virtually for your future home!

Property Maintenance Fee in Malaysia

Owners of strata property in Malaysia are required to pay a monthly property maintenance fee. These funds are utilised for the upkeep of common areas in the property. We will also find out why owners have to pay maintenance fees and how it is calculated.

When the term ‘strata’ was first introduced in Malaysia via the Strata Title Act 1985, strata property consisted of mostly high-rise residential and commercial units – including flats, apartments, condominiums, serviced apartments, Small Office Home Office (SOHO), Small Office Flexible Office (SOFO) and Small office Versatile Office (SOVO). The Act was later modified to include some landed properties where the development has shared facilities and amenities, such as gated and guarded communities.

In an effort to provide clearer and more stringent provisions on the management of stratified properties in Malaysia, the government implemented the Strata Management Act (SMA) 2013 in 2015. 

What is maintenance fee in Malaysia?

Facilities and common areas within a strata property such as a condominium block are jointly owned by all unit owners. Therefore, owners have to collectively pay a maintenance fee, also known as a service charge, to manage and maintain the property and its facilities.

In Malaysia, homeowners are required by law under SMA 2013 to pay these monthly fees. These fees are collected and managed by the Joint Management Body or JMB before the issuance of strata titles and by the Management Corporation or MC after strata titles have been issued.

What do maintenance fees cover?

The maintenance fee is mainly used to cover recurring costs of managing and maintaining the property including:

  • The hiring of security guards
  • Property management and administration staff
  • Electricity and water for common areas such as lifts, car parks, swimming pools and gyms
  • Cleaning services
  • Landscaping services
  • Servicing of lifts and escalators
  • Minor repair works on common property

Imagine a high-rise condominium with many units – if the owners do not pay their condo maintenance fees on time, how would these bills get paid and who will manage and guard their property?

Besides maintenance fees, owners also need to pay a monthly sinking fund. Calculated at 10% of the maintenance fees, these monies will be put into a reserve fund for emergencies such as damage caused by flood and major works such as painting the building exterior.

How are condo maintenance fees calculated?

The main factor that determines a property’s maintenance fees is the total expenditure for running and maintaining the property. Prior to the SMA 2013, contributions to the sinking fund and monthly maintenance service charges payable by strata owners were calculated based on the built-up size or per square feet (PSF). SMA now calls for share unit to be used instead as a basis for calculating these two charges – rather than simply the floor size of the unit owned.

The formula for calculating Maintenance fee to be paid: Operating expenditure ÷ Total share units in condo development 

So what is a share unit? Under SMA 2013, a property developer is required to file a Schedule of Parcels with the Commissioner of Building (COB) before selling any parcel in a development.

Schedule of Parcels is essentially a ‘floor plan’ that shows the overview and floor measurements of the parcels in a development. In the case of a phased development, the schedule must showcase the proposed allocation of the provisional share units among the new parcels in the provisional block. It will include all the parcels with dimensions, areas, share units, all accessory parcels and common properties.

Share units are the numbers assigned to each parcel by the developer’s licensed land surveyor that will determine maintenance charges, sinking fund and voting rights of each owner. Share units are calculated based on area, usage, size and location of the accessory parcel using the formula prescribed under the relevant strata title rules of each state.

In the calculation of share units, a different weightage is assigned based on the facilities that are enjoyed by the parcel. For example, a parcel with walk-up stairs will have a different weightage than a parcel with air-conditioned lifts.

What is the range of typical property maintenance fees in Malaysia?

The expenditure for managing and maintaining a property varies depending on the following factors:

  • Level of services: Owners, JMB and MC of a building need to decide on an “acceptable” level of service. For example, the number of guards on each shift or the number of times the corridors is swept.
  • Type of facilities: The more sophisticated the facilities, the higher the maintenance fees
  • Size and type of common area: A swimming pool with elaborate landscaping will cost more to maintain than a small park with a walking path
  • The density of the development: The cost is divided among units so owners in a high-density property will end up paying less. For example, Condo A has 100 units and Condo B has 50 units with similar facilities and built on similar land sizes. Both condos will have similar expenditures. However, owners of Condo A will end up paying less because the cost is shared between 100 owners while Condo B shares the cost between only 50 owners.

According to Henry Butcher Malaysia Managing Director Low Hon Keong, the rate of maintenance fees mostly depends on the type of facilities and the density of the development.

The average rate of maintenance fees in the Klang Valley is between 25 to 50 cents per square foot. Properties in prime areas like KLCC or Bukit Bintang incur higher fees because of its location.

“Most of the properties in these areas are high-end projects with sophisticated features like high-speed or personal lifts, advanced security and nice landscaping. These advanced facilities cost more to maintain., hence why the maintenance fees are higher. They could be paying an average of 50 cents per square foot,” said Low.

He said that maintenance fees were not necessarily lower in smaller cities or towns.

A property in Melaka might in fact have a higher maintenance fee than a similar unit in Kuala Lumpur because there are fewer units in total, so the cost is shared between fewer owners.

Security accounts for a big portion of incurred costs in managing high-rise residential buildings while in landed strata properties, the cost of landscaping is quite significant. Unlike regular landed properties, the local council is only responsible for waste collection in landed strata properties – cleaning, landscaping and maintenance of common areas are taken care of by the property management of strata schemes.

The average maintenance fees of landed strata property in Malaysia are:

  • RM1,000 to RM1,500 for bungalows
  • RM600 to RM1,000 for semi-detached houses
  • Below RM500 for terrace houses

Can you negotiate your maintenance fees?

Technically, you can’t negotiate the maintenance fees. The management fees are decided by the JMB or MC during their Annual General Meetings (AGM). The only way for the rates to change is to raise this issue during an AGM and get the majority of owners to agree and vote for it. Therefore, it is important for homeowners to attend their AGMs so that they won’t be surprised by any changes in rates.

However, if you find that the services provided are not reflective of the maintenance fees charged, you can question the management. Unit owners have the right to view the statement of accounts and can make a request to the JMB to do so for a fee not exceeding RM50. To find out if the people elected to represent owners in your strata property are responsible, read Is your strata property being managed by the right JMB or MC?

Who pays the maintenance fees for rental properties?

By law, it is the landlord (homeowner) who pays the maintenance fees. Any special arrangement for payment of maintenance fees, where the tenant pays it on behalf of the landlord as part of the rental fees, needs to be reflected in the tenancy agreement. If the landlord fails to pay the maintenance fees, the tenant can take legal action or decide to terminate the rental agreement.

Strata residents must be aware of their responsibilities and obligations as well as strive to take charge in order to protect the very investment that they live in. Find out what happens when you don’t pay your outstanding condominium fees.

Bigger Is Better?

‘Bigger is better.’ Well, that’s not always the case, no pun intended. A small area need not mean that it can’t stand out among the rest, it’s more of how you make the most out of the landscape that you have your hands on, be it the living room, yard or even the entrance to your home sweet home.  We always imagine the home of our dreams to be mansion-ish or built like a huge castle but how can smaller homes be the more ideal option for you and me?

‘With great power comes great responsibility.’ Same goes with a large home, it will be more expensive to buy and/or rent and most definitely significantly less cost-effective to maintain. Just imagine all the monthly expenses that you get to cut down on when you have lesser square feet in your house. Water, electricity and even maintenance and utilities fee, you will use much less of all these when you have a compact home! Same goes with mortgages, a smaller house will be more affordable and you will definitely see the savings in the long run.

Massive homes mean an abundance of space but sometimes one will hardly ever require all that space, and the most used area is really just a tiny portion as compared to the whole area available. So, when you buy a house with spaces that you are certain that you will definitely use and no more extra space to store up unnecessary materials, it will set you on a pathway to start decluttering. Minimalism brings about multiple benefits, there’s less to maintain, things are easier to find and everything you need is at your fingertip. All these are made better when you have a smaller home.

LBS is all about sustainability today, from the houses that we build to the offices that we work in. Reducing carbon footprints has been a mission that we have been on for a while now, and we spend most of our time in our very own homes. Living in a huge house equates to consuming more resources. A smaller home needs less water and electricity to keep it clean and during a hot day when we turn on our AC, a smaller home will be easier to cool down! All of these will not only help you save some ringgits but also save our earth!

Big spaces mean more space to renovate. Love revamping the place you live once in a while? With a smaller home the desire to renovate or execute a huge project can be made possible without burning a hole in your pocket. The downtime for your house is also shorter as projects for small homes are generally faster to complete as compared to larger homes. Cleaning after is also a breeze too.

Don’t get us wrong, we have just the same love for big homes but small homes will always have that special place in our hearts thanks to its convenience and affordability! Many people will even make the move from large houses to a much smaller one after their retirement and the reason is clear! From double storey to single storey, from Semi-Ds to condos, smaller homes give you that flexibility in life especially when you are an individual that is always out and about. Find the right home for you today with us and you may even drive home an Axia, how so? 

Learn more here: https://virtualfair.lbs.com.my/ 

Housing loan checklist: Non-standard documents you need to know

Applying for a housing loan is a lengthier process for a self-employed or freelancer in Malaysia. However, it doesn’t necessarily mean it’s difficult, especially when you have all the non-standard documents ready!

When it comes to personal finance, most freelancers in Malaysia might begrudge their civil servant friends and families. We all know how easy it is for them to get a loan. For those of us without regular employment, filling our taxes, getting insurance, and applying for a home loan is a much lengthier process. However, being a lengthier process doesn’t necessarily mean it’s difficult. If you are well-prepared and have all the non-standard documents ready, you are well on your way to owning your first home.

Can I Get A Home Loan Without Property Documents

It is impossible to get a housing loan without proof of income as your income stability and repayment capability isn’t guaranteed. If you are a civil servant, regular-employed, or salaried person, preparing the documents required for a home loan application is fairly easy. However, someone who is self-employed may not have the same basic documents.

Here are a few examples of jobs that fall under the self-employed category:

  • Hawkers, daily wage workers, online traders
  • Gig economy workers (Grab, Foodpanda, Lalamove)
  • Personal tutors
  • Event organisers
  • Freelancers (photographers, designers, writers, fitness trainers, etc.)
  • Authors
  • Musicians
  • Small entrepreneurs

When you fall under the category above, you can still get a home loan. However, the self-employed documents for a home loan are slightly different.

What documents are required for home loan approval

Below are the standard documents a person needs to submit to ensure a smooth housing loan application process:

  • Payslips
    One of the most important documents in proving a person’s home loan.
  • Employees’ Provident Fund (EPF) statements
    A great way to prove the level and stability of your income.
  • Bank statements
    Proof that you are indeed being paid your salary.
  • Copy of MyKad
    Required for almost any housing loan application as a Malaysian citizen.

As you might see, a self-employed person might have problems providing the first two documents on the list above. This is why a housing loan for the self-employed in Malaysia requires some non-standard documents for approval.

Housing Loan Documents Checklist Malaysia: 7 Non-Standard Documents Required For Home Loan Application

Unlike salaried people, self-employed do not have a regular payslip. Banks will review your financial stability before approving your housing loan application. As a self-employed person, banks may perceive your income as ‘unpredictable’ when it to comes to committing to the monthly repayments. However, here are 7 non-standard documents you can provide to prove your income and financial health:

1. Business registration

This is an important document to have, even if your business is small or you are a one-person freelancer. Having a registered business boosts your client’s confidence in dealing with you, and it appears more professional too. Furthermore, the date of registration will be considered very important to the bank. It will justify the sustainability of the business.

2. Business profile

This is important so that banks can identify the nature of your business. Even a simple website or official Facebook, Instagram, or LinkedIn page will be sufficient.

3. Financial records of past years’ income, tax return statement, balance sheet

You have a higher chance of getting your housing loan application approved if you can provide an organised financial record of previous years’ income, tax return, profit and loss statement, and balance sheet.

Here’s a simple checklist of what you can do:

  • Make sure that your business is registered with the Companies Commission Of Malaysia/ Suruhanjaya Syarikat Malaysia (SSM)
  • Keep all statements, documents, and licenses related to your business
  • Label all folders according to the latest dates or assessment year. This will make it easier for you to provide your proof of income when asked by the bank.
4. Income tax statements

A lot of the self-employed or freelancers in Malaysia may not declare their earnings to the Inland Revenue Board of Malaysia (IRBM) or LHDN. However, having the last three years of your income tax statements on record goes a long way in helping you get your home loan approved.

If you are required to pay income tax, it normally means your annual earning exceeds RM34,000 (after EPF deduction) or you earn income from a business (through gains or business profits). This is the sort of income stability that banks prefer to see.

5. Bank statements

For regular-employed applicants, bank statements serve as proof that they are indeed being paid their salary. For those who are self-employed or are freelancers in Malaysia, bank statements show that actual business income and profit are generated.

6. Savings

From the banks’ perspective, savings are the best way to justify and show your steady stream of income, which leads to your accumulated savings. If you aren’t able to show your savings record, it’ll be hard to justify the stability of your business.

7. Credit score report

Banks or financial institutions in Malaysia have their method of evaluating your credit score. As credit score indicates a consumer’s credit risk, banks will refer to two popular credit reports, CCRIS and CTOS to assist their evaluation. A good credit score will make you a more attractive candidate for a loan. With a good credit score, you can even get better home loan interest rates and even quicker loan approval.

Other Tricks That Can Help You Get A Home Loan 

The following can also help you get housing loan approval:

1. Get a guarantor

A credible guarantor must be someone who has a strong financial background. It can be anyone; your family members, relatives, and even close friends. This person will be evaluated based on his or her income stability, employment background, as well as a credit score to minimise your risks and liabilities as a self-employed person.

2. Apply for a home loan with banks that lend to self-employed borrowers

Banks are very ‘picky’ when approving an application. Before applying for a housing loan, take your time to research banks that approve loans for self-employed individuals and find out the interest rate on house loans for each bank. Here are some of the banks that offer home financing for self-employed applicants:

  • CIMB Property Financing
  • Bank Rakyat Home Financing-I
  • HSBC Ideal Home Plan
3. Housing Credit Guarantee Scheme (HCGC)

During the tabling of Budget 2022, the Government has allocated RM2 billion under the Housing Credit Guarantee Scheme (HCGC). This was to help those without proof of fixed income. The Government is cognisant of the challenges facing gig workers, small business owners, and farmers in getting a housing loan.

In reality, many of these individuals have the capacity of repaying their loans but without documents proving of fixed income, the process of applying for a home loan is difficult. This initiative will not only benefit potential house buyers but also accelerate the growth of the local property market. So far, BSN MyHome (Program Perumahan Rakyat) 2021 is one of the housing schemes.

Housing loan: How to apply as a first-time homebuyer in Malaysia

Looking to apply for a home loan in Malaysia? Here we’ve prepared a comprehensive and step-by-step guide on applying for housing loan in Malaysia. From understanding property and finance jargon, house loan calculator to learning about interest rate and credit score, we’ve compiled it all for you. 

Dreaming of a place you can call your own? Surely you’ve compiled Pinterest boards on how your future home will look like, the colour of its walls, and the choices of interior design? But before all that, how do you even secure a mortgage for your dream home?

Let’s face it, dreams don’t come cheap. Unless you’re a millionaire or have a trust fund, chances are you’re going to need a home loan. Applying for your first one may seem daunting, but don’t worry. We’re here to guide you with a comprehensive guide on how to apply for housing loan in Malaysia and turn your dreams into reality.

This guide will be categorised into four parts: Before ApplyingActually Applying for itAfter Applying, and some extras tips to help you secure your loan.

A. What to do before applying for a home loan?

First things first, if you’ve already found your dream home, you’ll want to know the maximum amount you can borrow based on your income and existing debts. If you haven’t chosen a place yet, it’s a good idea to first figure out a mortgage range with monthly repayments you can afford.

Our  house loan calculator will be able to do these for you.

How much you can borrow is basically known as the Loan-to-Value (LTV) ratio or the margin of finance. In Malaysia, it’s quite common to get around a 90% LTV for residential mortgage or home loans. There’s even a “Malaysia My First Home Scheme” (Malaysia Rumah Pertamaku) that gives qualifying first-time homebuyers a 100% LTV, meaning they can get a full loan.

Keep in mind that your LTV is affected by several criteria, like whether you are buying for investment, if you have more than one existing house loan, and so on. Aside from financing the property, it’s good to keep in mind that banks also sometimes allow up to 5% of additional margin of finance on the loan to finance things like valuation costs by the borrower, i.e. you.

What is a mortgage?

The mortgage you take from a bank is the total amount you’ve received to finance your home (also known as the principal amount) plus the total interest payable. Each month, part of your monthly payment will go towards paying off the principal, while the other goes towards interest on the loan. Interest is what the bank charges for lending you money.

What are the different types of housing loans in Malaysia?

That’s right, there are multiple types of property loans. Each home financing package or plan is different and has different benefits. You’ll want to pick one that best fits your unique financial needs.

1. Basic Term Loan:

A simple and basic that isn’t as flexible as other loans. This basically means you won’t be able to reduce the loan period, thus the loan interest, by making advance payments.

2. Semi-Flexi Loan:

As its name suggests, this loan is more flexible if you want to save money in the long run. If, for example, you came into some extra cash and wanted to pay more in a certain month (thus reducing your loan period and your loan interest).

3. Full-Flexi Loan:

Similar in nature to Semi-Flexi Loans, but with the added benefit of being able to withdraw any advance payments at any time with no extra charges. This flexibility is known as an overdraft facility which is definitely worth looking into as it has its pros and cons.

4. Islamic Home Loan:

Looking for Shariah-compliant financing? There are a few types, but unlike the above three conventional loans, an Islamic home loan works on the basis of interest-free transactions, following the Murabahah concept under Shariah Principles.

5. Fixed Rate Loan:

As its name suggests, this one has a fixed interest rate throughout the whole loan tenure. If you’re worried about floating rates, then this is a good option for you.

Get more details on all these types of home loans here.

What is the housing loan interest rate in Malaysia?

Most loans have variable interest rates and the interest rate is tied to the Base Rate (BR) of banks. The lower the interest rate, the better it is for you. Some packages offer fixed interest rates that don’t depend on the BR (see Fixed Rate Loan above).

Base Rates or BR is basically an internally-derived interest rate that the bank refers to before deciding on the interest rate to apply to your home loan amount. It’s conceived based on how much it will cost the bank to lend you the money.

With Islamic Loans, instead of interest rates (Riba), there are profit rates. The bank buys something on the borrower’s behalf and sells it back to the borrower at a profit. The idea behind this is financial justice, with the aim of creating a balance for the net a profit or loss between the lender and the beneficiary.

Read more: What to know about Base Rate (BR), Base Lending Rate (BLR) & Spread Rate when selecting a home loan?

  • A copy of the purchaser’s identity card
  • A copy of the title
  • A copy of the SPA
  • The latest assessment receipt
  • The quit rent receipt
  • The assessment receipt
  • Other relevant documents
What is Overnight Polic Rate (OPR) and how does it affect your property loan?

What’s an OPR? The Overnight Policy Rate is the rate a borrower bank has to pay to a lending bank for the funds borrowed. This can affect the BR. 

Bank Negara Malaysia (BNM) cut the OPR in January 2020 from 3% to 2.75%, and more recently to 1.75% due to COVID-19 outbreak. This is good news for borrowers because the lower cost of borrowing for banks lead to cheaper home loans for consumers. In short, borrowers will benefit from either lower monthly instalment payments or shorter loan tenure. 

So what are the new lending rates in 2020? Major banks like Maybank, Public Bank Bhd, RHB Bank Bhd, CIMB Bank Bhd and OCBC Bank has reduced their BLR and BR by 50 basis point in May 2020.

If you want to find out more about how OPR affect your home loan, click on this to read more.

*Update: As of 6 July 2022, Bank Negara Malaysia (BNM) had increased the Overnight Policy Rate (OPR) by 25 basis points to 2.25 per cent from 2.00 per cent (11 May 2022).

What is a credit score and how to check it?

You’ve probably heard of this term, but what exactly is it? To put it simply, a credit score is what banks use to appraise the credibility of your loan application, including home loans and credit cards. The higher your score, the better your chance of getting a loan. But how do you calculate credit score? Unfortunately, there’s no fixed formula to this as different credit agencies have their own ways to assess every individual’s credit score. However, there are a few factors that these credit companies look into:

  • payment history
  • credit mix and loan amounts owed
  • length of credit history
  • new credit applications in the past 12 months
  • legal track record

In order for your credit to be scored, you need to build a credit history — a record of your debt payment. When applying for loans, banks want to be able to see that you are responsible when it comes to paying back your debt and one easy way of building a credit history is by having a credit card. Your credit history will then be compiled into a credit report and these reports will define your financial health, which helps banks to decide if you’re good at managing your finances and if they should approve or reject your loan application. 

In Malaysia, most financial institutions will refer to both the Bank Negara’s Central Credit Reference Information System (CCRIS) and the CTOS Data Systems Sdn Bhd (CTOS). Central Credit Reference Information System (CCRIS) under Bank Negara records your personal credit rating based on your credit history, that is, your outstanding loan/financing amounts in the past 12 months. This means making sure all your loan repayments (personal loans, car loans, credit card payments, etc.) are always on time, up to date, and within the right amounts. And then there’s CTOS, a privately-owned agency that archives a person’s or company’s entire credit history (unlike CCRIS which reports your credit score over a 12-month duration). Check in on your CTOS credit score every once in a while as it has the added benefit of alerting you in case of fraud or any errors in payment.

WANT TO LEARN MORE ABOUT CREDIT SCORE? 
🧐 Low credit score? Here’s how you can fix it 
✅ Learn what a CTOS is and how it affects your home loan

How much can I borrow for a home loan in Malaysia?

If you’re wondering how you’re supposed to know this, we’ve got you covered. Simply calculate your Debt Service Ratio (DSR). DSR basically shows you your repayment capability based on your income and is a key factor that banks use to determine your borrowing power. Your DSR is calculated like this:

Total monthly commitment ÷ Net monthly income × 100 = DSR

For example, if your total monthly commitments (loan/financing and credit card debts) is RM2,300 and your nett income after deducting from EPF, SOCSO, and taxes is RM3,500, your DSR is RM2300 ÷ RM3500 = 0.657 or 65.7%.

Different banks have different thresholds for DSR. Generally, if you go over a certain percentage like 70%, this means you have too many commitments and the income criteria for the bank to give you a loan cannot be met because they believe you won’t be able to keep up with all your monthly repayments.

B. What happens during the loan application process?

You’ve got the basics down and ensured that you have a good credit history. You also roughly know how much you’re eligible to borrow. Now all that’s left is to choose a bank. 

Which bank is best for housing loan in Malaysia?

While it would be great if you could walk into any bank and get exactly what you needed on the spot, it’s just not possible. When it comes to banks, it’s not a “one size fits all” situation.

The bank you choose is dependent on the type of loan you feel is best for you. And “the best” is subjective; look at the different rates, packages, terms and conditions. This is a long-term commitment, so you’ll want to look into who gives you the best service.

One advice we can give is don’t be afraid to shop around. Research the different loan packages. Make appointments and speak with different mortgage bankers or loan officers. Find one you’re comfortable with and one who is experienced and takes the time to understand your unique financial needs.

Then, together, you can confirm the type of loan you want and submit your documents as part of your application.

What are the documents required when applying for housing loan?

The last thing you want is to walk into the bank empty-handed. When applying for a property loan, there are a few documents that you need to prepare prior to your meeting:

  • The property booking form
  • Identification documents (copy of your IC/Passport)
  • Salary slips (up to 6 months)
  • Bank and EPF statements
  • Income tax receipt/tax form

Read more about these steps here and here where we detail the main scenarios that often lead to a loan rejection.

C. What happens after you have submitted a loan application?

Now what? Easy. If your loan has been approved, celebrate! But not too much and not too expensive, because you’re now in debt. But you’ve secured your property and that’s definitely a cause for celebration.

What if my home loan was rejected?

There, there. It’s not the end of the world. Oftentimes, it’s not you — it’s the bank. Perhaps your DSR was higher than that specific bank’s maximum allowable DSR. It could also be that something went wrong with your documentation. 

Nevertheless, not getting that bank loan approval can set you back approximately three to six months from applying for another. If you’ve calculated your DSR (see above) and gotten a low enough value, you should be fine. However, different banks have different thresholds so that calculation is just an estimate.

But not to worry — we’ve got four handy tips to help you out with your next application. 

If you want to go in with an increased chance of a home loan approval and without doubts or worry, check out our home loan eligibility calculator to increase your chances of getting your mortgage approved. 

In the meantime, check your home loan eligibility using LoanCare and find out if you be able to secure a mortgage from up to 17 banks across Malaysia.

Should I pay off my home loan early?  

We’re loving the proactiveness here. It’s great that you’re thinking of this. Having less monthly instalments is a compelling goal, but sometimes, it’s not the best financial decision. An example is if your bank imposes penalties for settling your mortgage before your lock-in-period expires. Another reason would be if you’re covered under a mortgage insurance and want to retain this financial buffer.

So, when is it a good idea? When you’ve done the math and you’re sure that you’ll be saving on your loan interest payments. An early settlement a few years before your loan tenure of 35 years could result in thousands saved!

How do I pay off my home loan early?

We’re glad you asked. There are a few ways you can do so:

  • Refinancing to a shorter-term loan.
  • Make a few small, additional payments throughout the year.
  • Make a large capital repayment.

Each way has its pros and cons. Get more advice on each one, as well as further explanation on whether you should pay off your home loan early here.

D. How to improve your chance of getting a mortgage

Before we send you off on your merry way to start your home loan application, here are a few handpicked tips that we feel could be quite helpful depending on your predicament or needs.

How do I pay off my home loan early?

Thinking of getting a home with a significant other? An attractive prospect! This means you’d be able to get a larger loan (equating to a dream home on the higher, grander end). You can do this with two or more people and all the joint loaners will need to be between the ages of 18 and 60 while applying.

However, there are some stumbling blocks and pitfalls awaiting this path. Read through our list of four things to consider before applying for a joint loan – there are even tips on how to bolster one’s borrowing profile if your spouse, friend, or relative is self-employed.

Can a foreigner apply for a housing loan in Malaysia?

Malaysia is a melting pot of people from all over the world! It’s no surprise that we have expatriates looking to buy property here, whether to retire or embark on a new journey. Foreigners can legally buy property in Malaysia, but there are some criteria regarding the types of property you can buy. This is just the country’s way of ensuring expat buyers don’t buy up the cheaper real estate meant for locals. Each state sets a minimum price; for example in Kuala Lumpur, the minimum price threshold is RM1 million. Overhang properties (properties in the market where supply outstrips demand, usually new projects like luxury condos) are set at RM600,000.

Now, how easy it is to get a loan in Malaysia will largely depend on your personal situation. Many foreigners are here as part of the Malaysia My Second Home (MM2H) programme*. If you have this, there shouldn’t be any problems with applying for the various loans mentioned in this guide as the programme is well established and government-backed.

If you’re not under the MM2H programme, then your ability to get a loan from a Malaysian institution will depend on what type of property you want, your current financial situation, as well as how much of a deposit you are able to give. A good real estate agent will be able to help you out as well as Mortgage Officers in banks.

*Do note though that the MM2H programme has been temporarily suspended to allow the Ministry of Tourism, Arts and Culture (MOTAC) and related agencies to “comprehensively review and re-evaluate the MM2H program since its inception in 2002. The suspension is in line with the Government’s decision not to allow foreigners to enter Malaysia following the outbreak of COVID-19” – but we hope to welcome you soon. 

How does Covid-19 affect home loans?

With the economic impact of the pandemic and the various movement control orders (MCO), Bank Negara Malaysia (BNM) has made quite a few changes. From moratoriums on home financing repayments to reductions in base rates (BR) and new lending rates by Malaysian banks, read all about it here.

Seeing how Malaysia banks have started tightening their lending policy, it might be a bit more difficult to secure a housing loan in the future. Don’t worry though, if you have a strong credit rating, your chances of getting one is still high.

To make things easier for you during this unprecedented time, consider getting an experienced banker when submitting loans. He or she will be able to give you the best advice and increase your chances for loan approval.  

Our parting advice is, if you’re at a loss or if you need more guidance – fret not. A good real estate agent will be a reliable source of help. Most times, these are professionals who understand that not everyone speaks that property lingo. Remember, there are no dumb questions, so ask away. In the meantime, build up your credit score, learn about the different types of property loan, research on the current housing loan interest rate and check your home loan eligibility using house loan calculator to increase your chances of securing a loan.

DID YOU KNOW…

💸 Aside from home loan, you can utilise EPF withdrawal money to purchase a house
💳 There are a few important rules you have to follow to get your home loan approved
👍  What is home loan refinancing? Here’s our comprehensive guide

Perfection of Transfer and Perfection of Charge: Everything property buyers need to know!

These two documents are essential for the property ownership transfer process. We will take a look at the differences between the Perfection of Transfer and Perfection of Charge, the costs and the processes involved. Buying your first home can be a cumbersome process that involves numerous steps. In this article, we will talk about two documents home buyers will encounter after signing the Sales and Purchase Agreement (SPA) – the Perfection of Transfer (POT) and Perfection of Charge (POC). The Perfection of Transfer is necessary for transferring ownership from the developer’s name to your name as the property owner whereas the Perfection of Charge is required to charge the property title to the bank. For a comprehensive view of the related documents involved in the entire house buying process, read this list of legal documents required when buying a house in Malaysia.
1. What Is Perfection of Transfer (POT)?

POT is a process to register a property title under the name of a property purchaser. This document is required in situations where an Individual title or strata title has yet to be issued for that property by the land office. This typically happens with new launch properties or primary units purchased from a property developer.

During construction of a landed housing development or a high-rise building, the entire property project will be under a master title as the developer owns the plot of land. This plot of land will then be divided into their individual building or parcel lots.

This means the entire development will remain under one big plan until divided into an individual share. The developer is required to apply for the strata titles or individual titles on behalf of the purchasers by submitting applications to the land office. Once approved by the land office, each property will have its individual or strata title. This revokes the previous master title and will allow the purchasers to register their names on the title. For a deeper understanding, read on the differences between master title, individual title and strata title.

Why is the Perfection of Transfer important?

If your name is not registered on the title, the land office swill not acknowledge you as the property owner. You will also not be regarded as the registered proprietor as per the National Land Code 1965 and would not be able to exercise all the rights as a registered proprietor.

  • Selling your property will be a lengthy process – you will have to request the developer to transfer the property to the new buyer.
  • You may have to bear additional costs when executing the Memorandum of Transfer or MOT (when applying for home loans with a bank) as the POT is used as an instrument of charge to banks for loans.
  • Without strata titles, owners of strata properties such as apartments, condominiums and serviced residences will not be able to initiate the formation of the management corporation (MC).
2. What is the Perfection of Transfer process like?

Step 1: The buyer pays legal fees, stamp duty and disbursements.

Step 2: The buyer appoints his/her lawyer.

Step 3: The lawyer sends a Letter of Authorisation to the property developer and liaises with the developer on necessary documents such as a copy of the title and the developer’s company documents.

Step 4: The lawyer prepares an MOT (Form 14A) which is signed by both the developer and the buyer.

Step 5: Once completed, the developer will deliver the original title to the lawyer to finalize the process of transferring property ownership to the buyer.

Step 6: The lawyer makes a dispute (adjudicates?) based on the MOT and the buyer then pays stamp duty to the Inland Revenue Board (IRB) according to the purchase price of the property.

Step 7: The lawyer presents and registers the MOT and finalises the transfer of ownership at the land office.

3. How is the cost for Perfection of Transfer calculated?

A Perfection of Transfer quotation will include the following:

  • MOT professional lawyer fees
  • Stamp duty
  • Disbursement fees by the lawyer such as registration fees, consent to transfer, land search, winding up and bankruptcy search, transportation and photocopies

Below are the legal fee rates in Malaysia. Do take note that these are the maximum fees one would normally pay and are subject to discounts.

PROPERTY PRICE TIER LEGAL FEE
(% of property price)
First RM500,000 1%
Next 500,000 (RM500,001 – RM 1 million) 0.8%
Following RM2,000,000 (RM1,000,001 – RM 3 million) 0.7%
Next RM2,000,000 (RM3,000,001 – RM 5 million) 0.6%
Thereafter (> RM 5 million) 0.5%

Here is an example Perfection of Transfer calculation, assuming that the property purchase price is RM650,000:

  1. Professional Fees from Lawyer

Memorandum of Transfer = RM1,300

2. Disbursements

Stamp Duty on MOT = RM8,000

3. Registration Fees

State Registration Fees on Transfer = RM350

Consent to Transfer = RM150

4. Search Fees

Land Search/ CTC Title/ ROC Search = RM80

Winding up, Bankruptcy Search & ROC = RM20

5. Incidentals

Transportation, courier, etc = RM150

Photocopy, Printing, Faxing, Telecommunications, etc = RM150

Miscellaneous = RM100

GRAND TOTAL = RM10,300

Documents Required for the Perfection of Transfer
  • A copy of the purchaser’s identity card
  • A copy of the title
  • A copy of the SPA
  • The latest assessment receipt
  • The quit rent receipt
  • The assessment receipt
  • Other relevant documents
4. How is the POT related to the Memorandum of Transfer (MOT)?

MOT, or Form 14A as it is legally known, is an important piece of document that every home buyer must sign to gain ownership of a property (individual or strata title) from a developer.

An MOT is prepared and signed along with the SPA and housing loan documents. A signing of the MOT confirms an intention to transfer ownership of the property to the purchaser once the individual or strata title has been issued. This document contains details of the developer, purchaser and land title details for the land office.

So, how is MOT related to Perfection of Transfer? POT is a legal document needed before a property title has been issued. This document is used to set up ownership of the development and is issued during the building and construction phase. This is then followed by the MOT which enables a purchaser to have his/her name registered on a land title, which would then allow him/her to transfer the property legally.

Read: Ultimate guide on Memorandum of Transfer (MOT) and Stamp Duty in Malaysia

5. What is the Perfection of Charge (POC)?

The Perfection of Charge (POC) is a complementary process that is performed together with Perfection of Transfer. This process acts as the lending bank’s way to secure the loan taken out by the home buyer. Most buyers will apply for a housing loan to finance their purchase and will slowly “buy” back the property through recurring repayments of that loan over 20 to 30 years.

In return for the housing loan provided by the lending bank, the property title must also include the bank’s name as the chargee of the property. Here is where the POC comes into play – it serves as a charge, or security, to the bank’s loan. Should the buyer fail to make repayments, the bank will have an automatic right to sell the property to recoup the loan’s monthly repayments.

If you’re wondering who’s appointed to do the POC… you guessed it! It’s the bank. The bank is responsible for ensuring the ownership is transferred to the bank as a security measure for the loan. The bank’s lawyer is appointed for the registration of transfer and he will execute a discharge document or Form 16N to discharge the bank’s charge over the title. The homebuyer must forward the original property title to the bank once the title is registered by the Land Office, to enable the bank’s lawyer to proceed accordingly.

In short, Perfection of Transfer is needed to take ownership of a property from a developer whereas Perfection of Charge is required to then transfer that ownership to the lending bank. Previously, this process was completed through the Deed of Assignment (DOA) which is a different legal document that transfers ownership of a property from one party to another. This document is also required for homeowners who are applying for a home loan in Malaysia.

6. What is the Perfection of Charge process like?

Step 1: The lawyer prepares charge documents such as the Charge Annexure and Form 16A.

Step 2: The charge documents are executed by the buyer and signed by the bank.

Step 3: Once completed, the lawyer gets the charge documents stamped by the IRB.

Step 4: The buyer pays stamp duty of the charge documents (RM10 per copy)

Step 5: The lawyer presents the charge documents at the land office and registers the charge documents in favour of the bank.

Step 6: The buyer receives a copy of the title and a copy of Form 16A.

7. How is the cost for Perfection of Charge calculated?

A Perfection of Charge quotation is similar to the Perfection of Transfer except for the stamp duty. Generally, banks are responsible for paying the fees – which are dependent on the offer letter signed between the property purchaser and the bank’s loan agreement. For POC, the stamp duty is only RM40.

Documents Required for the Perfection of Charge
  • A copy of the homebuyer/ borrower’s identity card
  • A copy of the property title
  • A copy of the facilities agreement
  • The latest assessment receipt
  • The quit rent receipt
8. Other important information about the Perfection of Transfer and Perfection of Charge
  • If you had paid the stamp duty during the signing of your SPA, you could ignore this amount when completing a Perfection of Transfer. Homebuyers only need to pay the stamp duty once during a property purchase. Here are the latest stamp duty rates in Malaysia.
  • The property’s stamp duty is calculated based on the SPA price (at the time of signing) and not the current market value. If you bought a home in 2018 for RM650,000 and the current value is RM750,000, the stamp duty payable will be based on RM650,000.
  • Homebuyers who do not apply for a housing loan to finance their property purchase will not have to execute the POC.
  • For the execution of POT and POC, buyers can engage the same lawyer used during the SPA signing (where the SPA has been prepared but the strata title isn’t ready). In this case, the existing lawyer is allowed to charge the buyer only 25% of their full-scale legal fees, as per the Solicitors Remuneration Order 2017.
  • For property purchasers who engage a new lawyer specifically for the completion of POT, the Solicitors Remuneration Order states that the maximum charge the lawyer can charge is 50% of the mandatory legal fees.

Bumi Lot: How to check its status and the reasoning behind different Bumi quota in each state

Despite the National Economic Policy or NEP turning 50 this year, many are still unfamiliar with Bumi Lot and how it can benefit them. Here, we unveil the important things to know when buying a Bumi Lot.

As Malaysians, we all know about the New Economic Policy (NEP). The policy, which was adopted in 1971, included the creation of the Bumi Lot quota. These are units of land or property, which can only be purchased and owned by Bumiputeras.

With the aim of increasing the percentage of land ownership by Bumiputeras in Malaysia, at least 30% of property including housing developments had to be allocated to Bumiputeras. This applies to both residential and commercial property.

However, all land matters under Malaysian law fall under the jurisdiction of State Authorities. Therefore, the Bumi Quota differs from state to state. For example, the Federal Territory of Kuala Lumpur has the Bumi Quota set at 30%.

If you are interested in purchasing a Bumi Lot, we’ve outlined the important things you need to know below.

What is the difference between Bumi Lot and non-Bumi Lot?

A Bumi lot is cheaper than a non-Bumi Lot, usually by at least 5% all the way up to 15%. This is due to the Bumi Discount, which is a mandatory minimum discount offered to Bumiputeras on property.

As mentioned earlier, Bumi Lots can only be purchased and owned by Bumiputeras. However, it can be sold to non-Bumi. Do note that it will not be easy as it is a lengthy process and involves many procedures. In the majority of cases, these purchase requests are rejected.

It is also important to note that Bumi Lots are not the same as Malay Reserve Land (MRL). The latter is also known as “Tanah Rizab Melayu” and can only be owned and held by Malays as stated under the Malay Reservation Enactment 1913.

State guidelines on Bumiputra quota in Malaysia

As is the case with Bumi Quota, land laws fall under the jurisdiction of the State Government and therefore a Bumi Discount will also differ between the various states.

Below is a summary of Bumi Quota and Bumi Discount in each state in Malaysia:

State Bumi Quota Bumi Discount
Perlis
  • 30 – 50%, depending on State consent
  • Mostly are Malay Reserved Land
Kedah
  • Residential: 30 – 50%
  • Commercial: 30%
Minimum 5%
Penang 30% for all properties 5% for all property stages
Perak
  • State alienated land: 30%
  • Private land: 20%
Minimum of 5% discount except for low-cost property
Selangor
  • Residential: depends on State Constitution as per Lembaga Perumahan dan Hartanah Selangor’s Blue Print Perumahan Selangor Darul Ehsan
  • Commercial: 60% for Low-Cost Commercial Units (S&P RM120,000) and 50% for other Commercial Units
  • Industrial (more than 10 acres): 50% for Low-Cost Industrial Units (RM150,000) and 40% for other industrial units
Residential: 7% (except low cost)

Commercial: 10%

Industrial: 10%
Kuala Lumpur 30% for all housing and commercial projects 5%
Negeri Sembilan Minimum 30% for housing and commercial projects 10% (except low cost)
Melaka
  • Residential: 40% in Kesidang, Kota Laksamana, and Bandar Hilir. 60% in other areas.
  • Commercial: 35% in Kesidang, Kota Laksamana, and Bandar Hilir. 40% in other areas.
5 – 15%
Johor
  • 40% for all residential, commercial, and industrial development with conversion approval before 11 December 2004
  • For residential with conversion approval after 11 December 2004:
– 40% for selling price < RM200,000
– 30% for selling price > RM200,000 but < RM300,000
– 20% for selling price > RM300,000
15%
Pahang Minimum 30% depending on State Exco’s decision based on the location of the project.
Terengganu Private land: 30%
  • Surrender and re-alienation land project: 50%
7 – 7.5%
Kelantan Mostly are Malay Reserved Land
What’s the reasoning behind the Bumi Lot percentage in each state?

The percentage for Bumi Lots in different states is determined by the area population and planning made by local authorities. This may be the reason why some states have a higher Bumi Lot percentage and discount as they are more populated with Bumiputras and people who belong in the B40 income group.

For example, there is a distinctive difference between the Eastern state of Terengganu and the nation’s capital of Kuala Lumpur. Based on the Household Income and Basic Survey Amenities Report 2019 released by the Department of Statistics Malaysia (DOSM), the median income is RM5,545 while the mean income is RM6,815. Kuala Lumpur, on the other hand, has a median income of RM10,549 and a mean income of RM13,257.

These statistics are compounded by the fact that 97% of the population in Terengganu is Bumiputera compared to Kuala Lumpur’s 40.32% Bumiputera population. With a higher density of low-income Bumiputeras in the state, Terengganu has a relatively higher Bumi Discount and Bumi Lot percentage of 7.5% and 50% (for surrender and re-alienation land projects) compared to Kuala Lumpur’s 5% and 30%.

How can one’s Bumiputera status be verified?

This is a tricky situation as the term “Bumiputera” is not defined in the Federal Constitution. However, one’s Bumiputera status be verified via the following methods:

  1. The ‘Keturunan’ column in birth certificates must reflect both parents of an individual to be a Bumiputera.
  2. NRIC extracted from the National Registration Department.

Buyers who are looking to purchase properties should always ask developers if their properties are endorsed as Bumi Lots or are on Malay Reserve Land (MRL). Always check with the Land Office for various matters regarding the property before you decide to purchase.

Selling a Bumi Lot to a non-Bumi

As aforementioned it’s a tricky process to sell a Bumi Lot to a non-Bumi. According to real estate negotiator Johanizam Mustakim, if there are unsold Bumi Lots, the developer will make an application for release at the local Land Office.

“The developer will have to provide a report and convincing reasons for the release. An example would be the lack of demand for the Bumi lot even after years of advertising. A certain fee will have to be paid. The fee is determined by local authorities but is usually in the form of a refund for the initial discounted amount. For example, if the Bumi discount is 10%, then that is the amount that will be paid to the state.

“The developer can appeal to the Land Office if the initial application is rejected. If successful, the non-Bumi buyer will have to reimburse the developer with the discounted amount from the initial purchase” he said.

An important detail to keep in mind is that a “released” Bumi Lot does not make it a non-Bumi Lot. Once the non-Bumi owner of the Bumi Lot chooses to sell to another non-Bumi, he will need to apply again for the Land Office’s consent for the transfer of ownership.

Should you buy a Bumi Lot?

As with most things, Johanizam says that there are pros and cons to buying a Bumi Lot.

Pros of buying a Bumi Lot
  • Owning a Bumi Lot in a highly-populated Bumi neighbourhood such as Shah Alam, Banting and Sungai Buloh is a good investment as there is high demand if the owner plans to rent it out or sell it.
  • For Leasehold Bumi lots without restrictions, it is usually subject to easier approval by the Land Office when selling to a non-Bumi buyer.
Cons of buying a Bumi Lot
  • There is usually low demand for Bumi Lots due to the restricted market (Bumiputeras only). As The Real Estate and Housing Developers’ Association (REHDA) revealed, this is especially true in urban and non-Bumi areas.
  • In terms of capital appreciation, Bumi Lots are slow to increase. This may be due to the low demand. Owners reap only but a small profit from the sale of their property and therefore, are not the best long-term investments.
  • It is hard to convince the Land Office to release Bumi Lots to non-Bumis. The majority of applications are rejected.
  • A non-Bumi owner will have to apply to the Land Office again if he chooses to sell to another non-Bumi.