This manual provides a step-by-step guide to the basic procedure of purchasing new projects (pre-built or “off-the-plan” properties) in Malaysia.
- Appoint an Agent or Find a Developer:You have two options when buying a project: through an agent or directly from the developer. If you are unfamiliar with the Malaysian market and projects, it is advisable to appoint an agent who can introduce you to suitable projects.
- Viewing: Most projects have sales offices where you can view model rooms and/or scale models of the property. It is essential to visit the project to get a better understanding of its features and specifications. The agent or sales representative will accompany you during the viewing.
- Choose the Unit: Once you have identified a project that interests you, the next step is to choose a specific unit. The agent or salesperson will provide a price chart for comparison. You can try to negotiate with them regarding discounts and promotions during this stage.
- Sign Letter of Offer (LO) and Pay Booking Fee: After selecting the unit, you will need to sign a booking form, also known as the Letter of Offer (LO), and pay a booking fee. The booking fee amount is usually RM10,000 or a percentage determined by the developer. Keep in mind that the booking fee may be forfeited if the purchaser cancels for personal reasons.
Bank Loan for Foreigners:
Foreigners can obtain bank loans to purchase property in Malaysia, which is a unique feature compared to many other countries.
The bank will require certain documents for the loan application process. These documents typically include:
- Letter of Offer
- Copy of Passport
- Visa copy (if applicable)
- Salary Statement (3-6 months)
- Bank Statement (to verify salary)
- Income Tax Certificate from the previous year
- Copy of professional licenses (e.g., doctors or lawyers)
- Other documents requested by the bank
Approval for the loan usually takes around 2-3 weeks after submitting all the necessary documents.
Process to Get a Loan:
- Sign the offer letter from the bank, which outlines the terms and conditions of the loan.
- Sign the loan agreement prepared by a lawyer.
- The bank releases funds once the buyer pays their portion of the payment.
- Sign Sale and Purchase Agreement (SPA): The developer’s appointed lawyer will prepare the Sale and Purchase Agreement (SPA) and other relevant documents.
Once the SPA is ready, you need to proceed with signing it and pay a 10% payment (deducting the booking fee already paid). The developer usually bears the legal fees as part of the promotion.
The SPA is a legally binding agreement between the developer (seller) and the buyer. It outlines the terms and conditions of the property transaction.
- Obtain Necessary Consents: Depending on the circumstances, the buyer may need to obtain various consents, including:
- State consent (for foreign buyers);
- Developer consent (for properties under a master title);
- Land office consent (for leasehold properties with individual strata titles)
- Pay Down Payment: After signing the SPA, the buyer is required to pay the remaining 90% of the balance payment. This payment is typically made in stages based on the construction progress, as indicated in the payment schedule provided by the developer. The construction period is usually 3-4 years.
- Settlement of Outgoing Payments: After making the full payment, the purchaser needs to settle the following outgoing payments:
- Pay maintenance fee and sinking fund in advance to the management office;
- Purchase fire insurance;
- Pay assessment fees and quit rent as per the divided date;
- Pay deposits to the electricity company and water company.
- Handover of the Key (Vacant Possession): Once all payments have been settled, the seller is obliged to hand over all keys to the purchaser within 3-5 days, as specified in the SPA.
"Vacant possession" refers to the property being in a condition suitable for occupancy. It is when the access keys and cards to the purchased property are finally delivered to the buyer.
- Defect Check: Purchasers have the right to claim from the developer to rectify any defects found in the unit. It is important to conduct a thorough defect check before commencing any renovation work.
The defect liability period is the warranty period during which the developer is contractually obliged to repair defects that appear within a specific timeframe due to construction-related issues. The defect liability period is typically 12-24 months.
MOT (Title Transfer): Upon receiving the keys, most properties are still under the master title. When individual strata titles are issued, the purchaser must complete the Memorandum of Transfer (MOT) to transfer the title from the developer. Your lawyer will notify you when this process is required.
- Master Title: This refers to the land held by the developer, granting them control over all transactions related to the land. Before the completion of construction and the sale of the property, it remains under the master title. It is important to research the developer's background and financial stability when dealing with properties under a master title.
- Strata Title: This is a certificate or document that establishes ownership and control over a particular unit within a property, such as a condominium or apartment. The land remains under the ownership of the developer, who then separates it into individual strata titles. Strata titles are common for high-rise buildings and come with shared facilities. Owners are responsible for maintenance fees related to these facilities. Having a strata title serves as proof of ownership for the individual unit.
Conclusion:
Buying a new project in Malaysia requires careful consideration and adherence to the purchasing process. By following the steps outlined in this manual, you can navigate the process more confidently and make an informed decision. Remember to seek professional advice when needed and conduct thorough inspections to ensure a successful property purchase.
