MALAYSIA Law and Practice Contributed by: Natalie Ooi and Nicholas Ooi, Ooi & Ooi
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
• Johor: MYR2 million (landed), MYR1 mil - lion (strata) (some areas may have different thresholds); and • Sabah and Sarawak: these states have sepa - rate rules and require additional state approv - als. 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 indi - vidual property deals, its guidelines still influence policy, especially for large-scale or strategic investments.
Acquisitions of commercial real estate are gen - erally 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. 3.2 Typical Security Created by Commercial Investors 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 his - tory of the borrower, the lender may also require additional security, such as personal guarantees from the directors of the borrower and/or corpo - rate guarantees from the borrower, the borrow - er’s parent company or its associated company. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders According to the Foreign Exchange Policy Notic - es of Bank Negara Malaysia (the Central Bank of Malaysia), a resident entity is allowed to borrow up to MYR100 million in foreign currency equiva - lent in aggregate from a non-resident financial institution (NRFI). Although Malaysian companies may provide real estate as security to NRFIs, any deed or instru - ment 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 deal - ing, be incapable of registration under the NLC.
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