Malaysia is the best choice for foreign investment in ASEAN since 1980. World-class infrastructure and an attractive investment policy have made Malaysia one of the destinations for investment. Apart from that, the availability of freehold industrial land is also one of the factors that attract foreign investors to invest in Malaysia.
There are a few things that need to understand when foreign investors wish to purchase industrial land in Malaysia. First, check the categories of land use (agriculture, industrial, or building). As for now, foreigner is not allowed to own agricultural land in Malaysia. Industrial and building (residential or commercial) land is allowed to be purchased by the foreigner. Making sure the categories of land use match the purpose of the use is crucial when purchasing a piece of land.
Second, check the Express Conditions in the land title document. The state authority may subject the alienated land to any Express Conditions and Restrictions in Interest. The Express Conditions will be stated in the land title document. For industrial land, usually, there are conditions like building a light industrial factory or medium industrial factory or heavy industrial factory. More specific Express Conditions may be imposed such as for the manufacturing of electronic parts, for manufacturing of concrete products etc.
Third, Restriction in Interest should be considered when the purchase of industrial land. The most common restriction in interest stated in the land title document is the restriction to sell or lease or charge to third parties without state authority approval. For those land purchases from the development agency owned by the state government such as Johor Corporation, or Penang Development Corporation, more restrictions of interest will be imposed.
Fourth, understand the land tenure of ownership whether it is freehold or leasehold land. Freehold means the buyer can own the land for an infinite period. Leasehold means the buyer can own the land for a certain period such as 30 years, or 60 years. Once the leasehold period expires, the owner can apply for a lease extension from the state authority but subject to approval. Leasehold land is usually much cheaper and therefore contributes a shorter period of ROI.
In conclusion, foreign investors should understand the categories of land use, express conditions, restriction in interest, and tenure of ownership before deciding to purchase industrial land in Malaysia. Making a wrong decision may harm the investment. Getting a prominent property consultant to advise may be considered if you wish to have more assurance on your investment.
