5 Things To Know Before Buying A Commercial Property In Malaysia

As an entrepreneur, you’re constantly looking for the next milestone to achieve, propelling you further in your journey. 

After a few years building your company, you’ve generated consistent income, established a stable customer base and accumulated sufficient capital to purchase your own commercial property. 

Purchasing your own commercial property can come with certain benefits including having more flexibility in designing and renovating the premise and projecting a more credible impression to your customers or investors as it is a long-term commitment. 

On the flip side, business owners also need to consider external factors such as possible changes in zoning laws or market situation that could affect the property’s value or your operations.   

Types Of Commercial Properties In Malaysia 

Commercial properties in Malaysia can be classified according to their purpose and structure.  In Malaysia, the most popular types of commercial properties are multi-storey landed shops that are built in commercial areas with two to three levels.

According to data from the National Property Information Centre (NAPIC), two-storey and three-storey shops recorded some of the highest commercial property transactions in the first half of 2024 at 5,145 and 2,539 transactions respectively.  

There are also shophouses where the ground floor is reserved for running business operations, while the higher floors are converted for living purposes. 

Other types of properties include special purpose commercial buildings such as office complexes, factories and warehouses. Some of the most high-valued commercial properties are multi-storey shops, vacant plots and shopping complexes.

Double-storey shops recorded RM3,871.08million worth of transactions in 2024, while vacant plots and shopping complexes recorded transactions amounting to RM3049.10million and RM2955.21million. 

#1 Legal Obligations For Purchasing A Commercial Property 

Depending on the type of commercial properties you’re purchasing, you may need to fulfill certain legal requirements. For example, in Malaysia, industrial land ownership is governed by the National Land Code (NLC), which states that landowners who purchased a land are required to develop it within a period of two years. 

There are also limitations on the purchase of commercial properties built on Malay reserved lands, which can only be sold to Malay Muslims.

Foreigners also have to fulfill certain requirements when purchasing commercial properties in Malaysia. The Malaysian government has set a RM1million minimum threshold for acquisition of properties by foreign buyers. Foreign buyers may purchase a commercial property that is priced more than RM1million. 

#2 Buying A Commercial Property 

As with the purchase of most properties in Malaysia, the process starts with the drafting of a contract as proof of purchase known as the Sales and Purchase Agreement (SPA).  

The SPA is a legally binding contract between the developer and buyer drafted by the seller’s lawyers. The agreement includes the terms and conditions of the purchase including the agreed purchase price, property details and repayment terms. 

After the signing of the SPA, the contract will need to be brought to the Inland Revenue Board (IRB) to be stamped. Property buyers will need to pay fees for the drafting and stamping of the SPA. 

#3 Financing A Commercial Property 

Developed for conducting business activities, commercial properties tend to come with costlier price tags.  

According to the Malaysian Investment Development Authority (MIDA), the price of industrial land ranges from RM5 to RM200 per square feet, depending on the location. Meanwhile, ready-built factories come with a selling price of RM12 to RM500 per square feet of floor area. 

As commercial properties are costlier, you may need financing to pay for the property. There are many banks that offer commercial property financing. For example, the OCBC Commercial Property Loan offers up to 140% of the property value or purchase price or RM5million, whichever is lower to companies.  

The government also offers up to RM5million financing through the Soft Loan Scheme for Services Sector for small to medium enterprises (SMEs) who want to purchase land and buildings. 

Read Also: Guide To SME Business Loans In Malaysia 

#4 Maintaining A Commercial Property In Malaysia 

As a property owner, there are several taxes and costs that you may need to pay every year to maintain your property. 

Firstly, you will need to pay assessment fees twice a year in February and August in Kuala Lumpur. Assessment fees are a type of property tax that is paid to the local authority for their services including maintaining public amenities in the location of your property. 

Secondly, you will also be charged with quit rent once a year that is typically due in May in Kuala Lumpur. Quit rent is a type of land tax paid to the state government. 

The assessment rate and quit rent varies depending on the type of asset owned. For example, the annual assessment rate of an industrial land in Penang is 12% of property value. 

Commercial property owners also have to pay maintenance fees to a management company set up by a property developer every month for maintaining the amenities within the property including the hiring of security guards, cleaning and landscaping services and repairing works. 

#5 Tax Benefits And Obligations 

In Malaysia, company owners are entitled to tax deductions or capital allowance on purchases of industrial buildings and general plants. Property owners are entitled to an initial allowance of up to 20% and additional annual allowance of 3% to 20%, depending on the type of asset. You can also claim tax deductions on direct and indirect expenses for maintenance and support services.

On the other hand, there are also tax obligations such as property owners will be taxed at a rate of up to 30% on income generated from renting out commercial properties. 

Property owners are also be required to pay Real Property Gains Tax (RPGT) to the Inland Revenue Board (IRB) when they sell their commercial property or vacant lands. 

Depending on the disposer categories and holding period of asset, the RPGT rates differ. The following are the rates on the gains from selling the property that needs to be paid: 

 Source: Inland Revenue Board Malaysia (IRBM) 

Read Also: Guide To Business Banking Accounts In Malaysia 

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