It’s important to check all the particulars of a property before making a purchase. Some property titles may come with special terms for purchase.
For instance, there are a few property titles in Malaysia which are freehold, leasehold as well as Bumiputera Lots (Bumi Lots). In 1971, the government initiated the Bumi Lot Quota as part of the New Economic Policy to increase property ownership among the Bumiputera community.
Bumi means earth and putera refers to prince or son. Bumiputera refers to a group of people of certain ethnicities that are considered to be the earliest residents of Malaysia. This includes the ethnic Malay, the Orang Asli, Bumiputera from Sabah and Sarawak.
What Is A Bumi Lot?
When a housing developer launches a new project, it is mandatory to allocate at least 30% of the properties to Bumiputeras. These properties can’t be bought by non-Bumiputeras. As mentioned, these properties come with a Bumi discount that is different depending on which state you’re in.
These properties then have a Bumi lot title which means they can only be sold to Bumiputeras. Although Bumi lots can’t be sold firsthand to non-Bumiputeras, they can be sold by a Bumiputera owner to a non-Bumiputera in the subsale market.
Bumi Quota And Discounts For Residential Properties In Each State
|State||Bumi Quota||Bumi Discount|
|Perlis||30% – 50%||–|
|Kelantan||Mostly Malay Reserved Land||–|
|Penang||30%||5% for all property stages|
|Kedah||30% – 50%||Minimum 5%|
|Perak||20% for private land and 30% for alienated land||Minimum 5% (except for low-cost housing)|
|Selangor||Depends on State Constitution||7% (except for low-cost housing)|
|Terengganu||50% for surrender and re-alienation land projects||7% – 7.5%|
|Negeri Sembilan||Minimum 30%||10% (except for low-cost housing)|
|Malacca||40% in Kesidang, Kota Laksamana, and Bandar Hilir; 60% in other areas||5% – 15%|
|Johor||20 % – 40% depending on property price for projects with conversion approval after 2004||15%|
As shown in the table, Bumi lot quotas are the highest in Malacca with developers reserving 60% of properties in areas outside of Kesidang, Kota Laksamana and Bandar Hilir. There are also a high number of Bumi lots in Perlis, Kedah and Terengganu where developers allocate up to 50% of properties to the Bumiputera community.
In states such as Penang, Kuala Lumpur, Negeri Sembilan and Pahang, the Bumi lot quotas stand at 30%. For the state of Johor, the Bumi lot quotas are tiered depending on the property’s selling price. Property with prices below RM200,000 have a Bumi lot quota of 40% while those with priced above RM200,000 but under RM300,000 have a quota of 30%. Any properties priced above RM300,000 have a Bumi lot quota of 20%.
Most of the land titles in Kelantan are under Malay Reserved Land. These lands are only sold to Malay Muslims.
How To Buy A Bumi Lot?
Developers can make an application to the Land Office to have it release Bumi lots to non-Bumiputeras. However, applicants will have to provide strong reasons such as lack of demand for the properties even after some time in the market.
On top of that, applicants will need to pay a fee which usually equals the amount from the Bumi discount. For instance, the selling price of a home is RM300,000. With the Bumi discount, the home is RM279,000, which saves buyers RM21,000. So, applicants who are non-Bumiputeras could pay RM21,000 in fees.
Advantages Of Buying A Bumi Lot
As Bumi lots are sold with a discount to Bumis, there’s a possibility that they are cheaper than other properties in the same neighbourhood and condition. A minimum 7% discount can amount to quite a bit when it comes to a big purchase like a home.
A search on the PropertyGuru website found that a four-bedroom and three-bathroom Bumi lot at the Rafflesia Condo in Sentul, Kuala Lumpur is priced at RM600,000. Priced at RM429 per sqft, it is slightly below the price trends for the property between RM437 and RM 449 per sqft, according to the site.
If you’re considering buying a Bumi lot, getting approval from the Land Office for the purchase of a leasehold Bumi lot could be easier compared to a freehold one.
Things To Consider Before Buying A Bumi Lot
Some homebuyers may shy away from purchasing Bumi lots because they can beare mostly sold to only Bumiputeras, which limit the pool of potential buyers and hence decreasing the chances of the properties getting sold.
In addition, when a non-Bumiputera purchase a Bumi lot, the property will remain a Bumi lot. Should there be a need to sell the property to a non-Bumiputera, the owner will have to make an application at the Land Office for approval, which may cause a longer time to get the deal completed..
However, iAnother point to note is that in neighbourhoods that are heavily populated by Bumiputeras such as Shah Alam, demand for Bumi lots are higher, which makes it easier to sell the property, but you will sell the lots to Bumis as the area has high demand and doesn’t justify the sale to non-Bumiputeras.
Should You Buy A Bumi Lot?
The Bumi lot quota was introduced to encourage more Bumiputeras to buy properties with Bumi discounts ranging from 5% to 15%.
Naturally, if a non-Bumiputera wishes to purchase a Bumi lot, he or she will have to provide valid reasons to justify the purchase.
Non-Bumiputeras may also want to consider various factors such as the possibility of selling the property in the future as a Bumi lot and the demand for Bumi lots in the neighbourhood.
Featured Image Credit: Honey Shune Lai Nyo/DollarsAndSense
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