Purchasing properties in Malaysia
can be a little more complex at times. You may have run into terms like bumi
lots, bumi discounts, bumi quotas and Malay reserved lands. Here we talk about
what they are and their implications on the property market.
Bumi
Quota
What
is it?
Under the New Economic Policy (NEP),
the Bumiputera Lot Quota Regulation was introduced as means to increase
Bumiputera shares in real estate up to at least 30%. This means that, as of
1971 developers have had to allocate at least 30% of all property units (be it residential
or commercial) to Bumiputeras.
Inside
Scoop:
According to Malaysian law, State
Authorities are given full control over land matters and as such, Bumi Quota
regulations fall under the State Government’s jurisdiction causing them to
differ from state to state. A table with
a general outline of Bumi Quotas in all states in Peninsular Malaysia can be
viewed as below.
Bumi
Lot
What
is it?
Bumi Lots are units of land or
property, which can only be purchased and owned by Bumiputeras. These lots are
not to be confused with Malay Reserved Lands (see below).
Inside
Scoops:
This is all well and good for
genuine homebuyers and long-term investors, as they do not intend on quickly
selling off the lot. However, owners who wish to sell will face several
adversities when they decide to sell these properties. Some of these problems
include:
·
Lack of
demand for their property due to the restricted market (Bumiputeras only);
·
Slow appreciation
of Bumi Lot prices; owners reap only but a small profit from the sale of their
property;
·
Rejection
by Land Office for consent to transfer to non-Bumi.
In certain cases, Bumi Lots may be ‘released’
and sold to non-Bumis following procedures like the following:
- Apply for
consent to transfer by providing compelling enough reasons (i.e. there is no
demand for the lots following a year of advertising) to the Land Office;
- Appeal
to Land Office if application is rejected;
- Reimburse
developer with discounted amount from initial purchase.
A purchaser should also keep in mind
that a ‘released’ Bumi Lot does not make it a non-Bumi Lot. Meaning that once
the non-Bumi owner of the Bumi Lot chooses to sell to a non-Bumi, he will have
to reapply for the Land Office’s consent for transfer of ownership.
Furthermore, depending on the state
in question, the Land Title may or may not be endorsed (i.e. “stamped”) as a
Bumi Lot. It is rarely endorsed on Sale and Purchase Agreemetns (S&P). As
such, it is imperative the buyers get their lawyers to thoroughly investigate
the Title content as well as Land Office records. Below is an example of how
the endorsement would look like:
That said, there are no actual
policies or laws to regulate sales in the secondary market. And there in lies
the common problems that Bumi Lot owners face when they choose to sell their
properties. One of which is the Jabatan Tanah officers often reject transfers
of ownership from Bumis to non-Bumis regardless of whether or not the property
is a Bumi Lot.
Note:
1. Leasehold units are more strictly regulated by the Land
Office than freehold properties.
2. It is an unwritten policy that all transfers from
Bumis to non-Bumis will be rejected (the first time) by Land Office (regardless
of whether or not it is a Bumi Lot).
Bumi
Discount
What
is it?
The purchase of a Bumi Lot by a
Bumiputera is subject to a discount of up to 15% off the initial price. These
percentages differ from state to state and in Johor, it also depends on the
property prices.
Conventionally, during the
subdivision stage of development, a developer, with the State Authority’s
consent, will ‘mark’ several properties as Bumi Lots. Naturally, these
properties are advertised as such and will only be sold to Bumiputera buyers.
However, due to the declining demand for Bumi Lots, developers were often hard
pressed to sell off these lots to cut losses and avoid being penalized by State
Authorities.
As such, instead of marking certain
units as Bumi Lots and advertising them as such, developers will draw up the
list of Bumiputera buyers and ‘mark’ the certain units as Bumi Lots, following
the buyer’s consent. This where the Bumi Discount comes in; to be able to
purchase the property using the Bumi Discount, the byer must provide consent to
‘mark’ the property as a Bumi Lot.
Inside
Scoop:
Depending on the location of the
property, Bumi lots may be harder to sell as the market is strictly confined to
Bumiputeras. Anticipating this disadvantage, may Bumiputera buyers (especially
real estate investors) are unwilling to purchase Bumi Lots and hence, basic
economics tells us that where there is scarce demand in relation to supply,
prices are kept low. Thus, when property prices of neighbouring non-Bumi lots
rise, the discounted Bumi Lots do not appreciate at the same rate.
However, contrary to the common
misconception, this does not apply to all Bumi Lot properties. For example, in
areas that are densely populated by Bumiputeras (i.e. Shah Alam, Dengkil,
Putrajaya etc.), the bulk of demand for units in that area is from Bumiputeras
and hence, owner do not have to worry selling their properties off.
Malay
Reserved Lands (MRL)
What
is it?
A common misconception is that Malay
Reserved Lands (MRLs) are the same as Bumi Lots, when in fact the two types of
lands are quite different. MRLs are lands, which can only be owned and held by
Malays.
Inside
Scoop:
Converse to Bumi Lots, MRLs are
virtually impossible to be legally ‘released’ to non-Malays. For the land to be
granted release, another property of similar value and size must be declared as
a replacement. In order for this be done, the Exco will survey surrounding
districts for applicable lands.
Furthermore, there are several other
characteristics that distinguish MRLs from Bumi Lots. The following are a few
of those features:
- Malay
owners are not allowed to rent out properties built on MRLs or the lands to
non-Malays.
- All
business that operates on MRLs must be owned by Malays.
- Publicly
traded companies must comprise of only Malay stakeholders.
*You
can read more about MRLs here.
Conclusion
It is imperative that we are
informed about the characteristics of the various land titles in Malaysia.
Although Bumi Lots are great for those who seek to settle down or use the
property for the long run, they can be really hard to sell should you need
extra cash in future.
This is something to keep in mind
for investors who are looking to flip properties. Buyers who are looking to
purchase properties should always ask developers if their properties are
endorsed as Bumi Lots.
Do take precautions and check with
the land office for various matters regarding the property.
4 Bumi Attributes You Should Know About Malaysian Properties
Purchasing properties in Malaysia can be a little more complex at
times.
You may have run into terms like bumi lots, bumi discounts, bumi quotas
and Malay reserved lands. Here we talk about what they are and their
implications
on the property market.
Bumi Quota
What is it?
Under the New Economic Policy (NEP), the Bumiputera Lot Quota
Regulation was introduced as a means to increase Bumiputera shares in
real estate up to at least 30%. This means that, as of 1971, developers
have had to allocate at least 30% of all property units (be it
residential or commercial) to Bumiputeras.
Inside Scoop:
According to Malaysian law, State Authorities are given full control
over land matters and as such, Bumi Quota regulations fall under the
State Government’s jurisdiction causing them to differ from state to
state. A table with a general outline of Bumi Quotas in all states in
Peninsular Malaysia can be viewed
- See more at: http://loanstreet.com.my/learning-centre/Bumi-Land-Jargons-Explained#sthash.a6ZK4DP4.dpuf
4 Bumi Attributes You Should Know About Malaysian Properties
Purchasing properties in Malaysia can be a little more complex at
times.
You may have run into terms like bumi lots, bumi discounts, bumi quotas
and Malay reserved lands. Here we talk about what they are and their
implications
on the property market.
Bumi Quota
What is it?
Under the New Economic Policy (NEP), the Bumiputera Lot Quota
Regulation was introduced as a means to increase Bumiputera shares in
real estate up to at least 30%. This means that, as of 1971, developers
have had to allocate at least 30% of all property units (be it
residential or commercial) to Bumiputeras.
Inside Scoop:
According to Malaysian law, State Authorities are given full control
over land matters and as such, Bumi Quota regulations fall under the
State Government’s jurisdiction causing them to differ from state to
state. A table with a general outline of Bumi Quotas in all states in
Peninsular Malaysia can be viewed
- See more at: http://loanstreet.com.my/learning-centre/Bumi-Land-Jargons-Explained#sthash.a6ZK4DP4.dpuf
4 Bumi Attributes You Should Know About Malaysian Properties
Purchasing properties in Malaysia can be a little more complex at
times.
You may have run into terms like bumi lots, bumi discounts, bumi quotas
and Malay reserved lands. Here we talk about what they are and their
implications
on the property market.
Bumi Quota
What is it?
Under the New Economic Policy (NEP), the Bumiputera Lot Quota
Regulation was introduced as a means to increase Bumiputera shares in
real estate up to at least 30%. This means that, as of 1971, developers
have had to allocate at least 30% of all property units (be it
residential or commercial) to Bumiputeras.
Inside Scoop:
According to Malaysian law, State Authorities are given full control
over land matters and as such, Bumi Quota regulations fall under the
State Government’s jurisdiction causing them to differ from state to
state. A table with a general outline of Bumi Quotas in all states in
Peninsular Malaysia can be viewed
- See more at: http://loanstreet.com.my/learning-centre/Bumi-Land-Jargons-Explained#sthash.a6ZK4DP4.dpuf
