SELANGOR STATE NEW GUIDELINES FOR FOREIGN PURCHASERS EFFECTIVE FROM 1 SEPTEMBER 2014

Highlights of the New Guidelines

Foreigners/Permanent Residents/Foreign Companies in the State of Selangor (“Foreigners”) are only permitted to buy residential properties that are priced at a minimum of RM2 million for Zone 1 and 2, & a minimum threshold of RM1 million for those located in Zone 3.
The properties in Selangor shall be categorized into three zones, Zone 1, 2 & 3 encompassing the districts of:(a) Zone 1: Petaling, Gombak, Hulu Langat, Sepang and Klang.
(b) Zone 2: Kuala Selangor and Kuala Langat.
(c) Zone 3: Hulu Selangor and Sabak Bernam.
Foreigners are permitted to buy strata and landed strata properties only and no more than 10% of Non-Bumiputera units can be purchased by Foreigners.
For commercial and industrial sub-segments, Foreigners are only permitted to buy properties priced RM3million and above located in the abovementioned zones.
These highlights were outlined in the circular dated 28 August 2014 which were passed and decided in the State Exco Meeting on 20 August 2014. These new guidelines shall apply to all Sales & Purchase Agreements (“SPA”) which are entered and dated after the effective date of the new guidelines which is 1 September 2014.

The coming into effect of these new guidelines on the purchase of property by Foreigners in State of Selangor does surprise developers and property agents and it will inevitably cause foreign investors to minimize their investment in the State. Further, there was no differentiation or sub-segments of zones in Selangor before the introduction of these new guidelines.

Before the announcement by Prime Minister Datuk Seri Najib Tun Razak on 25 October 2013 to increase the minimum threshold of property that could be purchased by foreigners to RM1 million after 1 January 2014, the minimum threshold was set at RM500, 000. The unexpected issuance of these new guidelines has caught most of the property developers in the dark and they need to make significant changes on their housing development plans within the prescribed zones, in an already slowing market.

As for those foreigners eligible for the Malaysia My Second Home programme (“MM2H”), they will need to purchase directly from developers in accordance to the respective zone system and not from secondary market. Also, they will only be eligible to buy one residential unit per family.

In Malaysia, land matters are always a State matter. Even though the Government announces or proposes its policies through Budget 2014, individual State governments can issue their own guidelines. However, these new guidelines have shown that the State of Selangor is imposing stricter governmental restrictions to curb speculations by local and foreign investors in the real estate market.

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