© The Sun (Used by permission)
by Andrew Wong
Since its inception, the Foreign Investment Committee ("FIC") has issued various guidelines for the regulation of acquisition of properties by foreign interests. The current applicable guidelines are contained in the "Guideline on the acquisition of properties by local and foreign interests", which came into effect on 21st May 2003.
Any acquisition of property by a foreign interest, including a permanent resident, requires the approval of the FIC. "Foreign interest" means (a) an individual who is not a Malaysian citizen or (b) a foreign company or institution, or (c) a local company or local institution whereby parties mentioned in (a) and/or (b) above hold more than 50% of the voting rights therein.
Acquisition of property by a foreign interest, if approved, is usually subject to conditions imposed by the FIC (hereinafter referred to as the "conditions for acquisition").
Residential property
The general rule is that, a foreign interest is allowed to acquire a residential property valued at more than RM150,000.00 per unit, with no limit on the number of property acquired. Each State Authority will have the discretion to consider acquisition by a foreign interest, based on the area or location of property, types of property and percentage of total units in a project. Financing from internal and external sources are allowed.
Exceptions to general rule on residential property
(a) A permanent resident may acquire a residential unit valued at more than RM100,000.00.
(b) A local manufacturing company, owned by foreign interests, may acquire residential units valued at less than RM150,000 but more than RM60,00, provided the residential units are to be used by the company's employees.
Commercial property
A foreign interest may acquire commercial property valued at less than RM10 Million, without having to incorporate a local company, provided that the commercial property is for its own use.
Agricultural land
A foreign interest may only acquire agricultural land valued at more than RM250,000.00 or in area of at least five (5) acres, whichever is higher, subject to conditions for acquisition, provided that the acquisition is for the purposes of agricultural activities on a commercial scale using modern or high technology, or for an agro–tourism project, or for agricultural or agro–based industrial activities for production of goods for export. In the last mentioned activity, equity conditions may be relaxed.
Industrial property
A foreign interest is permitted to acquire industrial property, without any price limit, provided that the property shall be registered in the name of a locally incorporated company, and further, the acquisition shall be subject to conditions for acquisition.
Public auction
Foreign interest including a foreign bank may acquire property valued at more than RM150,000.00 per unit, in a public auction, subject to conditions for acquisition.
Love and affection
A transfer of property to a foreigner for love and affection requires approval of the FIC and approval is generally allowed for transfers among immediate family members only.
Lease
Any lease of property for a term of 10 years and above to a foreign interest requires the approval of the FIC.
Disposal
The FIC not only regulates acquisition of properties by foreigners but also, disposal of properties by foreigners. For example, the disposal of any property by a foreign interest to another foreign interest requires FIC approval. Disposal of a property valued at less than RM20 Million by a foreign interest to a local interest does not require FIC approval, although FIC must be notified of the said disposal.
Charging
Any charging of property in Malaysia to a foreign interest requires the approval of the FIC and such charging of property will only be allowed if all of the loan taken shall be utilised solely for the operation of business in Malaysia.
Exemptions from approval
The following acquisitions of property by foreign interests are exempted from obtaining FIC Approval: –
(a) Acquisition by Multimedia Super Corridor (MSC) status companies of any property in the MSC area, provided the property is used for operational activities, and this includes using the property as a residence for their employees;
(b) Acquisition of residential unit under "Malaysia My Second Home" Programme;
(c) Transfer of property pursuant to a will or court order;
(d) Acquisition of industrial property by a manufacturing company licensed by Ministry of International Trade and Industry, for own manufacturing.
Exemptions from conditions for acquisition
Some acquisition of properties by foreigners, although requiring FIC approval, are exempt from conditions for acquisition, and these includes:
(a) acquisition of a residential unit for own use;
(b) acquisition of one (1) or more contiguous properties with a total value of less than RM10 Million.
Acquisition of an industrial property by a foreign interest for its own manufacturing operations is exempted from the equity condition only and may be subject to other conditions for acquisitions.
Restrictions
Foreign interests are not allowed to acquire:
(a) low and medium low cost properties;
(b) properties built on Malay reserve land;
(c) properties allocated to Bumiputera in any property development;
(d) stall and service workshops;
(e) agricultural lands developed on the basis of the homestead concept.
Conditions for acquisition
When an acquisition is permitted by FIC subject to conditions for acquisition, some of these conditions for acquisition relate to equity conditions (for example, 30% Bumiputera equity), share capital condition (for example, paid–up capital of at least RM250,000), employment condition (for example, recruit and train Malaysians to reflect the country's population composition), property development condition (for example, at least 75% of the total value of building materials and fittings used for construction should be of local interests), and registration condition (for example, property to be registered in the name of a local company).
Compliance period
Equity conditions, if imposed, must be complied with within 2 years from date of the FIC approval or from the date of commencement of the development of the property, whichever is earlier. The compliance status must be reported to FIC at least 1 month before the compliance deadline or whenever requested by FIC. The compliance period may be extended for 1 year based on merits of the case.
The writer is the Deputy Chairman of the Conveyancing Practice Committee, Bar Council, Malaysia www.malaysianbar.org.my
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