What is the different Freehold vs Leasehold in Malaysia?
The rapid growth of population in Malaysia brings the development of property throughout Malaysia especially in the capital of Malaysia, Kuala Lumpur, Johor, Selangor, Melaka, and others. In recent years, with the improvement of living standards, there's an increasing number of new buyers beginning to invest in real estate in Malaysia.
Therefore, the question had always been asked from the buyer when buying a house in Malaysia, what is "Leasehold vs Freehold?". This is a really important decision that needs to be considered in the process when buying a house in Malaysia.
Understanding the property market in Malaysia is difficult, especially for the new buyer when deciding leasehold or freehold.
Therefore, is it important that you need to know the difference between leasehold and freehold? And what is the concern if you choose to buy a leasehold property?
For an advanced perspective, let's take a look at the difference between leasehold and freehold property.
What is a freehold property?
Freehold property is a property that is entirely own by the owner with non-control from the government or local government. It is undeniable that freehold properties are always snapped much faster compared to leasehold properties.
In Act 56 of Malaysia National Land Code, 1965 it is clearly stated that all state lands are owned by the State authority. When the land is disposed by the government authority to an individual for an unlimited period, then it will then be freehold land.
This is usually in the case when the buyer buys a freehold bungalow, landed house, apartment on a certain piece of land. If the developers own freehold land, then developers have the ownership in the form of a master title, and the developer can use it to build landed houses and transfer the ownership of the properties to buyers upon the completed sale.
However, if the property is an apartment or high-rise building, then the buyer will only have the ownership part of the residential development which will be distributed to the buyer in the form of a Strata Title. While the developer will still retain the ownership of the land.
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What are the advantages of buying a freehold property?
- The owner of the freehold property owns the land when the property is built on.
- The value of freehold property has a higher value in the long run.
- In the ease of selling the property, the transaction process is straightforward. The sale of freehold properties will generally take a short time to complete.
What is a leasehold property?
A leasehold property is a property owned by the government, and it only can belong to the owner for 30, 60, 99, or 999 years. Once the expired of the leasehold period, then the ownership of the property will return to the State government or authority unless it has been renewed before the expiration.
If the owner would like to keep the property, then he needs to apply for a leasehold extension before the lease expired. If the renewal is granted from the Stage government or authority, then the owner can extend his lease in exchange for a premium payable based on the market value of the land.
Compared to freehold property, the leasehold property owner needs to follow stricter rules and regulations which formulate by the State authority. The types of usage and type of activities allowed on the property are restricted by the rules which had stated on the leasehold property. Leasehold properties buyer is responsible for the development and maintenance of the property as land legislation.
What are the advantages of buying a leasehold property?
- Leasehold properties cost less compared to freehold properties, which generally in 20% or more.
- A buyer can make an investment more valuable by buying a leasehold property, which has lower entry costs and higher rental throughput.
- The process of buying and selling leasehold property takes a longer time compared to freehold property because of state consent and the time for approval is needed.
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