A Guide to Bumi attributes in Malaysian Property

بِسْـــــــــمِ ﷲِالرَّحْمَنِ الرَّحِيم

The complexity of the Malaysia legal system has given rise to attributes in real estate and land properties that makes it less straight-forward and easy to understand for the layman. There are certain terms in Malaysian property that does not exist anywhere else in the world.

In today’s guide, we will share with you what some of these terms are, and what their implications are towards the real estate market.

Bumi Quota

The Bumiputera Lot Quota Regulation was introduced in 1971 under the New Economic Policy (NEP) as a measure to increase Bumiputera shares in all aspects of the economy, including real estate, up to a target of at least 30%. Developers are thus legally required to allocate a minimum of 30% of all property units to Bumiputeras.

In Malaysia, as land is a state matter pursuant to the Federal Constitution, the power to manage land is demarcated to the State Authority. Thus, regulation of Bumi Quotas falls under the direct purview and control of the State Government, causing the exact quota to differ between different states.

Bumi Lot

Bumputera Lots are units of land or property open for sale or lease only to Bumiputera owners. They are related to the the Bumi Quota imposed by the State on real estate developers. In every development, whether residential or commercial, Bumiputera ownership will be required to be of a certain percentage (usually 30%) at any one time. Control of transactions of Bumiputera Lots usually falls to the developer, who ensures that the quota imposed is met. These properties are usually restricted from being sold to non-bumiputera buyers.

For most Bumiputera Lots, the Sale and Purchase Agreement can sometimes determine if the property is a Bumiputera unit. There may or may not necessarily be any mention of it on the individual title of the property itself. In some cases, the term “Bumi Lot” will be found as a restriction-in-interest on the property’s individual title. In other cases, the label “Bumi Lot” label will be found on top of the individual title. There are also cases where a Bumiputera Lot may not be labelled as one on any of its documents.  For example, a seremban house for sale would not have any endorsement on the Title. In these exceptional cases, a Bumiputera owner will be able to apply for consent to transfer the property to a non-Bumiputera buyer, subjected to the State’s consent.

However, for strata properties without an individual title yet, consent from the housing developer must be obtained in order to resell the property. This is so because the developer needs to consider if the Bumi Quota imposed by the State is met at that particular time. Keep in mind that a release of a Bumiputera Lot does not automatically make it a normal lot. This means that subsequent transfers of ownership to non-Bumiputera owners will still be subjected to the Land Office’s consent.

Regardless of whether the property is titled as a Bumi Lot or not, there will be many encumbrances when trying to transfer property owned by a bumiputera to a non-bumiputera. Although no actual policies or laws exist to regulate sub-sales or sales in the secondary market, it is the norm for the Land Office to reject applications for these transfers the first time, although appeals can be made. Therein lies the problem, when these decisions are based on unwritten policies subjected to the Land Office’s discretion. However, if a plausible reason is provided to the Land Office, such transfers will sometimes be approved. Freehold units tend to be less prone to these issues compared to leasehold units.

Bumi discount

Bumiputera Lots are commonly sold by developers at a discount of 7% to 15% of the purchase price. The exact percentage of discount offered will differ from state to state and is also dependent upon prevailing property prices.

During the sub-division stage, developers, with the consent of the State, will earmark a number of properties as Bumiputera Lots. These properties will be advertised as such and will only be sold to Bumiputera buyers. However, the limited demand for Bumiputera Lots make them difficult to sell. Hard pressed to cut losses, developers often find other ways to stimulate interest in Bumiputera Lots in order to fulfill the Bumi Quota set by the State and avoid legal penalization. Instead of setting aside and marking units as Bumiputera Lots, developers will single out Bumiputera buyers from the total list of buyers, and offer them discounts on the property. However, the catch is that these buyers will need to give their consent for these properties to be marked legally as Bumiputera Lots in order to enjoy these Bumi discounts.

Malay Reserved Land

Malay Reserved Lands (MRLs) are distinct from Bumiputera Lots. It is a common misconception that both are one and the same. In fact, Malay Researved Lands are more restrictive than a Bumiputera property and can be considered a subset of it. Unlike Bumiputera Lots, which can be owned by any Bumiputera as defined in Article 153 of the Federal Constitution, Malay Reserved Lands are gazette parcels and can only be owned by a Malay, as defined by fulfilling the criteria in Article 160(2).

These types of properties are always marked with the words “Malay Reserved” in red on the individual title. Malay reserved property can only be transferred between Malay owners. It is virtually impossible for Malay Reserved Lands to be released. In order for release to be granted, a replacement must be declared. This is most commonly in the form of another property or land parcel of similar value and size.

Malay Reserved Lands are subjected to more stringent legal restrictions. For example, the lands and properties on Malay Reserved Lands cannot be rented or leased to non-Malays. Furthermore, any business that operates on Malay Reserved Lands must be wholly owned by Malays. Larger businesses, such as publicly traded companies must be comprised of Malay stakeholders only.

Last Words

Before we start dabbling in real estate, is it vital to be informed about the characteristics of the various land titles in Malaysia. Depending on the objective of your purchase, Bumi Lots may or may not be worth the cheaper prices. They are great for genuine homebuyers that want settle down and have a long-term home and also for long-term rental investors that do not plan to sell off the property in short timeframes. However, for investors seeking to flip properties and obtain high returns, Bumi Lots can be hard to resell in the real estate market. Bumi Lots have a more limited market, slow appreciation of value and are subjected to strict regulations by the Land Office.

As a conclusion, the take-home message from this guide is that you should keep in mind and research the ins and outs of the title of your prospective property purchase.