Cash flow and Timing of Sub-sale Property Purchase in Malaysia by Foreigners

If you are a foreigner looking to purchase a sub-sale property in Malaysia (e.g. not from a developer), there are several steps, payment amounts, and timing of the transaction that you need to be aware of. This article will break down the typical process for you with a closer focus on cash flow and timing. However, do note that ‘sub-sale’ transactions in Malaysia are not as simple or as straightforward as purchases directly from developers. Hence the process, steps and time frame to complete a sub-sale purchase can vary significantly from matter to matter. Understanding the ‘cash flow’ in a sub-sale purchase is important for proper planning to avoid any late interest penalty on the purchaser.

Engaging a Lawyer

It is always advisable to engage a real estate lawyer at the very outset, even before signing an offer letter, which contains several critical negotiable elements, and before placing the earnest deposit with the real estate negotiator. Your lawyer will also be able to conduct essential preliminary searches to check and verify the status and legal ownership of the property, and to verify to a certain degree any representations made about the property. For example, whether the property comes attached with car parks, whether there are any caveats indicating challenges to ownership etc. At this early stage, you should also begin checking with your bank on your ability to obtain financing for the intended property purchase. These steps will gain you precious time as a purchaser later on.

Offer Letter & Earnest Deposit

Once you are ready to make an offer to purchase a property, the real estate negotiator will prepare the offer letter. The terms of the offer letter will set out your main obligations as a purchaser, the time sensitive deadlines to meet, and the key features that may apply to your particular property purchase. Upon the offer letter terms being accepted by the seller, you will be required to place an earnest deposit with the real estate agent as stakeholder, of between 2% to 3% of the purchase price in cash, when signing the offer letter. Getting your lawyer to review and amend the terms of the offer letter before signing off is critical, to ensure that your rights as a purchaser are protected, even at this early stage. Not doing so could result in critical missed opportunities to you as a purchaser. For example, inserting that the obligation to sign the sale and purchase agreement will be ‘subject to you obtaining a loan approval in principle’ could save you from a forfeiture of your earnest deposit (more below).

Apply for Financing

Immediately after the offer letter is signed, the purchaser should apply for a bank loan without any delay, as loan applications from foreigners often take longer than usual to process. Unless an extension of time has been requested at the outset, the offer letter will typically provide for a standard time frame of 14 to 21 days for the parties to execute the Sale and Purchase Agreement (“SPA”). The failure to meet this deadline may result in the purchaser’s earnest deposit being forfeited if the seller does not agree to an extension of the signing deadline. Waiting until the SPA is signed to apply for a loan will likely use up the precious 3 months’ time frame provided to purchasers to pay up the full purchase price and could result in late interest penalties to the purchaser.

Signing the Agreement, Deposit & Fees

When the SPA and transactional documents are ready to be signed, the purchaser needs to pay the balance deposit sum, making up 10% of the purchase price after counting in the earnest deposit paid earlier. The solicitor’s fees, full stamp duty, and other related incidental costs for the entire transfer and / or loan transaction will also need to be paid upfront.

In Malaysia, the average time for a straightforward sub-sale SPA transaction usually takes 3 to 4 months from the date the agreement is signed.

State Authority Consent

For a foreigner purchasing a sub-sale property in Malaysia, there are usually some condition precedents to be met before the typical 3 months completion period starts counting. This includes obtaining State Authority consent (applies to all types of property) and / or obtaining ‘developer confirmation’ (for property without strata title). This step will likely extend the total transaction time by an additional 1 to 2 months (or longer), depending on the State the property is located in.

In some states, such as Johor, a levy is further imposed on a foreign purchaser as a condition to the State Authority consent. The levy could be based on a percentage of the value or purchase price of the property (e.g. in Johor the levy is 2% of the property value).

Paying the Differential Sum

After all the condition precedents are met, and where a loan is taken to finance the purchase of the property, the purchaser must place the differential sum with its solicitors within 2 weeks of request. The differential sum is the residual amount of the balance purchase price that is not covered by the loan sum. An example of the breakdown of the 100% purchase price will be:

  • the deposit (10%)
  • the loan (50%)
  • the differential sum (40%)

If a loan is taken, the exact differential sum can only be determined after the approved loan sum is known. Foreign purchasers should therefore apply for a loan early, in order to prepare sufficient cash to meet the differential sum.

Loan Sum Released

Only after the differential sum is paid by the purchaser will the bank disburse the loan. Where a loan is obtained, it will usually be disbursed in 2 parts;

  • to settle the seller’s outstanding redemption sum (if any); and
  • to pay the balance loan sum to the seller.

If the seller does not have any outstanding redemption sum, the transaction process will be sped up slightly as this step will not be necessary. After the redemption sum is fully paid off, the purchaser’s bank will release the balance loan sum to the seller’s lawyers, marking the full payment of the purchase price and the completion of the transaction.


The overall time frame for a foreigner to complete the sale transaction will usually take between 5 to 6 months. However, keep in mind, any delay in completing the sale transaction will result in the purchaser being liable for late interest penalties. If there are further excessive delays of the transaction beyond the extended completion date, the seller can even terminate and forfeit the purchaser’s 10% deposit.


This article was written by Shawn Ho (Partner) & Suzanne Fam (Senior Associate) from the corporate practice group of Donovan & Ho.  Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020.  We are also ranked as a Recommended Firm by IFLR1000 2020.

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. We also advise on property transactions and real-estate related tax planning. Feel free to contact us if you have any queries.


Foreigners Purchasing Malaysian Property using a Private Company
Incidental Costs Applicable to Purchasing Sub-Sale Property in Malaysia

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