By GUNAPRASATH BUPALAN
Whether you are a veteran investor with a dozen properties parked under your name or a newbie who’s about to purchase your first property, there are some terminologies that you should familiarise yourself with.
This issue of Real Reserve takes you back to the roots of property investment, to once again refresh the minds of the veteran and to open the eyes of the new investor.
In Malaysia, it is most important that you familiarise yourself with four key market segments way before you speak to that real estate agent that you are so eager to call. It’s best to understand the segments first so that the agent knows that you aren’t a rookie.
The four key market segments to pay attention to:
Developer Property or also known as New Property
These are new developments that are purchased directly from property developers upon viewing the plan or the show units. Being a new development, these units should be fitted with new appliances (if provided within the purchase) and new fittings that include tiles, bathroom appliances and others.
Some developers practice a ‘build-then-sell’ approach. This type of offer means that the developer will complete construction before selling all the units unlike the traditional property sale where payment starts upon building progression.
Sub-sale or also known as Secondary Property
Sub-sale properties are existing properties that are purchased from a seller who is not a developer, or for a more common term – second hand properties.
Sub-sale properties could sometimes be occupied by the owner or by a tenant at the time of purchase. Sometimes, the units are left vacant.
Sellers of these types of properties more often than not use real estate agents as negotiators. This means that purchasing these types of properties enables you to negotiate the final price a little.
Auction properties have become a big part of Malaysian property purchase of late. This is due to the nightmare that banks are currently facing – Non Paying Loans (NPL). When an owner is unable to make his monthly payback to the amount he or she borrowed for the loan to purchase their house, the bank will seize the house and if the outstanding is still unsettled, the bank will then call for an auction on the said property.
These types of property could be obtained below the current market value. An auctioned unit is sold to the highest bidder from the fixed auction starting price and is sold on ‘as-is-where-is’ basis.
Unlike other types of property purchase, there is no guarantee given on vacant possessions and titles. Most often, winners of auctioned properties may not be able to inspect the interior of the property they are bidding for and has to gamble on the given information by the auctioneer – a risk the bidder has to take.
Commercial properties or also known as non-residential properties
Commercial properties, as the sub-header says it are non-residential properties. These are properties that are mainly used for business purpose such as retail outlets, offices; show units, hotels, complexes, multipurpose halls, etc.
Developments that claim to be a mixed-development – a mixture of commercial and residential, more often then not fall under a commercial title.
Aside from the market segments, it would also be good to understand the three major property types that are commonly used here in Malaysia.
The three major property types that you normally hear:
The three common land titles in Malaysia include ‘Freehold’, ‘Leasehold’ and ‘Malay Reserved Land’. Checking the status of the land is easily done by giving a call to the Land Office or the State Land Registrar.
The tenure of freehold land is for life. You own the land, the unit, the building and anything that is on the land. There is no time limit for the owner and the freehold land lies with the titleholder until the property is transferred to someone else.
Leasehold land is returnable after the expiry of the lease period. This type of land usually belongs to the government and the lease is often for 99 years. When the lease expires, the government can take back the land or lease it further. At the end of the lease it is fairly easy to renew the lease for a further 99 years upon payment of a premium based on the current market value of the property. It is also possible to arrange for a new lease during the period of the existing lease.
Malay Reserve Land
Malay Reserve Land is land that is exclusively for Malays or Bumiputeras. It cannot be sold to other races, including foreigners.
These days, many developers tend to build commercial buildings and combine them with functions. For instance, retail units on the lower floors and offices on the upper floors. The reason to do so would be to have a good ow of human traffic within the complex amongst office dwellers and the retail outlets, which most of the time would include F&B outlets and convenience stores.
Commercial titles include that of:
• Retail Lots / Stores
• Shopping Centres
• Shop Offices
• Shop Houses
• SOHO / SOFO / SOVO
• Commercial buildings
• Factories and warehouses (though sometimes this falls under Industrial title)
Residential titles are solely for the use of residential properties only and not for any form of business or office purpose. Do take note that residential units such as serviced apartments / SoHos / SoVos / SoFos, all fall under commercial land title and not a residential title.
Properties that fall under Residential Title include:
• Terrace Houses
• Semi-detached Houses • Bungalows
So now, the next time a real estate agent starts to negotiate with you, you are able to hold your argument ground by understanding the land titles, key segments and property type that you are about to purchase.