Should you invest in a bumiputra lot?

Focus: Should you invest in a bumiputra lot?

 By KHAIRUL ANUAR BIN SHAHARUDIN
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One of the issues always raised by house buyers in Malaysia is whether a particular property is a bumiputra lot or not. There seems to be a stigma attached to property labeled as bumiputra lot not just among the non-bumiputras who shun it in the secondary market but also from bumiputras themselves. Most property investors think that buying and selling bumiputra property is a hassle. It has its own procedures to follow and it takes longer to transfer.

What is a bumiputra property?
Before we even go into the definition of bumiputra property, let us see the definition of ‘bumiputra’ itself. The word ‘bumiputra’ comes from a Sanskrit word meaning ‚Sons of the Soil‘. There is no specific clause defining the word ‘bumiputra’ in the Federal Constitution of Malaysia, unlike the word ‘Malay’ which is defined in Article 160(2) of the Constitution as someone who professes to be a Muslim, speaks the Malay language, adheres to Malay customs and is domiciled in Malaysia. In Article 153 of the Federal Constitution, there is a quota set for Malays and natives of any states of Sabah and Sarawak in certain matters. This has been used to define the word bumiputra and relates to bumiputra lots in housing developments.
The quota for bumiputra property is imposed on housing developers but is rarely written on the individual title of the property. The housing developer will control any sale to the general public and make sure the quota imposed is met. Usually, a quota of 30 per cent of the total houses sold in the housing development is imposed on the housing developer to be sold only to bumiputra buyers.
Other than a quota on the number of houses sold, there is a special discounted purchase price with seven per cent discount to be given to any bumiputra buyers. There are states in Malaysia like Johor with bumiputra discount of 15 per cent. When you buy a bumiputra unit from a housing developer and get a bumiputra discount, your property is restricted from being sold to non-bumiputras in the secondary market.
Or is it really?
Malay reserve vs bumiputra lot
When it comes to Malay reserve property, there is no doubt about it. The property can only be transacted between two Malays. The Malay reserve property is even known as ‘red ink’ grant as there is a red label on such title with the word ‘Malay Reserve‚ in order to restrict any transaction. There is no such similar labelling on bumiputra property on the Sale & Purchase Agreement or its individual title.
The only evidence to show whether a property is a bumiputra lot or not is to find out whether the owner is a bumiputra or not. In the absence of such label on the individual title, it is at the discretion of the land office, when registering a transaction to determine whether the transaction at the secondary market is between two bumiputras. This is especially true when the property is a leasehold property requiring consent to transfer and to charge from the State Authority. It is important to justify the sale of your property if you are a bumiputra selling to a non-bumiputra.
Examples
In order to understand the working of bumiputra lot, let me give a few examples of property transactions I have done as a bumiputra myself.
I invested in a condominium in Sunway in 2004. I sold it in 2006 when I managed to find a non-bumiputra buyer for it. There was no clause in the Sale & Purchase Agreement (SPA) labelling the property as a bumiputra lot. When I drafted the SPA for the sale at the secondary market, I was required to get the consent from the housing developer which also managed the condominium (the law now doesn‘t require that kind of consent anymore). I was refused the consent by the management as they argued it may affect the bumiputra quota when titles are issued for the condominium. I finally managed to sell off the condominium when the management agreed with my argument that they only need to worry about the quota when the strata titles are issued years down the road.
In another case, I bought a single-storey terraced house as investment in Seri Kembangan in 2005 and sold it in 2009. The buyer was a bumiputra from Sarawak with a non-bumiputra‘s name. I was only allowed to transfer the property into his name after I attached his Amanah Saham Bumiputra book with my second appeal.
Nowadays, Selangor land offices allow the transfer of bumiputra property to non-bumiputras if the seller can show proof that he had advertised in the main newspapers offering the property for sale three times but to no avail. The advertisements must be 14 days apart from each other. This would constitute the proof needed to show that there were no bumiputra purchasers for the property, leaving the seller no choice but to sell to non-bumiputra buyers.
In conclusion, as there are so many bumiputra investors out there, thanks to more awareness about making money from buying and selling property, I think it is safe to say, there is no more stigma on investing in bumiputra property either as a buyer for the bumiputras buying from housing developer or as a buyer of bumiputra property from the secondary market. There is enough money circulating among the bumiputras from buying and selling of properties that a bumiputra property investor can make money by selling their property to another bumiputra or even to a non-bumiputra buyer. There is no good time but right now to buy and sell property whether you are a bumiputra or not. As an investor, I always believe property to be the best way to make lots of money.
Why not? I did.
Khairul Anuar bin Shaharudin is a lawyer and author of “40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia”.

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