Planning & Development (Malaysia)

Introduction
Planning System
Development Control System
Building Control System
Malaysia's Multi-media Super Corridor (MSC) Project
Key Legislation Affecting Land Development
Statutory Levies on Property and Development

Introduction

progress.

Malaysia is a country with a land area of 330,000

square km and comprises both Peninsular Malaysia
and the states of Sabah and Sarawak on the island
of Borneo. It is strategically located between the
Indian Ocean and the South China Sea. This unique
location has exposed the country to external
influences which have since been absorbed into the
nation, creating a multicultural blend of tradition and

The multi-ethnicity of Malaysia's population has come into being over the course of the
last 150 years. Currently, the population in Malaysia stands at over 21 million people,
51 percent of which live in urban areas.
Malaysia has a three-tiered government; the Federal Government, state governments
and local authorities. Under the Constitution of Malaysia, land is a state matter.
However, the Federal Government, in ensuring uniformity of law and policy, is
empowered to enact uniform legislation on land and local government which are
applicable to the I I states in Peninsular Malaysia and the Federal Territory of Kuala
Lumpur and Labuan.
The states of Sabah and Sarawak are still governed by their respective land and local
authority ordinances.

Planning System
Background
There are 145 local authorities in Malaysia, 98 in Peninsular Malaysia and 47 in Sabah
and Sarawak. They are vested with powers to control all development of land within
their jurisdiction.
In Peninsular Malaysia, town and country planning is carried out pursuant to the Town
& Country Planning Act 1976 (Act 172), while Sabah & Sarawak have separate laws.
Generally speaking, local authorities as the local planning authorities, have three
functions under the Town and Country Planning Act 1976, i.e.a.

To formulate structure plans which lay down policies concerning the social,
economic and physical character of those areas and the protection of which is
best for the environment.

b.

To use the structure plans as guidelines for the preparation of local plans.

c.

To control development proposed by developers, individuals or other authorities.

Structure Plan
Currently, 66 of the 98 local authorities in Peninsular Malaysia have prepared Structure
Plans which have been gazetted. The Structure Plan consists of a written statement
illustrated by diagrammatic maps. The latter does not distinguish individual properties
or show the effect of proposals on particular areas of land. The Structure Plans only
consider the future development of the local authority area taking into consideration
such matters as population, housing, employment, transport, shopping, recreation,
landscape, environment and so on.
Local Plan
Under the aegis of the Structure Plan comes the Local Plan which is a more detailed
plan. By looking at it, it is possible to gain a good idea of what is going to happen in
any piece of land. Although almost all the local authorities have structure plans
prepared, most of them have still to prepare the detailed local plans.
Land Laws with Reference to Planning
Land matters in Peninsular Malaysia are governed by the National Land Code (NLC)
1965 which adopts the "Torren System" of land administration. Sabah and Sarawak
each have their own separate land laws.
Local authorities in Peninsular Malaysia undertake planning on the use of land under
their control in accordance with the Development Plan system, subject to the provisions
governing land use under the NLC 1965.

Planning System
Machinery to Administer Land
Land is strictly a State matter. It is administered by the State Director of Lands and
Mines under whom is the Registrar of Titles, Deputy Registrar of Titles, Land
Administrator, Collector of Land Revenue and the Assistant Collectors. The Director of
Lands and Mines and the Registrar of Titles, are normally centralised in the state capital
while each district has its own Land Office under the District Officer. In larger districts,
the District Officer leaves all land matters to the Land Administrator who usually deals
directly with the Director of Lands and Mines.
In Peninsular Malaysia, each State is divided into Districts and each District is further
divided into Mukims and within the Mukims are the towns and villages. Generally, the
Registrar's Office keeps and maintains records of town or village land or any lot of
country land exceeding ten acres in area and any part of the foreshore or seabed, while
records of any lot of country land not exceeding ten acres in area are kept at the
District Land Offices.
At the national level, there is the National Land Council whose main duty is to
formulate a national policy in the promotion and control of the utilisation of land to
guide the Federal and State Governments.
Classification of Land
"Land" in the NLC is classified as :a.

town land

b.

village land

c.

any land that does not fall in the above two categories i.e, town or village, is
treated as country land.

All alienated lands are normally classified into one of the following three categories of
land use:a.

agriculture

b.

building

c.

industry

When a piece of land is subject to "agriculture" condition, it means that it can only be
used for agriculture, that is, for the cultivation of crops and the breeding of livestock
and fish. The minimum land area for "agriculture" category is I acre. No building can be
constructed on the land other than a building as a dwelling house for the owner. In
estates, houses can be built for the labourers and clinics for the health of the workers
and schools for the labourers' children. The government can impose other conditions as
prescribed in the NLC if it is found necessary.
When a piece of land is subject to a "building" condition in its title, it is meant for the
construction of residential houses, commercial buildings and all other buildings that
normally one sees in towns. Uses of such will be specified under the expressed
condition of the land.
For example,the category "industry" limits the use of land to industrial purposes only.
This means that the land can be used for the setting up of factories for manufacturing
workshops, foundries and the like.

Planning System

Conversion
Though a piece of land may have expressed or implied conditions on it, this does not
mean that the conditions cannot be varied. A land owner can apply to the State
Government to change the category on this land, say from "agriculture" to "building" to
"industry", or the other way round. Section 124 of the NLC allows for this. Usually the
application for the variation of condition has to go through a process of approval by
various departments and if there is objection to the application, the State can reject the
application.
Sections 135 and 136 of the NLC spell out conditions that have to be fulfilled for land to
be subdivided for the issue of separate titles. The plan must be approved by the
planning authority that is, any authority having jurisdiction under any law of the time
being in force relating to town planning,the lots in the layout plan must be of suitable
shape and size, that each lot should have an access to a road.
Amalgamation and Subdivision
In large scale development, very often, landowners have to amalgamate the land into
one piece and then only is he allowed to subdivide. This was a tedious two step process
because on amalgamation of the land under Section 146, the State Authority issues
only a qualified title - title in advance of survey (Q.T). Before subdividing the
amalgamated lots into housing lots the landowners have to apply for the final title e.g.
grants (Section 135 (I) and (183). To overcome this problem each state had its own
system of speeding up the process. In some states, to have speedy subdivision where
amalgamation is involved, the land owner was required to surrender this original
multiple plot of land and the State Authority then realienates the lots to the landowner.
This is known as the Surrender and Re-Alienation process under Section 240A- 40H.
The government in recognition of this constraint imposed by the NLC on land
developers amended Section 135 (I ), 140 (I) and 146 (1) of the NLC in 1985 which
allowed the State Government to subdivide, amalgamate and partition qualified titles in
continuation of final title simultaneously. The government in recognition of this
constraint imposed by the NLC on land developers amended Section 135 (I), 140 (1)
and 146 (I) of the NLC in 1985 which allowed the State Government to subdivide,
amalgamate and partition qualified titles in continuation of final title simultaneously.
Section 124 allows for the conversion of land from one use to another. Before 1985,
conversion and subdivision had to be carried out in two stages. First the conversion has
to be approved, and only then, can application for subdivision be submitted. This
imposes an unnecessary burden on landowners and delayed in the issue of qualified
titles. In the amended version, which was approved in 1985, Section 124A (I) allows
for simultaneous application for sub-division and conversion in respect of the proposed
subdivisional portions. This has speeded up the process of the issuance of titles.
Appeal Board
Under the Town and Country Planning Act 1976, every State Government is required to
set up an Appeal Board. A land owner can appeal to the Appeal Board against a refusal
of planning permission by a local authority. When an appeal is lodged by an aggrieved
landowner, the Appeal Board can refer the appellants' grounds of appeal to the local
authority to hear their side of the story. Representation at the enquiry is usually in
writing and the appellants may be required to present his case verbally. The decision of
the Appeal Board is sent to the local authority and the appellants and is final. The local
authority or the appellant, if he is not happy with the decision of the Appeal Board, can
refer the matter to the Courts on point of law only. .

Planning System

Chart 1 : An Outline of Planning Procedure, Town & Country Act 1976

Development Control System

Development control is the requirement that all development must have the approval of
the local authority. Development is generally understood as the carrying out of building,
engineering, mining or other operations in, on, over or under the land or the making of
any material change in the use of buildings or land. When a planning application is sent
to the local authority, the local authority considers whether the proposal is in
accordance with the Structure Plan and/or Local Plan, if there is one. The local
authority can approve the layout or building plan, reject it or approve it with conditions.
Layout Plans Approval
Before any building or structure is constructed in a local authority, two stages of
planning approval is required. The first being a layout approval which requires the
physical plan of the proposed building project. The second approval is a building
approval and it deals with the physical characteristics of the building itself.
Subdivision of Land
The I I states in Peninsular Malaysia and the Federal Territory of Kuala Lumpur are
governed by one general land law contained in the National Land Code 1965. Local
authorities can approve the layout plan and under their control. However, before
development of the land commences the land has to be converted and subdivided in
accordance to the requirement of the National Land Code, 1965.
Application for the approval for conversion and subdivision of land may vary from state
to state but generally the procedure is shown in the following charts.

Chart 2 : Layout Approval

Development Control System

Chart 2 : Approval for Subdivision of Land

Building Control System

Building Plan Approval All buildings to be constructed by private individuals /
developers require prior approval from the local authority where the building is to be
constructed. This control is introduced to ensure that structures are constructed on
suitable locations and are safe and habitable places for working and for dwelling, and in
accordance to the building bylaws. While the engineers in the local authority checks on
the architectural and structural aspects of the proposed building, the town planners
review the overall layout, building lines, density and plot ratio, parking and others. This
process is shown in Chart 4.

Chart 4 : Building Plan Approval

Building Control System

Requirement for Carrying Out Development
The requirements of the Housing Developers (Control and Licensing) Act 1966 and
Housing Developers (Control and Licensing) Regulations 1989 must be fully compled
with in carrying out any development. They include:

obtaining a developers' licence from the Licensing and Advisory Division,

Ministry of Housing and Local Government (MHLG);

opening a Housing Development Account;

obtaining an advertisment and sale permit from Licensing and Advisory Division,
MHLG;

conducting sale and purchase agreements in accordance with the requirements

of the Housing Developers (Control and Licensing) Regulations 1989.

Requirement at Construction Stage

The requirements for proceeding with construction works in a particular development,
include the following:

approvals for building plans and earth works must be obtained;

earth works must be carried out in accordance with the requirements of the
Earth Works By-Laws;

safety requirements for construction works under the Factory and Machinery Act
1967 and Occupational Safety & Health Act 1994 must be complied with;

construction works should only be carried out within the limits of lot boundary
as approved by qualified personnel;

all construction works shall be supervised by a qualified personnel;

construction works shall not cause nuisance to surrounding areas;

Issuance of CFO
In connection with the delivery of vacant possession and issuance of Certificate of
Fitness for Occupation (CFO), the following requirements must be complied with:

all temporary buildings must be demolished and the site cleaned up before
application is made;

application in accordance with prescribed procedure;

necessary endorsement from relevant technical departments obtained before

application for CFO is submitted to Local authority;

vacant possession should only be delivered upon an application for CFO which is
in order and has been duly accepted by the Local Authorities;

all minor deviations should be rectified within 6 months as required under the
Uniform Building By-Laws 1984.

Key Legistlation Affecting Land Development

The main legislations affecting land ownership, development and building
operations in Malaysia include :
Housing Developers (Control and Licensing) Act 1966
- Act 118
Street, Drainage and Building

Act 1974

- Act 133

Local Government

Act 1976

- Act 171

Town and Country Planning

Act 1976

- Act 172

Strata Title

Act 1985

- Act 318

Drainage Works

Act 1954 (Revised 1988)

- Act 354

Land Acquisition

Act 1960 (Revised 1992)

- Act 486

Sewerage Services

Act 1993

- Act 508

National Land

Code 1965

Environmental Quality

Act, 1974

Uniform Buildings

By-Law, 1984

-Act 127

Statutory Levies on Property and Development

Stamp Duty
The Stamp Duty on an instrument of transfer is payable at the following rate :
up to RM 100,000
1RM
100,001 - RM500,000
2%
RM500,00 I - RM 2,000,000
3%
RM2,000,000 and above
4%

Real Property Gains Tax

A real property gains tax is charged on gains derived from the disposal of real property
at the rates as prescribed in Schedule 5 of the Real Property Gains Tax Act 1976 (Act
169).
In the case where the disposer is a company, the rate of tax on disposal within two
years after the date oaf acquisition of the chargeable asset is 30%. Thereafter, the rate
of tax is 20% for the 3rd year, 15% for the 4th year and from the 5th year onwards the
rate of tax is 5%.
In the case of an individual who is not a citizen and not a permanent resident, the rate
of tax on a disposal within 5 years of acquisition is a flat rate of 30%. From the sixth
year onwards, the tax is assessed at 5%.
For Malaysian individuals, the rate of tax on a disposal within two years after the date
of acquisition of the chargeable asset is 30%. Thereafter, the rate of tax is 20% for the
3rd year, I 5% for the 4th year and 5% for the 5th year. No tax is payable as from the
6th year.

Conversion Fees
In Malaysia land conversion fees is based on a percentage of the improved value of the
land. For example, if a developer bought 200 acres of agriculture land and intends to
build houses, he has to submit his application to the relevant authorities as shown in
flow charts. If the layout plans for the 200 acres is approved by the relevant
authorities,the conversion fee from agricultural land to building land is estimated as
follows :Example:
Nature of 200 acres of land at RM 10,000 / acres = RM2 million
Assume only 45% of land (90 acres) is saleable .
The balance of building land say at RM8 per sq. ft. therefore is
Deduct development cost say at RM 100,000 per acre
Actual improved value of land
Assume conversion fees to be 20% of improved value
The conversion fees the developer has to pay the government
for converting the 200 acres of agriculture land to building
land is RM4.4 million or RM22,000 per acre.

RM31 million
RM 9 million
RM22 millio

RM4.4 milion

However, as land is a State matter in Malaysia and there are I I states and two federal
territories, majority of the states have simplified the method of calculating conversion
fees. Instead of taking a percentage of the impoved value of the land, some states only
value the agricultural land and charge conversion fees as a percentage of the value of
the agricultural land.