Indonesian Buyers: Complete Guide to Buying Property in Malaysia

Indonesian buyers represent one of the largest foreign buyer groups in Malaysia, especially in Johor and Kuala Lumpur. But the process differs significantly from buying property in Jakarta or Bali. The ownership structure alone is a fundamental departure — Malaysia offers freehold title to foreigners. Indonesia does not.

In Indonesia, foreign nationals are restricted to Hak Pakai (right to use) with a maximum tenure of 80 years. In Malaysia, a foreigner can hold freehold land in perpetuity. That single difference changes the investment calculus entirely. Add in lower price points than Singapore, cultural and language familiarity, geographic proximity, and a shared Islamic banking infrastructure, and the case for Malaysian property becomes clear. But the tax treatment, remittance process, and financing landscape have specific nuances that Indonesian buyers must understand before signing anything.

This guide covers the full picture — from moving money out of Indonesia to calculating your actual returns after Malaysian and Indonesian taxes.

Why Indonesian Buyers Choose Malaysia

The motivations go beyond price. Several structural factors make Malaysia uniquely attractive to Indonesian investors compared to other regional options.

Freehold ownership. This is the headline. Indonesia's Agrarian Law (UUPA 1960) restricts foreign ownership to Hak Pakai — a right-to-use title with a maximum initial term of 30 years, extendable to 80 years total. Hak Milik (freehold equivalent) is reserved for Indonesian citizens. In Malaysia, foreigners can hold freehold strata or landed property directly on the title. No intermediary structures, no time limits.

Cultural and language familiarity. Bahasa Malaysia and Bahasa Indonesia share the same root language. Most Indonesian buyers can navigate daily life, read property documents (which are bilingual English/Malay), and communicate with agents and lawyers without a translator. Shared cultural norms around food, religion, and social customs reduce the friction of cross-border property management.

Geographic proximity. Jakarta to KL is 2 hours 20 minutes by direct flight. Surabaya to KL is 2 hours 40 minutes. Medan to Penang is 45 minutes. AirAsia, Malaysia Airlines, Garuda Indonesia, and Lion Air operate high-frequency routes on all corridors. A property in KL is more accessible from Jakarta than a property in Bali from Jakarta during peak season traffic.

Lower price point than Singapore. Many Indonesian investors compare Malaysia against Singapore. A 1,000 sqft condo in Singapore's CCR costs SGD 2M+. The same size in KL's Mont Kiara costs RM 800K-1.2M (roughly SGD 240K-360K). For Indonesian buyers who want Southeast Asian diversification without Singapore's price tag, Malaysia is the logical middle ground.

Islamic banking infrastructure. For Indonesian buyers who require Shariah-compliant financing, Malaysia is the global leader in Islamic banking. Products like Musharakah Mutanaqisah and Commodity Murabahah are standard offerings from every major Malaysian bank. Indonesia's Islamic banking sector is growing but remains smaller by assets under management.

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Indonesia vs Malaysia: Property Ownership Comparison

The yield comparison is nuanced. Bali holiday rentals can generate 5-7% gross yields, but these are short-stay yields that fluctuate with tourism seasons and require active management. KL's 4-6% yield is primarily from long-term tenancies — more predictable, less management-intensive.

Jakarta CBD yields of 3-5% are broadly comparable to KL, but with the Hak Pakai limitation, your effective holding period is capped. In Malaysia, freehold means you hold indefinitely and benefit from long-term compounding of both rental income and capital appreciation.

Remittance from Indonesia: Moving Money to Malaysia

Bank Indonesia (BI) allows outward remittance for property investment purposes. Indonesia does not have a blanket capital control that prevents citizens from moving money offshore. However, the process is more regulated than some buyers expect.

What you need to provide your Indonesian bank:

Processing:

Major Indonesian banks — BCA, Bank Mandiri, BNI, CIMB Niaga — all handle outward remittances for property purchases. Typical processing time is 2-3 business days via SWIFT/TT. Cost ranges from IDR 250,000 - IDR 500,000 per transfer plus correspondent bank charges.

Practical tips:

• Start the remittance process early. Do not wait until the SPA 14-day payment deadline to initiate your first transfer. Processing delays happen.
• Transfers above USD 25,000 (or equivalent) require an Underlying Transaction (UT) report to Bank Indonesia. Your bank handles the filing, but you need to provide the supporting documents listed above.
• Consider splitting large transfers across 2-3 tranches to avoid any single-transfer processing delays.
• The IDR/MYR exchange rate is volatile. IDR has depreciated against MYR over the past decade. Lock in your rate early if your bank offers forward contracts, or use a specialist FX broker for large amounts.

IDR/MYR exchange rate: Approximately IDR 3,600 per RM 1 as of early 2026. On a RM 1.5M purchase, you are transferring approximately IDR 5.4 billion. At IDR 500,000 per transfer fee, the remittance cost is negligible relative to the purchase price.

Financing Routes for Indonesian Buyers

Malaysian banks can be cautious with Indonesian income documentation. Indonesia's tax compliance landscape and document standardization differ from what Malaysian bank credit teams are accustomed to reviewing. This affects both approval rates and processing times.

Best financing options:

HSBC Malaysia. If you have an HSBC Premiere account in Indonesia, the cross-border referral programme offers the smoothest path. HSBC Malaysia can access your financial profile within the banking group. LTV up to 60-70% for Premier clients. This is the recommended route for salaried professionals.

OCBC Malaysia. OCBC has a presence in both Indonesia (via OCBC NISP) and Malaysia. Cross-border clients get preferential processing. LTV typically 50-60%.

CIMB Malaysia. CIMB has a strong Indonesia presence (via CIMB Niaga). Indonesian buyers who bank with CIMB Niaga can leverage the relationship, though the cross-border programme is less formalized than HSBC's.

All-cash purchases. Many Indonesian buyers — particularly high-net-worth individuals from Jakarta — prefer to buy entirely with cash. This eliminates the financing risk, speeds up the transaction, and avoids the 0.5% loan stamp duty. The trade-off is opportunity cost of capital and loss of leverage benefits.

Income documentation required by Malaysian banks:

The key challenge: Malaysian bank credit teams may not recognize Indonesian tax documents. SPT formats differ from EA forms (Malaysia) or IR8A (Singapore). Having your documents professionally translated into English and notarized reduces friction significantly.

For a comprehensive analysis of all financing options available to foreign buyers in Malaysia, see our foreigner financing guide.

Tax Treatment: Indonesia-Malaysia Double Taxation Agreement

Indonesia has a worldwide taxation system. This means Indonesian tax residents must declare and pay tax on global income — including rental income from Malaysian property. However, the Malaysia-Indonesia Double Taxation Agreement (DTA) prevents you from being taxed twice on the same income.

How it works:

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1. Rental income is first taxed in Malaysia. As a non-resident (less than 182 days in Malaysia), your rental income is taxed at a flat 30% on net rental income after allowable deductions (assessment, quit rent, loan interest, repairs, insurance). Personal reliefs are not available.

2. Report the same income in Indonesia. Include Malaysian rental income in your SPT annual tax return. The income falls under "income from overseas" (penghasilan dari luar negeri).

3. Claim a foreign tax credit. Under Article 24 of Indonesia's Income Tax Law (PPh) and the DTA, you can credit the Malaysian tax paid against your Indonesian tax liability on the same income. The credit is limited to the Indonesian tax that would have been payable on that income.

Worked example:

In this example, the Malaysian tax fully offsets the Indonesian tax liability. You pay RM 14,400 in Malaysia and nothing additional in Indonesia. However, if your Indonesian marginal rate is higher than 30%, you would owe the difference to DJP (Direktorat Jenderal Pajak).

The DTA credit method ensures you are not double-taxed. But it does not reduce your total tax below the higher of the two countries' rates. The combined effective rate is the higher of the Malaysian rate or the Indonesian rate on that income tranche.

RPGT: The Exit Cost Indonesian Buyers Must Budget For

Real Property Gains Tax is charged on profits when you sell Malaysian property. The rates for foreigners per Schedule 5 of the RPGT Act:

Critical point for Indonesian buyers: Indonesia does not have a specific capital gains tax credit mechanism for RPGT paid in Malaysia. Capital gains from property disposals in Indonesia are generally treated as income and taxed accordingly. The DTA covers income tax, but the interaction between RPGT (a specific capital gains levy) and Indonesian income tax on overseas gains is complex.

In practice, RPGT paid to LHDN is a pure cost. You should not assume you will get a credit for RPGT against Indonesian tax on the same gain. Consult a cross-border tax advisor who understands both Malaysian RPGT and Indonesian PPh to confirm your specific position.

Retention mechanism: When you sell, the buyer must retain 7% of the purchase price and remit it directly to LHDN as a RPGT retention sum. For Malaysian citizen sellers, the retention is only 3%. This 7% retention is essentially a deposit — if your actual RPGT liability is less than 7%, LHDN refunds the difference (typically within 3-6 months of filing). If it is more, you top up.

Strategy: Hold for a minimum of 6 years. The difference between 30% and 10% RPGT on a RM 400K gain is RM 80,000. That is equivalent to nearly two years of rental income on a typical KL investment property.

For detailed RPGT calculations and exemption rules, see our RPGT guide.

Popular Areas for Indonesian Buyers

Johor Bahru. The most natural choice for Indonesian buyers, particularly those from Sumatra and the Riau Islands. Johor sits at the intersection of the Malaysia-Singapore-Indonesia growth triangle. Batam-JB connectivity (ferry routes), the future RTS Link to Singapore, and prices at RM 300 - RM 600 per sqft make Johor the value proposition. The Indonesian community in JB is well-established, with familiar food, cultural institutions, and Indonesian-language media. The minimum price for foreign buyers in Johor is RM 1M, but the Medini zone has previously offered exemptions for new strata.

Kuala Lumpur. For Jakarta-based professionals and business owners, KL offers a familiar big-city environment. The Sudirman-Thamrin corridor in Jakarta has a direct parallel in the KLCC-Bukit Bintang strip — similar density, international business community, and premium retail. Mont Kiara and Bangsar offer more residential, family-oriented environments. Prices in KL range from RM 400-800 per sqft for mid-range condos, with the foreigner minimum at RM 1M.

Melaka. The historical connection between Melaka and Indonesia runs centuries deep. Indonesian tourists are already the largest visitor group to Melaka. For Indonesian buyers seeking a lifestyle investment or retirement property, Melaka offers heritage charm, lower prices (RM 300-500 per sqft), and a RM 1M minimum for foreigners. Yields tend to be lower (3-4%) but the entry price is accessible.

Penang. Less common for Indonesian buyers compared to Johor and KL, but Penang's proximity to Medan (45-minute flight) makes it relevant for North Sumatra-based investors. The food culture, multicultural environment, and island lifestyle attract a specific buyer profile. Island strata minimum for foreigners is RM 1M (with a 3% state levy on top); landed is RM 3M. Mainland strata starts at RM 500K.

The Buying Process for Indonesian Buyers

1. Identify eligible property. Confirm the property is above the state minimum price for foreigners and is not restricted (Malay Reserve, Bumiputera lot, agricultural). Our minimum price by state guide has the full table, and you can verify eligibility instantly with our foreigner eligibility checker.

2. Pay booking fee (RM 5,000 - RM 20,000). Initiate your first remittance from Indonesia for the booking amount. Have your SPA/booking documents ready for the underlying transaction report.

3. Sign SPA within 14 days. Pay 10% of purchase price (minus booking fee). This is when the bulk transfer from Indonesia needs to land.

4. Apply for financing (if applicable). Start this process before SPA signing if possible. Allow 6-10 weeks for foreign buyer mortgage approval.

5. State consent application. Your Malaysian lawyer submits this. Processing: 1-6 months depending on state. The consent fee varies by state — budget RM 10,000-30,000 in Peninsular Malaysia.

6. Stamp duty and legal fees. MOT stamp duty (8% flat for foreigners from 2026; was 4% flat prior), loan stamp duty (0.5% of loan), legal fees for SPA and loan. Total acquisition costs: approximately 10-12% of purchase price for foreigners. For a detailed breakdown of the 8% foreigner surcharge and worked examples, see our foreigner stamp duty guide. Use our stamp duty calculator to compute your exact figure.

7. Settlement. For completed properties, this occurs after state consent approval and loan disbursement. For under-construction, progressive payments follow the SPA schedule.

For the complete foreigner purchase process, see our foreigner property guide. If you are considering buying without an MM2H visa, our without-MM2H guide explains what is actually required.

Common Mistakes Indonesian Buyers Make

Assuming Hak Pakai-like limitations exist. In Malaysia, freehold is freehold. There is no 30-year initial term, no renewal process, no reversion risk. Some Indonesian buyers instinctively look for the catch because perpetual foreign ownership feels unfamiliar. The catch is not in the ownership structure — it is in the tax treatment.

Underestimating the 30% non-resident tax on rent. If you live in Indonesia and rent out a Malaysian property, 30% of your net rental income (after allowable deductions like assessment, quit rent, loan interest, and repairs) goes to LHDN. No personal reliefs. This is the biggest drag on returns for non-resident owners. For filing requirements and deduction details, see our foreigner rental income tax guide.

Not starting remittance paperwork early. Bank Indonesia's underlying transaction documentation requirements add processing time. If you wait until the SPA deadline to initiate transfers, you risk missing the payment window.

Ignoring RPGT on exit. Indonesian buyers accustomed to Indonesia's property market — where enforcement of capital gains tax on property has historically been inconsistent — may not budget for Malaysia's strictly enforced RPGT. Budget 10-30% of your expected gain as RPGT from day one.

Buying in oversupplied Johor developments. The Iskandar Malaysia corridor has significant residential oversupply. Not all Johor is created equal. Check occupancy rates for the specific development and consult transaction data before committing.

Indonesia's restriction to Hak Pakai makes Malaysian freehold ownership genuinely attractive. But freehold status does not override the need for rigorous cashflow analysis. Run the numbers including Malaysian non-resident tax, RPGT on exit, and currency exposure. If the deal still works after all three, it is a deal worth doing.

Sources

• RPGT Rates — LHDN Schedule 5
• LHDN — Non-Resident Tax Treatment
• Foreigner Stamp Duty 2025-2026
• State-by-State Minimum Prices
• Penang Foreign Purchaser Requirements
• Malaysia-Indonesia Double Taxation Agreement — LHDN
• National Land Code — Section 433B