REITs are the stock market's version of property investment — all the yield, none of the 3am plumbing calls. But Malaysian REITs are not created equal. Some deliver consistent 7-8% distribution yields with zero tenant management. Others trade at premiums that compress your yield below a fixed deposit. Knowing the difference is the line between a productive allocation and dead capital.
This guide covers every REIT listed on Bursa Malaysia, how they compare to physical property ownership, the actual tax treatment on distributions, and when each option makes more sense for your portfolio.
What Is a REIT
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate. In Malaysia, REITs are listed on Bursa Malaysia and regulated by the Securities Commission (SC) under the Guidelines on Listed Real Estate Investment Trusts (SC-GL/1-2018).
The mechanics are simple:
- A REIT pools money from investors (unitholders) to buy and manage properties.
- The REIT collects rental income from tenants.
- By law, the REIT must distribute at least 90% of its taxable income to unitholders each year to maintain its tax-exempt status, per the SC REIT Guidelines.
- Units are traded on Bursa Malaysia like ordinary shares. You buy and sell through a standard brokerage account.
The 90% distribution requirement is what makes REITs attractive. Management cannot hoard cash. The income flows through to you.
Malaysian REITs typically distribute income semi-annually or quarterly. Distribution yields range from 4% to 8% depending on the REIT, asset quality, and market conditions.
Every Malaysian REIT: Key Metrics
Here is the full landscape of REITs listed on Bursa Malaysia, grouped by conventional and Islamic (Shariah-compliant) classification.
Conventional REITs
| REIT | Key Assets | Sector | Approximate Yield | Market Cap Range |
|---|---|---|---|---|
| KLCCP Stapled Group | KLCC, Mandarin Oriental KL | Office/Retail/Hotel | ~5.0% | Large-cap |
| IGB REIT | Mid Valley Megamall, The Gardens Mall | Retail | ~5.5% | Large-cap |
| Pavilion REIT | Pavilion KL, Pavilion Bukit Jalil, Elite Pavilion Mall | Retail | ~5.0% | Large-cap |
| Sunway REIT | Sunway Pyramid, Sunway Resort, Sunway Medical | Diversified | ~5.5% | Large-cap |
| CapitaLand Malaysia Trust | Gurney Plaza, East Coast Mall, Sungei Wang | Retail | ~6.0% | Mid-cap |
| Sentral REIT | Platinum Sentral, Menara Shell, MRANTI Park | Office | ~7.0% | Mid-cap |
| Axis REIT | 60+ industrial properties across Malaysia | Industrial/Logistics | ~5.5% | Mid-cap |
| YTL Hospitality REIT | Marriott Maui, JW Marriott KL, hotels across MY/JP/AU | Hospitality | ~4.0% | Mid-cap |
| Atrium REIT | Industrial properties in Selangor | Industrial | ~7.0% | Small-cap |
| Hektar REIT | Subang Parade, Kulim Central, Segamat Central | Retail (suburban) | ~8.0% | Small-cap |
| Al-Salam REIT | Mydin hypermarkets, commercial properties | Diversified | ~6.0% | Small-cap |
Islamic (Shariah-Compliant) REITs
| REIT | Key Assets | Sector | Approximate Yield | Shariah Status |
|---|---|---|---|---|
| Axis REIT | Industrial/logistics across Malaysia | Industrial/Logistics | ~5.5% | Full Shariah-compliant |
| Al-'Aqar Healthcare REIT | KPJ hospital properties across Malaysia | Healthcare | ~6.0% | Full Shariah-compliant |
| KLCCP Stapled Group | KLCC, Mandarin Oriental KL | Office/Retail/Hotel | ~5.0% | Shariah-compliant |
Axis REIT is notable because it was Malaysia's first Islamic REIT, listed in 2005. Its portfolio is exclusively industrial and logistics — warehouses, factories, office-industrial hybrids. All tenants and activities must comply with Shariah principles. No gambling, no alcohol, no non-halal operations on any property.
Al-'Aqar Healthcare REIT holds hospital buildings leased to KPJ Healthcare. Healthcare is a defensive sector. People do not stop getting sick during recessions. This gives Al-'Aqar a stability profile that retail-heavy REITs cannot match.
For Muslim investors who require Shariah compliance, these three options provide exposure to industrial, healthcare, and prime commercial real estate respectively.
REITs vs Physical Property: Head-to-Head
This is the comparison that matters. You have RM 100,000 to deploy. Which vehicle serves you better?
| Factor | REITs | Physical Property |
|---|---|---|
| Minimum investment | ~RM 100 (1 lot) | RM 30,000-100,000+ (downpayment + legal fees) |
| Liquidity | Sell within seconds on Bursa | 3-6 months to sell, sometimes longer |
| Management effort | Zero — professional managers handle everything | High — tenants, repairs, vacancy, collection |
| Gross yield range | 4-8% distribution yield | 3-6% gross rental yield (before expenses) |
| Net yield after costs | Distribution yield IS the net yield | 1-4% after maintenance, tax, vacancy, repairs |
| Capital appreciation | Modest — tracks NAV, typically 0-5%/year | Higher potential — 3-8%/year in good locations |
| Leverage | Limited — margin financing at 50-70% LTV, higher rates | Up to 90% LTV at 3.5-4.5% mortgage rates |
| Diversification | Instant — one REIT holds multiple properties | Concentrated — one property, one location, one tenant |
| Tax on income | 10% withholding tax (final) | Progressive rate up to 30% (residents) |
| Control | None — you are a passive unitholder | Full — renovate, reposition, change tenant mix |
The leverage difference is the most important line in that table. Physical property lets you control a RM 500,000 asset with RM 50,000 of your own money. If that property appreciates 5%, you made RM 25,000 on a RM 50,000 investment — a 50% return on equity. REITs do not offer that amplification.
But leverage cuts both ways. If your tenant vacates for three months and you are covering a RM 2,200/month mortgage from savings, the leverage that amplified your upside is now amplifying your cashflow bleed.
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Tax on REIT Distributions
This is where REITs have a structural advantage that most investors underestimate.
When a REIT distributes income, the tax treatment depends on who you are, as defined under Section 109D of the Income Tax Act 1967:
| Investor Type | Withholding Tax Rate | Filing Requirement |
|---|---|---|
| Malaysian individual | 10% | Final tax — no need to declare in annual return |
| Malaysian company | 0% withholding (taxed at 24% corporate rate at company level) | Declare as income |
| Non-resident individual | 10% | Final tax — no further obligation |
| Non-resident company | 24% | Final tax |
| Unit trusts / institutions | 10% | Final tax |
Note: The 10% concessionary withholding tax rate has been in effect from YA 2016 to YA 2025 under LHDN's Public Ruling No. 1/2021. Check whether this concession has been extended beyond YA 2025.
The 10% final withholding tax for individuals is powerful. Compare this to rental income from physical property:
- A Malaysian tax resident earning RM 100,000/year in employment income who receives RM 30,000/year in net rental income pays marginal tax of 19-25% on that rental income.
- The same investor receiving RM 30,000 in REIT distributions pays 10%. Full stop. No aggregation with other income. No progressive rate escalation.
For non-residents — Singaporeans investing in Malaysian property, for example — the advantage is even starker. Rental income from physical property is taxed at a flat 30% for non-residents. REIT distributions are taxed at 10%. That is a 20 percentage point difference on identical real estate exposure.
The withholding tax is deducted at source by the REIT's trustee before the distribution reaches your brokerage account. You receive the net amount. No action required on your part.
Why Property Investors Should Hold REITs
If you already own physical property, REITs are not a replacement. They are a complement. Here is what they add to a property-focused portfolio:
Sector diversification you cannot buy physically. You cannot buy a hospital. You cannot buy a logistics warehouse network. You cannot buy a mid-sized shopping mall. Al-'Aqar gives you hospital exposure. Axis REIT gives you industrial logistics. IGB REIT gives you Mid Valley Megamall. These are asset classes that are otherwise locked behind institutional-scale capital requirements.
Liquidity as a buffer. Physical property is illiquid. If you need RM 50,000 in an emergency, you cannot carve off a bedroom and sell it. But you can sell RM 50,000 of REIT units by 5pm today. Holding part of your property allocation in REITs gives you an accessible layer you can tap without fire-selling a condo.
Income smoothing. Physical property income is lumpy. A two-month vacancy wipes out your yield for that quarter. REITs smooth this because they hold dozens or hundreds of tenancies across multiple properties. One vacancy in a 60-property portfolio is a rounding error.
Passive exposure during accumulation. Early in your investing journey, you might not have enough for a downpayment. REITs let you start building real estate exposure from RM 100 while saving for that first physical property.
When Physical Property Beats REITs
REITs are not universally superior. Physical property wins in specific, important scenarios.
Leverage is the primary advantage. A 90% loan-to-value mortgage on a RM 500,000 property means you deploy RM 50,000 of your own capital to control RM 500,000 of real estate. Your return on equity is amplified 10x on the capital appreciation component. REITs do not offer comparable leverage. You can use margin financing, but the loan-to-value ratios are lower (50-70%) and the interest rates are higher (5-7% vs 3.5-4.5% for mortgages).
Forced appreciation through improvement. Buy a tired condo for RM 350,000. Spend RM 30,000 on a renovation that makes it feel like a RM 450,000 unit. Rent it for 20% above comparable un-renovated units. You have forced both yield and capital value upward through direct intervention. You cannot renovate a REIT.
Hands-on value-add strategies. Subdividing a landed property into multiple rental units. Converting a commercial lot to co-working space. Furnishing a bare unit for Airbnb at 2x the long-term rental rate. These active strategies require ownership and control that REIT unitholders do not have.
Tax deductions on expenses. Physical property owners can deduct mortgage interest, maintenance fees, quit rent, assessment rates, repairs, insurance, and agent commissions against rental income. These deductions reduce your effective tax rate on rental income. REIT distributions do not offer this — you receive a net amount after the 10% withholding tax with no deductions available.
The optimal approach for most investors is a combination. Physical property for leverage-amplified returns on your best conviction bets. REITs for diversified, liquid, passive exposure to fill the gaps.
How to Build a REIT Portfolio
Building a REIT allocation is straightforward. Here is the practical process.
Step 1: Open a Bursa Malaysia Trading Account
You need a Central Depository System (CDS) account and a trading account with a licensed broker. Major options:
| Broker | Platform | Brokerage Fee | Minimum |
|---|---|---|---|
| Maybank Invest | Maybank Trade | ~0.10% + clearing fees | RM 8/trade |
| CGS-CIMB | CGS-CIMB iTrade | ~0.10% + clearing fees | RM 8/trade |
| RHB | RHB TradeSmart | ~0.10% + clearing fees | RM 8/trade |
| Mplus | Mplus Online | ~0.08% + clearing fees | RM 8/trade |
Online account opening is available for most brokers. Malaysians can typically complete the process in 1-3 business days. Foreigners need to visit a branch with passport.
Step 2: Decide Your Allocation Strategy
Three common approaches:
Yield maximiser. Focus on the highest-yielding REITs: Hektar (~8%), Sentral (~7%), Atrium (~7%), CapitaLand Malaysia Trust (~6%). Accept smaller market caps and potentially less liquidity in exchange for higher distributions.
Blue-chip stability. Concentrate on the large-cap names: KLCCP, IGB REIT, Pavilion, Sunway. Lower yields (5-5.5%) but backed by prime, irreplaceable assets with deep trading liquidity.
Shariah-compliant. Restrict to Axis REIT, Al-'Aqar Healthcare, and KLCCP Stapled. This gives you industrial, healthcare, and prime commercial exposure within Shariah guidelines.
Step 3: Evaluate Before You Buy
Key metrics for REIT analysis:
- Distribution yield. Annual distribution per unit divided by current unit price. Higher is better, but check if it is sustainable.
- Price-to-NAV ratio. Unit price divided by net asset value per unit. Below 1.0 means you are buying the underlying property at a discount. Above 1.0 means a premium.
- Occupancy rate. Percentage of leasable space that is occupied. Below 85% is a warning sign. Above 95% is strong.
- Weighted Average Lease Expiry (WALE). Average remaining lease term weighted by rental income. Longer WALE means more income visibility. Below 3 years means significant re-leasing risk.
- Gearing ratio. Total borrowings divided by total assets. Malaysian REITs are capped at 50% gearing by regulation under Paragraph 8.32 of the SC REIT Guidelines. Below 35% is conservative. Above 40% warrants scrutiny.
Step 4: Buy and Monitor
REIT units trade in board lots of 100 units. At a unit price of RM 1.50, one lot costs RM 150 plus brokerage. You can build a diversified 5-REIT portfolio for under RM 2,000.
Monitor quarterly reports for distribution announcements, occupancy changes, and acquisition/disposal activity. Reinvest distributions to compound your position over time.
Common Mistakes to Avoid
Chasing the highest yield without checking sustainability. A REIT yielding 10% might be doing so because the unit price has collapsed due to deteriorating fundamentals. Check occupancy trends, tenant quality, and lease expiry profiles before buying on yield alone.
Ignoring sector concentration. If you own three retail REITs, you are tripling your exposure to the same macro risk — e-commerce disruption, consumer spending cycles, footfall trends. Spread across retail, industrial, office, and healthcare.
Treating REITs as fixed deposits. REIT unit prices fluctuate. During the 2020 market drawdown, Malaysian REIT prices dropped 20-40%. If you needed liquidity at the bottom, you crystallised losses. REITs are equities. Size your position accordingly.
Forgetting the 10% withholding tax in yield calculations. A REIT advertising 6% gross yield delivers 5.4% net yield after the 10% withholding tax. Always calculate on a net basis when comparing against fixed deposit rates or physical property yields.
Key takeaway: Malaysian REITs offer property investors a liquid, diversified, and tax-efficient way to access real estate income. They do not replace physical property — leverage and active value-add still favour direct ownership. The smart play is holding both: physical property for your highest-conviction positions, REITs for everything else.
Frequently Asked Questions
Can foreigners buy Malaysian REITs? Yes. Any foreigner with a CDS account and trading account with a Malaysian broker can buy REIT units on Bursa Malaysia. The 10% withholding tax on distributions applies equally to foreign and local individual investors.
Are REIT distributions guaranteed? No. Distributions depend on the REIT's net income. If occupancy drops or a major tenant defaults, distributions can be reduced or suspended. The 90% payout requirement applies to taxable income — if there is no income, there is nothing to distribute.
Can I use EPF money to buy REITs? Not directly. EPF withdrawals under Account 1 are restricted to approved unit trust funds, not direct equity purchases. However, some EPF-approved unit trust funds hold Malaysian REITs as part of their portfolio.
How often do REITs pay distributions? Most Malaysian REITs distribute semi-annually or quarterly. Distribution dates and amounts are announced to Bursa Malaysia and published on each REIT's investor relations page.
What is the difference between a REIT and a property fund? A REIT is listed on Bursa Malaysia and traded like a stock. A property fund (unlisted) is a private investment vehicle that is not exchange-traded, has limited liquidity, and typically requires higher minimum investments. REITs offer transparency, liquidity, and regulatory oversight that unlisted funds do not.
Sources
- Securities Commission Malaysia — Guidelines on Listed REITs (SC-GL/1-2018)
- Bursa Malaysia — Listed REITs
- LHDN — Withholding Tax (Section 109D, Income Tax Act 1967)
- LHDN — Public Ruling No. 1/2021: Taxation of Unit Holders of REITs/PTFs
- EPF (KWSP) — Housing Withdrawals
For a deeper understanding of physical property investment fundamentals, read our Beginner's Guide to Property Investment in Malaysia. To understand how yield is actually calculated, see Rental Yield Calculation Malaysia. And to model the real cashflow on any property, use our Cashflow Calculator — it accounts for maintenance, tax, and vacancy that most yield calculations ignore. For more on the difference between headline yield and actual take-home numbers, see Gross Yield vs Net Cashflow.