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With the rapid pace of property development throughout Malaysia, the number of freehold properties for sale are diminishing as newer projects incline towards being leasehold. However, some buyers still prefer freehold over leasehold having the perception that freehold property is better in terms of potential value gain and financing availability. Is this true? Let’s discuss the characteristic differences between these two ownership models and whether, from a bank’s perspective, both type of property stands on equal footing when buyers apply for property financing.

Freehold vs Leasehold: The Debate

Freehold property is where the buyer owns the land which the property is built on. In contrast, leasehold property is where the buyer owns the property but not the land on which the property is built. Simply put, leasehold property is a long tenancy where you can occupy the property as long as the lease is valid.


The table below takes a look at some of the key differences that you need to understand when comparing freehold and leasehold properties.


  Freehold Leasehold
Value of the property

Freehold properties have greater appreciation in value in the long run.

Prices might be less than or equivalent to comparable freehold properties during the first 20 to 30 years. But:


1. the value of leasehold properties usually depreciates over the years as the lease period comes to an end.


2. the uncertainty about obtaining an extension or renewal of lease often reduces marketability of the property.

Rental Yield of the property Lower as compared to leasehold properties mainly because of the higher entry cost.

Higher as compared to freehold properties because:


1. the entry cost is generally 20% lower than for equivalent freehold properties


2. property developers usually offer more facilities, features and incentives for leasehold properties to remain competitive in the market

Ease of selling the property

Transaction is easier and straightforward. Sale of freehold properties will generally take 3+1 months to complete, as stated in usual S&P agreements.

Buying and selling a leasehold property takes a longer time because state consent and approval is needed.

Despite the differences in some aspects, there is value to be derived from each type of property depending on your objectives and needs. And what about financing? 

Are freehold and leasehold property on equal footing in terms of financing? 

In general, banks do not have a preference of one type of property over the other, be it freehold or leasehold. Loan underwriting is dependent on the value of the property and the financial health of the borrower, rather than the type of title of the property. However, when reviewing an application for financing of leasehold properties, lenders will take the remaining tenure left on the property lease into consideration in order to ensure it is reasonably long enough to cover the loan repayment period. So, when you are considering buying a leasehold property, you should always take a look at the remaining tenure and renewal possibilities before deciding whether to make a purchase.


Besides this single additional consideration, the financing approval process for both freehold and leasehold properties is exactly the same. And no, there are no additional documents required when applying for financing for a leasehold property.


All in all, buying a property is really up to your preference and it is never a one-is-better-than-the-other scenario. Regardless of which type of property you are looking to buy, it is your bank’s responsibility to match the best financing options for your means so that you are not saddled by excessive financial commitments. Whatever you decide, do come to talk to us and we will have the right advice for you.



This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.