Contributed by John Butler

The Urban Renewal Act (URA) has become one of the most contentious pieces of draft legislation in recent years. Designed to accelerate the redevelopment of ageing or under-utilised urban land, the Bill has prompted intense debate about property rights, constitutional protections and socio-economic effects. While much of the discussion has centred on Malaysian property owners, foreign residents, especially Malaysia My Second Home (MM2H) visa holders who own property, also need to understand how the URA might affect them.

The proposed Bill aims to create a legal framework allowing ageing or derelict urban properties to be redeveloped even when not all owners consent. Under the Bill:

• Government authorities can designate urban renewal zones.
• Property developers shall initiate the process, facilitated by the URA legislation.
• Properties built just 30 years ago can be caught for urban renewal.
• A consent threshold, typically ranging from 75% to 80% of owners, is required to proceed with redevelopment, although the exact figure has yet to be debated and amended during parliamentary discussions.
• Once the threshold is met, dissenting minority owners could be compelled to sell their share or have their property acquired, even if they object.

Government supporters say the URA will help rejuvenate old housing stock, unlock urban land value and modernise cities. Prime Minister Datuk Seri Anwar Ibrahim has publicly assured that the URA will not result in forced evictions or alter land status for original owners. However, many urban planners, community groups, legal experts and property associations argue that the Bill, in its current form, risks eroding constitutional property protections and undermining minority ownership rights. One of the most contentious points is why the age of property caught by the URA is so low at 30 years. There appears to be no logical answer, as properly maintained property in Malaysia and elsewhere in the world will last for a considerably longer time.

MM2H visa holders and property ownership

Under Malaysia’s Malaysia My 2nd Home (MM2H) programme, foreign retirees and long-term residents gain a renewable visa by meeting financial requirements and often investing in Malaysian property. MM2H visa holders:

• Are permitted to purchase residential property (primary or secondary market) that meets minimum price thresholds set by state governments (over RM1,000,000 in most states).
• Hold freehold or strata titles in their names, just like Malaysian owners.
• Can retain and sell this property without time restrictions related to their visa, provided they continue to meet visa conditions (such as maintaining fixed deposits or meeting renewal criteria).

Given this, any change to property law such as the URA could have direct consequences for MM2H holders who own property subject to redevelopment or renewal designation.

Potential impacts

1. Vulnerability to compulsory acquisition: If a property falls within a designated urban renewal zone and receives sufficient consent from other owners, the URA could allow redevelopment to proceed without unanimous agreement. This means dissenting owners can be compelled to sell or have their land acquired under the Land Acquisition Act. For MM2H holders, this could mean:

• Loss of property control if the URA’s thresholds are met.
• Sale or acquisition without full consent, potentially even against the owner’s wishes.
• Legal complexities if the property is strata-titled with multiple co-owners.
• Loss of confidence to invest in Malaysia.
• Your home is yours only until the government or a property developer decides it isn’t.

In short, foreign owners with minority interests in strata buildings may find themselves particularly vulnerable to redevelopment decisions made by majority-owner consensus.

2. Compensation and property type concerns: One of the most debated aspects of the URA is how compensation will be structured:

• Some supporters have suggested one-for-one replacement or upgraded property offers for owners within a renewal zone.
• Critics warn compensation may not reflect equivalent market value, especially for unique landed homes versus high-density replacement units.
• For MM2H holders, this raises several considerations:

  • Fair compensation: Any acquisition must legally be adequate but what that means in practice (cash, replacement units or other forms) remains uncertain.
  • Type of property: Owners of single landed homes might be offered a different property type instead of an equivalent landed replacement, influencing lifestyle and investment value.
  • Retirement peace of mind: Foreigners invest in the MM2H for retirement purposes and to enjoy peace of mind. They do not wish to be compelled to do battle between the yes and no factions of a URA project.
  • Political neutrality: Retirees are not interested in the local politics of their adopted country.

Furthermore, there is a history of late, sick and abandoned projects in Malaysia. The government often has no solution except to seek white knights to rescue them. What happens if the redevelopment is abandoned? The homeowner stands to lose everything.

3. Constitutional protections and legal recourse: Malaysia’s constitution provides property rights under Article 13, requiring that no person be deprived of property without adequate compensation. However, legal experts and civil society groups argue the URA’s consent thresholds and redevelopment mechanisms risk weakening these safeguards:

• Minority owners could be forced into sales.
• Legal disputes could arise if compensation or process fairness is contested.
• Owners might face expensive legal battles, particularly if they are overseas during redevelopment proceedings.

MM2H holders, especially non-resident owners, could face additional jurisdictional and procedural hurdles in asserting their rights or challenging renewal decisions.

4. Market and investment implications: Even absent compulsory actions, the mere existence of the URA regime may shift property market dynamics:

• Properties in areas earmarked for potential urban renewal might see price volatility, increasing due to speculation or decreasing due to perceived risk.
• Foreign investors might reassess the attractiveness of older strata properties and sub-sale purchases, especially those built more than 30 years ago, which are traditionally held for long-term value.
• This could impact MM2H holders’ investment decisions, confidence and resale strategies.

Navigating uncertain terrain

The Urban Renewal Act represents a paradigm shift in Malaysian property law, one that prioritises redevelopment and urban densification but also raises difficult questions about individual property rights. For MM2H visa holders who own property:

• Your property ownership is not automatically stripped but may be subjected to speculative URA.
• MM2H participants must not be subjected to forced redevelopment. Their homes are their lives, not speculative assets.
• If your investment lies within a designated renewal area, you could be subject to redevelopment pressures, majority-consent mechanisms and legal obligations you may not fully control. Politicking will surely rear its ugly head.

The MM2H community is facing one of the most serious threats in its 20-year history. The proposed URA legislation, especially the widely discussed 30-year redevelopment benchmark, has triggered deep anxiety among thousands of foreign retirees who made Malaysia their home. This is not a minor administrative issue. It is a direct threat to the security of retirement homes, long-term residency stability and Malaysia’s reputation as a trustworthy place for foreign retirees.

A policy vacuum is now harming Malaysia’s international credibility. Today, the MM2H Association must take a strong and public stand. The Ministry of Tourism, Arts and Culture as well as expatriate clubs must be alerted to the ramifications and repercussions of the urban renewal laws. The very future of the MM2H programme hangs in the balance. Every day without clarification allows fear to spread, forums to speculate and confidence to deteriorate.

In a significant development, the proposed URA has been pulled back from the immediate legislative agenda. However, stakeholders should remain alert, as this withdrawal is only a temporary measure to allow for further refinements before a new, potentially more comprehensive version of the Bill makes its way back to the floor of Parliament.

This article was first published in StarBiz 7.

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