I read the article “Malaysians are snapping up agricultural land – here’s why” in The Star newspaper today, and the article totally resonated with our reasons for purchasing our agricultural farm land in The Valley, Karak Bentong. It was a dream we had for the longest time, but we never thought we would be able to afford a land. It was during CNY 2022 that we had a casual chat among the in-laws and siblings that we started thinking about it seriously.
Uptrend Demand for Agricultural Land in Malaysia
According to the statistics from the National Property Information Centre (Napic), there was a total of RM17.86 billion worth of agricultural land changed hands involving 82,040 transactions in 2022, which is the biggest number of transactions recorded since 2011 (84,726). There is a notable increase in the number of Malaysians wanting to own a plot of land, and it is not just for farming.
Why the Sudden Surge of Interest in Agricultural Land?
If you are not familar with land categories, agricultural land is not just for farming. If you are an individual (like me & hubby), you can purchase an agricultural land for small time farming and to build a home. During our journey to purchasing our land, we spoke to real estate agents, land owners, contractors and developers and these are some of the key reasons people are interested in agricultural land:
#1 Buying a land for retirement
There is an increased interest by city folks who are buying agricultural land in the countryside as part of their retirement planning. With increased cost of living in the city, economic uncertainties, and the recent Covid scare – people to start thinking about food security, maintaining a roof over their heads, and having sufficient space for everyone in the family.
Our thought was to have our own plot of land so that we can be self-sustainable irrespective of situation. The plan was to have sufficient space for vegetable farming, fruit trees, and possibly some goats and chicken. We wanted some open space where we can roam freely and not be confined to the walls within our city home. A small build-up is all we need, in short just a shelter from mother nature and wild animals. Our idea is to live simple, live off the land, and if the need arises we can go off-the-grid.
It took us a while to decide as we went through different locations and land options including residential-titled land in the outskirts of Selangor. There are pro and cons to every option and we finally opted for a picturesque sloping land in The Valley at Karak.
#2 Post-Covid Thoughts
When we went through lockdown due to Covid, we were concerned about food scarcity. I remember stocking up on dry and canned food, although it was not the best dietary option. I also recall how scarce bread was and how we had to queue up just to get into supermarkets for grocery shopping. We can’t be choosy about food, and whatever we could get our hands on was the only option we had.
Having a plot of land is alike a safe haven in event of a future pandemic. Whatever happens, there is a possibility of growing our own food. We can also have a home if we are not able to fulfil the financial obligations for our city home. A home in the city is easily RM1 Million but a small home in the farm can start from RM80K or less (depending on the size, finishing and interior options). If everything goes south, we would still have a roof over our heads and food on the table for all.
This does not mean that a home in an agricultural land is all about downsizing and economizing. If you have extra funds and want to splurge, it is still possible to build your dream home in your own land. We have seen large multi-million dollar homes on agricultural land – so possibilities are there. Remember that you will have to comply with all the local council regulations – including buildings that do not exceed 20% of total land size.
#3 Build a Private Retreat / Weekend Home / Homestay
Probably for someone with extra funds, building a retreat away from the city can be very fulfilling. After a long week at work, it is always refreshing to be able to escape to your own private retreat, with everything build to your specifications. I do believe this is an upcoming trend for well-heeled city folks, and thus an increased interest in homestead guarded communities like The Valley in Karak Bentong, Tanarimba in Janda Baik, Planters’ Haven in Nilai, and the latest one Anyara Hills in Semenyih. The supply of these land are limited as there are also limited homestead developments in Malaysia. Indicatively, an acre of land in these locations start from RM500K for The Valley, RM1 Million for Tanarimba, RM1 Million for Planters’ Haven, and RM3.5 Million for Anyara Hills.
#4 Operating a small-scale farm
We have also seen people purchasing agricultural land to operate a small-scale farm. These are not large corporations who are buying hundreds of acres but private family-owned, jointly-owned or individual-owned farms that are growing durians, bananas, jackfruit (nangka), vegetables, etc. Farming can be a lucrative investment but may not be a walk in the park as many would think. Unless you are equipped with the knowledge and expertise, coupled with deep pockets (or financial backing), I would suggest a thorough research before venturing. As with all investment, there are risks and cost involved.
#5 For investment
I believe that there are also people who invest in agricultural land for long term, and that is also why we tend to see a lot of land that are almost pristine or left as secondary jungle for an extended period of time. These land are not abandoned, rather they are purchased for future appreciation and to be sold later. Do note that some homestead guarded communities have clauses to prohibit non-active land owners. You may be required to develop / build on the land within a specific period of time.
It is expensive to own a piece of land… at least for us.
Expensive is very subjective as it can mean different things to different people. For me, it is expensive and here’s why:
#1 Initial Purchase Cost
Unlike residential property, it is harder to get a loan for land – and agricultural land, for that matter. Very few banks have loans for agricultural land. On top of that, the interest rate is high and the financing amount can be very low – from what I know, it is only 50%. For illustration purposes, if you are purchasing a RM500K land, you will need to fork out RM250K in downpayment. This excludes lawyers fees, stamp duty, S&P agreement and MOT! Conversely, purchasing a RM500K house will only require a RM50K downpayment which is 10% of purchase price. Make sure you have put aside sufficient sum or have a good banker to back up your land purchase.
#2 Land Scarcity
Land is scarce. You cannot make more land. Developers can always build more houses, build more high-rise dwellings, so there is always opportunity to create more if there is demand. It is near impossible with land. (I am saying near impossible as the government can always reclaim the sea to artificially create more land. This is a very expensive operation and are usually done after very careful environment and economic study). Due to land scarcity, the price of land is always on an upward trend. When we started looking at land, we are shocked at the prices. We had a small budget to start off with, and we ended up stretching it twice the amount.
#3 Road Access and Land Tiers
Unlike residential houses, the price of the land is not just determined by the location. Road access is equally important because you want to make sure that you can access your land easily. There is legally gazetted road access for all land, and this is called “right of access“. This road or access cannot be blocked, barricaded, fenced up or used for other than as an access road for land owners. This is to ensure that all land owners can access their land. This road is usually maintained by the land owners and is not under the jurisdiction of the local council. The roads are usually covered in dirt or gravel and may require 4-wheel drive vehicle to access.
This leads to the introduction of “Land Tiers“. Land with direct access to the road is called Tier 1, and the ones on the inner sides are Tier 2, Tier 3 and so on. The deeper the location of your land, the cheaper it is. The legally gazetted road access will pass through Tier 1 land, but not all. When we were scouting for land, we came across a Tier 3 land which had the road access blocked and fenced up by the Tier 1 land owner. Legally they are not supposed to do so, but it would be a messy process to exercise this. Plus, I do not want to buy a place with a wrong foot. So always make sure that the road access is not blocked and that you can access your piece of land with your vehicle.
At The Valley in Karak, all land parcels have direct tarred road access. There is no need to access someone else’s land to get into yours and you can drive in with a normal car.
#4 Water and Electricity Infrastructure
Two of the most important infrastructure you will need – water and electricity. Getting electricity supply from TNB and water supply can be a lengthy and expensive process if there is none nearby.
You can always power your home with solar panels and go off-the-grid, however you need to take into account the cost of maintaining these in the long run. Unlike solar panels in your city home, you will not have alternative sources if your solar acts up. I can’t imagine living in the darkness in the jungle, so I am going to get TNB when I am ready.
Underground water can be tapped but always check the local council if there are any laws around it. I am not sure about this as I do not intend to do so. You can also dig a well – I love this idea, but the ‘paranormal’ possibility around it made me think twice. If you have natural spring water (air mata air), that would be idea but not all land are blessed with this. As a typical city folk, I prefer my water to come from the main water supply. In The Valley, all it takes is an application and the water source is connected to our land.
Finally – internet. Can you live without internet? If you can’t then you have to think about whether you have access to internet connection. Out the city, you will have to rely on TM for Unifi. If there is no coverage, then you can still opt for Starlink – RM2,300 for the hardware currently and RM220 per month for internet. Remember to also check for mobile phone coverage because a lot of rural areas have spotty/no connectivity. You don’t want to end up not having connection in an emergency!
#5 Ongoing Cost
Unless you are thinking of buying a land and leaving it as it is, there is running cost to maintain the farm and house. For our land, it was a six-figure investment to get earthworks done, land cleared, terracing the land, slope reinforcement, building drainage to manage excess water flow, felling & removing weak/rotting trees, pest treatment etc. If you intend to maintain a farm, you need a farm hand / gardener / farming contractor to help manage your farm when you are not there day-to-day. The cost is dependent on the size of your farm and what type of farm you have. From time to time, you may also require additional funds for new builds (like retaining walls, stairs and steps, roads, drains, etc), additional pest treatments, replacing dead fruit trees, and more. So, besides the initial cost of purchase, you will also need to put aside a substantial amount of money for all the above I have mentioned.
Enjoy the Experience of Owning an Agricultural Land in Malaysia
Having no experience in land ownership was indeed scary. We practically dived head-in without knowing what to expect. It was a roller-coaster experience, learning as we go, making mistakes and trying to pull things together. The land is part of our retirement planning so that we have a tranquil place to escape to away from the busy city.