Residential vs Commercial Title: What Buyers Often Overlook in Malaysia

When investing in property, many buyers focus on location, price, and size—but overlook one critical detail: the property title. In Malaysia, the distinction between residential and commercial titles carries significant implications for utility rates, business licensing, and financing. Here's what you need to know before signing that Sale & Purchase Agreement.

Utility Rates: The Hidden Cost Multiplier

Residential Title:

• Utilities (electricity, water, sewerage) are billed at domestic rates.

• Lower tariffs make it ideal for personal use or small-scale home businesses.

• Example: TNB’s residential electricity tariff starts at RM0.218/kWh for the first 200 kWh.

Commercial Title:

• Utilities are charged at commercial rates, which are significantly higher.

• Water and electricity bills can be 30–50% more than residential equivalents.

• Example: Commercial electricity tariff starts at RM0.435/kWh for the first 200 kWh.

Implication:   If you're running a business from a commercial-titled unit, budget for higher monthly overheads—even if the property size is the same as a residential unit.

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Business Licensing: Legal Use & Compliance

Residential Title:

• Typically zoned for private dwelling; business operations may violate local council regulations.

• Limited licensing options for home-based businesses (e.g., online retail, tuition).

• MBPJ, DBKL, and other councils may issue fines for unauthorized commercial use.

Commercial Title:

• Designed for business activities—retail, office, warehouse, etc.

• Easier to obtain business licenses, signage permits, and fire safety approvals.

• Allows for higher foot traffic, advertising, and operational flexibility.

Implication:   Using a residential unit for business may seem cost-effective, but it risks non-compliance and enforcement action. Always check with the local authority (e.g., MBSA, MPSJ) before operating.

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Financing & Loan Structures: What Banks Consider

Residential Title:

• Banks offer up to 90% margin of financing for first-time homebuyers.

• Longer loan tenures (up to 35 years) and lower interest rates.

• Eligible for government schemes like PR1MA, MyHome, and BSN Youth Housing.

Commercial Title:

• Lower margin of financing (typically 70–85%) depending on borrower profile.

• Shorter loan tenure (usually capped at 25 years).

• Higher interest rates due to perceived business risk.

Implication:   Investors must prepare for higher upfront capital and stricter loan terms when purchasing commercial-titled properties. However, rental yields may offset these costs over time.

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Final Thoughts: Choose Based on Purpose

Criteria	Residential Title	Commercial Title
Utility Rates	Lower (domestic tariffs)	Higher (commercial tariffs)
Business Licensing	Restricted	Permitted
Financing	Higher margin, longer tenure	Lower margin, shorter tenure
Usage Flexibility	Limited to dwelling	Flexible for business operations
Investment Potential	Stable, slower appreciation	Higher yield, faster turnover

Tip for Investors:   If you're eyeing a shop lot, SOHO, or serviced apartment, check if it's under a commercial title—even if it looks residential. This affects everything from monthly bills to resale value.