Real Estate Investment Trusts (REITs) offer an accessible way for investors to gain exposure to income-generating properties without the hassle of direct ownership.
In Malaysia, REITs are publicly traded on Bursa Malaysia and allow individuals to invest in commercial real estate like shopping malls, office buildings, hospitals, and warehouses with relatively low capital.
Many investors overlook REITs in favor of stocks or fixed deposits (FDs), but they provide a unique combination of steady dividend income and capital appreciation potential.
Whether you’re a beginner looking to diversify your portfolio or an experienced investor seeking passive income, REITs can be a great addition to your investment strategy.
In this guide, we’ll explore how REITs work, their benefits and risks, the different types available in Malaysia, and a step-by-step process to start investing. By the end of this article, you’ll have a clear understanding of whether REITs are the right fit for your financial goals.
What Are REITs and How Do They Work?
A REIT is a company that pools investors’ money to acquire and manage properties.
These properties generate rental income, which is distributed to investors in the form of dividends. REITs operate like unit trusts but focus specifically on real estate assets.
Types of REITs in Malaysia
- Retail REITs – Shopping malls (e.g., Pavilion REIT, Sunway REIT)
- Office REITs – Corporate buildings (e.g., KLCC Stapled Group)
- Industrial REITs – Factories & warehouses (e.g., Axis REIT)
- Healthcare REITs – Hospitals & medical centers (e.g., Al-`Aqar Healthcare REIT)
- Hospitality REITs – Hotels & resorts (e.g., YTL Hospitality REIT)
How Investors Earn Money
- Rental Income → REITs must distribute at least 90% of profits to qualify for tax benefits.
- Capital Gains → The share price of REITs can appreciate over time, providing additional returns.
Islamic REITs (i-REITs) in Malaysia
For Syariah-conscious investors, Malaysia offers Islamic REITs (i-REITs) that comply with Islamic finance principles.
These REITs operate ethically, avoiding investments in alcohol, gambling, and non-halal businesses.
Examples of i-REITs in Malaysia
- Al-`Aqar Healthcare REIT (Hospitals & medical facilities)
- Al-Salam REIT (Retail & office spaces)
- Axis REIT (Industrial properties)
- KLCC Property Holdings (Office & retail)
To remain Syariah-compliant, income from non-halal sources must not exceed 20%.
Why Invest in REITs in Malaysia?
1. Low Capital Requirement
Unlike physical properties that require large down payments, REITs allow investors to start small as RM100.
2. Passive Income from Dividends
Malaysian REITs (M-REITs) offer consistent dividend payouts, averaging 5% to 7% per year, making them a great option for passive income.
For example, Sunway REIT and Pavilion REIT have historically paid dividends twice a year.
3. High Liquidity
Unlike physical properties that take months to sell, REITs can be bought and sold instantly on Bursa Malaysia, similar to stocks.
This makes them a more flexible investment option.
4. Professional Management
REITs are managed by experienced property managers, so investors don’t have to deal with tenant issues, repairs, or legal paperwork.
For example, IGB REIT, which owns Mid Valley Megamall and The Gardens Mall, is managed by a dedicated team ensuring high occupancy and rental income.
5. Tax Advantages
No stamp duty when buying REIT shares (unlike direct property purchases, which incur a 1% stamp duty for properties above RM100,000).
No Real Property Gains Tax (RPGT) when selling REIT shares (whereas selling a physical property may be taxed up to 30% RPGT depending on the holding period).
6. Diversification
Instead of investing in a single property, REITs provide exposure to various real estate sectors such as retail, office, industrial, and healthcare.
For example:
- AXIS REIT focuses on industrial and logistics properties.
- KIP REIT invests in community-centric shopping malls.
- Al-‘Aqar Healthcare REIT owns hospitals and healthcare-related assets.
Risks of Investing in REITs in Malaysia
1. Market Volatility
REIT prices move up and down like stocks because they are traded on Bursa Malaysia. Economic downturns, financial crises, or property market slowdowns can cause REIT prices to drop.
For example, during the COVID-19 pandemic, retail REITs like Sunway REIT experienced declines in net property income due to reduced mall foot traffic and tenant closures.
2. Interest Rate Risks
When interest rates rise, borrowing costs for REITs increase, which can affect profits and dividend payouts. Higher interest rates also make bonds and fixed deposits more attractive, leading some investors to sell their REIT holdings.
These hikes can lead to higher borrowing costs for REITs and make fixed-income investments more attractive, potentially causing a decline in REIT share prices.
3. Withholding Tax on Dividends
Not all dividend income goes straight into your pocket—some of it is taxed before you receive it. In Malaysia:
- Local individuals and institutions are taxed 10% on REIT dividends.
- Foreign investors are taxed 24% on REIT dividends. This means that if a REIT declares a 10 sen per unit dividend, local investors receive 9 sen after tax, while foreign investors receive 7.6 sen.
4. No Control Over Property Decisions
Unlike buying a physical property where you can choose what to buy, when to sell, and how to manage it, REIT investors have no say in property decisions.
REIT managers decide which properties to acquire, sell, or renovate.
If management makes bad decisions, such as overpaying for a new property or selling valuable assets, it can affect rental income and share prices.
How to Invest in REITs in Malaysia?
Investing in Malaysian REITs is simple and can be done entirely online. Here’s how you can get started:
Step 1: Pick a Brokerage Firm
To buy REITs, you need a stockbroker (brokerage firm) that allows trading on Bursa Malaysia. Choose a broker based on:
Trading fees & commissions – Look for low-cost brokers to maximize your returns.
User-friendly platform – A good mobile app and website make trading easier.
Syariah-compliant options – If you prefer Syariah-compliant brokers, consider MIDF Invest, BIMB Securities, or Wahed Invest.
🔹 Recommended Brokers:
Rakuten Trade – Low fees, beginner-friendly, and offers rewards.
Moomoo Malaysia – Advanced tools, low-cost trading, and free stock promotions.
If you’re looking to diversify your portfolio easily, both StashAway and Wahed offer REITs as an investment option. Check out my review comparing StashAway and Wahed to see which platform might be the best fit for your investment goals!
Step 2: Open a Trading & CDS Account
To start trading, you need:
1. A Central Depository System (CDS) account – This holds your shares.
2. A trading account – This lets you buy and sell REITs on Bursa Malaysia.
📌 Required documents:
- IC or passport (for identity verification)
- Bank account details (for deposits and withdrawals)
Approval Time: Usually takes 1–3 working days. Once approved, you can log in and start trading.
Step 3: Fund Your Trading Account
Before buying REITs, you need to deposit funds.
- Minimum deposit varies by broker (Rakuten Trade: RM100, Moomoo Malaysia: RM0 minimum).
- Deposit methods: Online bank transfer, FPX, or e-wallet (depending on the broker).
✅ Pro Tip: If you’re starting small, begin with RM500–RM1,000 to get familiar with trading.
Step 4: Choose a REIT to Invest In
There are different types of REITs in Malaysia, each focusing on specific property sectors:
Retail REITs – e.g., Pavilion REIT, IGB REIT (shopping malls)
Hospitality REITs – e.g., YTL Hospitality REIT (hotels & resorts)
Industrial REITs – e.g., AXIS REIT (warehouses & logistics hubs)
Healthcare REITs – e.g., Al-‘Aqar Healthcare REIT (hospitals)
Key things to check before investing:
Dividend Yield – Higher yields mean better passive income (typically 5%–7% for M-REITs).
Historical Performance – Check price trends and past dividend payouts.
Occupancy Rates & Tenants – A REIT with strong tenants (e.g., IKEA, luxury brands) is more stable.
Step 5: Buy & Monitor Your REIT Shares
📌 Buying REIT shares:
- Log in to your brokerage account (e.g., Rakuten Trade or Moomoo Malaysia).
- Search for the REIT you want (e.g., SUNREIT for Sunway REIT).
- Enter the quantity and buy price, then confirm the purchase.
📌 After buying, monitor your investment:
Track dividends – Most REITs pay quarterly or semi-annually.
Stay updated on market trends – Economic changes and interest rates affect REIT performance.
Reinvest profits – Use dividends to buy more REITs and grow your portfolio over time.
Practical Example: REIT Investment Returns
Scenario:
- Investment: RM1,000 in a REIT with 6% dividend yield.
- Annual Dividend: RM60.
Comparison:
- Fixed Deposit (3% yield) → RM30/year.
- REITs (6% yield) → RM60/year.
- Stocks → Variable returns, higher risk but potential capital gains.
- Physical Property → Requires RM50,000+ downpayment and a mortgage.
FAQs on REITs in Malaysia
Are REIT dividends taxed?
Yes, but individual investors enjoy a lower tax rate than institutions.
Can foreigners invest in Malaysian REITs?
Yes, but withholding tax applies to dividends.
What is the minimum capital required?
As little as RM100, depending on the REIT’s share price.
Is REIT a good investment in Malaysia?
Yes, REITs offer stable dividend income and diversification, making them a good choice for income-focused investors.
Is REIT better than FD?
REITs often provide higher returns than fixed deposits (FDs), but they carry more risk.
How do I invest in REIT directly?
You can invest in REITs directly through Bursa Malaysia by purchasing shares via a stockbroker or an online trading platform.
Can I buy REITs without a broker?
No, you need a broker or an online trading platform to purchase REIT shares.
Do REITs pay monthly?
Most Malaysian REITs distribute dividends quarterly or semi-annually rather than monthly.
What are the top 5 largest REITs?
The largest Malaysian REITs include KLCC Stapled Group, IGB REIT, Sunway REIT, Pavilion REIT, and Axis REIT.
Can you pull money out of a REIT?
Yes, you can sell your REIT shares anytime on Bursa Malaysia, subject to market liquidity.
Conclusion
Malaysian REITs provide an easy way to invest in real estate without huge capital or property management headaches.
They offer steady dividends, liquidity, and diversification, making them a solid passive income option.
For beginner investors, REITs can be a defensive asset in their portfolio. Research wisely, invest consistently, and enjoy the benefits of real estate investment without the hassle.
Have you invested in any REITs? Or are you ready to start your REITs investing journey? I’d love to hear about your experiences and any questions you may have!
Drop a comment below to share your thoughts, or feel free to reach out directly to me via email [email protected]
And if you enjoyed this post and want to see more content like this, be sure to subscribe to my blog for insights, tips, and personal stories about my journey in investing.
