Malaysia’s real estate investment trust (M-REIT) sector may face reduced investor interest if the long-standing withholding tax concession on REIT income distributions is allowed to expire on Dec 31, 2025, according to Maybank Investment Bank (Maybank IB).
Currently, under the Year of Assessment (YA) 2016–2025 framework, most individual investors benefit from a 10% final withholding tax, resident corporate investors enjoy 0%, while non-resident corporations are taxed at 24%. This tax structure has been instrumental in maintaining Malaysia’s attractiveness as a REIT investment market.
In its latest research note, Maybank IB highlighted that although the concession has been renewed several times over the years, there has been no indication from authorities on whether the incentive will continue into YA 2026. Should the relief lapse, REIT distributions would revert to marginal tax rates, which could reduce post-tax yields by 50 to 100 basis points. This decline would affect both retail and institutional income-focused investors, potentially making local REITs less competitive compared to regional alternatives.
The firm warned that such a change could discourage foreign fund participation, despite M-REITs offering an appealing average dividend yield of 5.7%. The Malaysian REIT Managers Association is expected to raise the issue with the Ministry of Finance as the deadline nears.
Maybank IB currently maintains ‘buy’ calls on six of the eight M-REITs under its coverage, including Pavilion REIT and YTL Hospitality REIT. Meanwhile, KLCCP Stapled Group — comprising KLCC Property Holdings Bhd and KLCC REIT — as well as Al-Salam REIT, carry ‘hold’ ratings.
This evolving landscape in the REIT market comes at a time when investor interest across Malaysia’s broader property sector remains varied, especially in strategic locations such as commercial property in KL, expanding business zones with office space in Bukit Jalil, and industrial corridors where demand for industrial land in Selangor, factory space in Puchong, and industrial property in the Subang area continues to grow.
