During the COVID-19 pandemic, Johor’s property market experienced a significant downturn. However, with the reopening of borders and the introduction of visa-free travel between Malaysia and China, the market particularly in Johor Bahru has shown strong signs of recovery and renewed investor interest. The launch of the Johor–Singapore Special Economic Zone (“JS-SEZ”) further strengthens its appeal by promoting integrated economic activity and seamless cross-border collaboration. This article examines the JS-SEZ in Iskandar Puteri and explores how stakeholders can benefit from the Private Lease Scheme, viewed through both legal and economic lenses.
Introduction
Iskandar Puteri is one of the five flagship zones under the Iskandar Malaysia development corridor. Iskandar Puteri offered large, undeveloped parcels which are suitable for development. Located within the special economic zone, there are benefits of tax and investment incentives and the non-restriction on foreign property ownership in selected areas. Medini which is one of the areas under local governance of Majlis Bandaraya Iskandar Puteri stretches across 2,230 acres (about 902 hectares) within Iskandar Puteri, is envisaged as the central business district of Iskandar Malaysia by 2030.[1]
The enactment of the Iskandar Regional Development Authority Act 2007 aims to establish and govern the Iskandar Regional Development Authority (“IRDA”). Its primary purpose is to provide the legal and administrative framework for the direction, policies, and strategies guiding development in the Iskandar Development Region (“IDR”) of Johor, Malaysia. IRDA played a central and strategic role in the formulation and ongoing implementation of the Iskandar Malaysia Comprehensive Development Plan.
Iskandar Investment Berhad (“IIB”), a government-linked investment company set up in November 2006 to drive the Iskandar Malaysia development corridor, designed Medini in Iskandar Puteri as a fixed, master-planned central business and township zone spanning over 2,230 acres destined to be the region’s economic hub by 2030. Rather than selling parcels outright, IIB retained land ownership by granting 99‑year master leases to developers under a Private Lease Scheme (“PLS”), enabling the private sector to build and sell units while IIB remained the landowner throughout.
From Surplus to Stability: The Overhang Question
Prior to the Covid-19 pandemic, the Iskandar region recorded one of the highest serviced-apartment overhang rates in Malaysia, with an estimated 5,000 to 6,000 completed units remaining unsold more than nine months after completion.
However, the situation has improved markedly in recent years. By mid-2023, the number of unsold high-rise units in Johor Bahru had fallen by around 28%, while the stock of unsold units still under construction dropped by nearly half. This positive trend continued into late 2024, when the total number of unsold serviced apartments in Johor fell to approximately 11,810 units out of 102,438 statewide, placing Johor third in the national overhang ranking instead of first.[2]
The overhang issue in Johor was mitigated primarily through the impact of the JS-SEZ, which boosted demand for serviced apartments. The JS-SEZ has played a significant role in attracting international investments and driving regional growth, leading to increased property sales. After the pandemic and the recovery of the economy, Johor saw more than 15 percent growth in overall property sales, including those affected by the property overhang, especially serviced apartments priced at RM500,000 and above.[3]
Investment Momentum in the JS-SEZ
In the first quarter of 2025 alone, the JS-SEZ attracted the lion’s share of investor attention, accounting for 90% of all approved investments in Johor. This surge underscores the zone’s role as a major economic magnet.[4]
According to the National Property Information Centre statistics on the Malaysian property value transaction, the market is in a slow healing phase, with signs of gradual improvement tempered by lingering weaknesses.
Overhang of property is easing, led by a 6.7% year-on-year drop in serviced apartments to 18,246 units (RM14.61 billion) and a 5.6% quarter-on-quarter fall in Johor Bahru. However, demand has yet to fully rebound, as reflected in the 8.9% drop in transaction value to RM51.42 billion and the 6.2% fall in transaction volume to 97,772 deals in 1Q2025. At the same time, new residential launches surged by 124% to 12,498 units compared to 5,585 units a year earlier, yet sales performance remained modest at just 10.8%.[5]
While the spike in supply reflects developer confidence and a push to capture potential demand, it also poses a clear risk: if market absorption remains slow, as current figures suggest, this aggressive growth could easily outpace actual buyer interest, leading to unsold inventory piling up once again. In other words, even as overhang is improving now, an unchecked surge in new projects without a matching rebound in demand could reverse these gains and recreate the very oversupply problem the market is trying to resolve.
Rethinking Ownership through Private Lease
In Malaysia, all land ultimately belongs to the State Authority under the National Land Code 1965, which governs Peninsular Malaysia. Ownership is typically granted as either perpetual ownership (freehold) subject to state powers such as compulsory acquisition, or leasehold, meaning ownership for a fixed term (commonly 30, 60, or 99 years) after which the land reverts to the state unless renewed upon payment of a premium.[6] Renewal or conversion from leasehold to freehold is at the discretion of the State Authority and is not an automatic right.
A private lease on the other hand operates on a fundamentally different basis from land tenure created through state alienation under the National Land Code 1965. By contrast, a private lease is purely contractual in nature, arising from an agreement between the registered proprietor and another party, and does not result in the transferee being recorded as the registered owner in the land register.
In practice, such an arrangement often takes the form of a chain of contractual leases. First, the landowner holding either freehold or state leasehold title, grants a “head lease” to a developer for a specified term, such as 99 years, through a private contractual agreement. The developer, without obtaining or transferring legal title under the National Land Code 1965, then enters into sub-lease agreements with individual purchasers, sometimes for shorter durations such as 30 years.[7] The purchasers’ rights derive entirely from these subleases and are enforceable only as between the contracting parties. Consequently, purchasers are not strata title owners, renewal or extension of their tenure depends on the developer’s and ultimately the landowner’s consent, and legal ownership in the land registry remains vested in the original landowner. This structural arrangement can also complicate management of common property, as the statutory mechanisms available to registered proprietors under strata title law are not directly applicable to private leaseholders.
The validity of private lease scheme in Malaysia can be seen in the recent case of Tropika Istimewa Development Sdn Bhd v Wong Hang Fah[8], where the Court of Appeal’s decision on private lease schemes in Medini Iskandar marks a significant milestone, affirming their legality and validity under the regulatory framework set by the IRDA and approved by the Ministry of Housing and Local Government. It restores certainty to the property landscape within the SEZ, reassuring developers, investors, and buyers that projects compliant with IRDA guidelines and duly approved will not face retrospective invalidation, such as under the earlier Ang Ming Lee ruling. It confirms that Medini properties, while on freehold land leased for 99 years, can lawfully be developed and transacted under private lease arrangements. By upholding the enforceability of sale and purchase agreements and strata titles issued under the scheme, the decision not only safeguards developers’ rights but also strengthens the legal foundation for similar private lease frameworks in Malaysia’s SEZs.
Economic and Legal Perspectives on Private Leases
As the fourth quarter of 2025 approaches and property development accelerates, the risk of another overhang looms. One potential solution, should this occur, is the introduction of private lease sales. It could offer both economic opportunities and legal challenges in addressing the property overhang issue.
From an economic standpoint, the lesser the private lease term the lower the unit prices will be-by roughly one-third compared to conventional tenure, making them more accessible to buyers who might otherwise be priced out. At the same time, it would enable developers to unlock value from stagnant inventory that might otherwise sit unsold, generate no income, and risk eventual abandonment. This approach could appeal to investors seeking mid-term rental yields without committing to a long-term tenure, and it would enable landowners to retain the freehold interest and re-lease the property upon expiry, ensuring recurring returns.
Large-scale projects such as Forest City, with its plan for 700,000 units and a target population of two million, could use shorter leases as a sales tool to better match supply with actual market demand.[9] Though the arrangement offers clear economic benefits for both buyers and developers, it is important to note the associated risks: shorter leases may be perceived as less valuable, limiting capital appreciation, and financial institutions may be hesitant to provide conventional mortgage financing for such properties.
From the legal angle of private leasing, its large-scale use for residential sales is relatively untested, particularly in the SEZ context. If the property is sold as strata units, the Strata Management Act 2013 (“SMA”) and Strata Titles Act 1985 (“STA”) would still apply, meaning buyers become part of the Joint Management Body or Management Corporation with obligations to contribute to maintenance fees. The key uncertainties lie in renewal rights, pricing upon expiry, and how strata governance will function in developments where ownership is limited to short leases. Without clear contractual terms and regulatory safeguards, disputes could arise over renewal obligations, buyback arrangements, and maintenance responsibilities.
Under the current legal framework, only registered proprietors of strata titles qualify as members of the Management Corporation (“MC”) under the STA and the SMA. Private lease purchasers, not being registered owners, cannot be MC members, which means they have no formal voting rights or legal standing in the management of the common property. This creates a gap where, even if the landowner steps back from daily management, the people who have the most interest in the property, who are the leaseholders, have no legal say in how it is run.
Legal Reforms for Sustainable Private Lease Models
One possible solution is legislative reform to expressly deem private lease purchasers as “owners” for the purpose of the SMA and related provisions under the Local Government Act concerning assessment and rating. If the law were amended to recognise long-term private leaseholders as equivalent to strata owners for management purposes, they could form or join the MC, contribute to the sinking and maintenance funds, and participate in decision-making on common property upkeep. Such recognition would align their rights and obligations with those of strata title owners, safeguarding their interests and ensuring sustainable management of developments. This would also give local councils clarity when levying assessments, since the leaseholders, not a distant landowner, would be the ones living there and responsible for payment and compliance.
In effect, the private lease structure could be made to function much like a strata title scheme, but without transferring the freehold interest, thereby balancing investor appeal, effective property management, and the landowner’s long-term control.
Nonetheless, even if private leaseholders were legally recognised as “owners” for management purposes, a further question arises: would their share units be calculated in the same way as for strata title owners, or on a reduced basis? This is particularly relevant in mixed developments combining residential, hotel, and commercial components—where property consultants typically allocate different share values based on use. Equal allocation across all uses would not be accurate or fair, as different property types carry different maintenance demands, operating costs, and usage intensity.
Conclusion
The JS-SEZ is positioned to become Southeast Asia’s next growth corridor, and the Private Lease Scheme provides a unique entry point for investors seeking both flexibility and long-term returns. Economically, it lowers barriers to entry, accelerates absorption of high-value developments, and ensures recurring revenue streams without the capital lock-in of outright ownership. Legally, the scheme is still maturing, but this presents a first-mover advantage for investors who can leverage robust contracts and proactive governance to secure their interests. With the right safeguards in place, private leases could evolve into a cornerstone of Johor’s property market, offering investors not just yield but also a strategic foothold in Malaysia’s most dynamic economic zone.
For further information, please contact:
Mohd Zam Mustaman, Partner, Azmi & Associates
zam.mustaman@azmilaw.com
- IM Investors, Medini (IM Investors) <https://www.iminvestors.com/medini.html?utm_source> accessed 1 October 2025.
- Nordin R, ‘Significant Drop in Johor Property Overhang’ (The Star, 3 February 2025) <https://www.thestar.com.my/news/nation/2025/02/03/significant-drop-in-johor-property-overhang> accessed 1 October 2025.
- ‘Johor Says Property Overhang Falling as JS-SEZ Boosts Demand for Service Apartments’ (Malay Mail, 2 February 2025) <https://www.malaymail.com/news/malaysia/2025/02/02/johor-says-property-overhang-falling-as-js-sez-boosts-demand-for-service-apartments/165268> accessed 1 October 2025.
- Xiang Yun, Y, ‘JS-SEZ Drives Investment in the South’ (The Star, 22 April 2025) <https://www.thestar.com.my/news/nation/2025/04/22/js-sez-drives-investment-in-the-south> accessed 1 October 2025.
- Syafiqah Salim, ‘Malaysia’s Property Transaction Value Drops 8.9% in 1Q, Reports Napic’ (The Edge Malaysia, 9 May 2025) <https://theedgemalaysia.com/node/754664> accessed 1 October 2025.
- National Land Code, s 76.
- Ainur Zaireen Zainudin, Norhafiza Abdullah, Norhidayah Md Yunus, Salfarina Samsudin, Nur Emma Mustaffa, Siti Radiaton Adawiyah Zakaria, Fatin Afiqah Md Azmi and Noorfajri Ismail, ‘Private Lease Apartment – A Better Potential Through Build‑Then‑Sell Approach’ (2023) 21 Planning Malaysia Journal 369 <https://doi.org/10.21837/pm.v21i27.1307> accessed 1 October 2025.
- [2025] MLJU 1467.
- Intan Farhana Zainul, ‘Family Offices to Boost Forest City, Grow Wealth Management’ (The Edge Malaysia, 7 October 2024) <https://theedgemalaysia.com/node/728478> accessed 11 December 2025.
