by 
17th September 2024
Learn what industrial land is, its uses, and factors to consider when investing. Understand land conversion and how to calculate conversion premium in Selangor.
What is Industrial Land?
Industrial land refers to real estate specifically designated for industrial operations, such as manufacturing, logistics, warehousing, and distribution. Unlike residential or commercial land, industrial land is governed by specific zoning regulations and permits that allow businesses to carry out industrial activities. This ensures that the land is used effectively while adhering to environmental and safety standards set for industrial zones.
Industrial land is essential for businesses involved in large-scale production or distribution activities. These properties play a key role in housing factories, logistic hubs, and distribution centers, enabling companies to run their operations smoothly.
Logistics Parks: A Type of Industrial Land
Logistics parks are a common type of industrial land development that serves as a hub for transportation, storage, and distribution of goods. These parks typically feature facilities such as warehouses, distribution centers, and supporting infrastructure like loading docks and freight stations.
Logistics parks are designed to streamline operations for businesses dealing with high volumes of goods. By offering strategically located facilities, they make it easier for companies to efficiently manage their supply chains and meet customer demands.
Factors to Consider When Investing in Industrial Land:
1. Location
One of the most critical factors when investing in industrial land is its location. Choosing a property that is easily accessible by major transportation routes such as highways, railways, seaports, and airports is essential. Proximity to transportation infrastructure makes it easier to move raw materials in and finished products out, increasing operational efficiency and reducing transportation costs.
2. Size and Shape
The size and shape of the industrial land you invest in should be aligned with the specific needs of your business. A larger plot is ideal for large-scale industrial operations such as manufacturing or logistics, while the shape should be suitable for constructing warehouses or factories. A well-structured layout maximizes operational efficiency, ensuring that buildings, parking, and loading zones are adequately placed.
3. Zoning Regulations and Permits
Zoning regulations are a major consideration when buying industrial land. Different areas are zoned for specific uses, and industrial activities often require special zoning approvals. It’s important to ensure the land you’re considering is zoned for industrial purposes and has the necessary permits to carry out your intended operations. Failure to comply with zoning regulations can lead to legal complications and operational delays.
What is Land Conversion/Change of Category of Land Use?
In Malaysia, land use is governed by the National Land Code 1965. All land is divided into three main categories:
- Agriculture
- Building
- Industry
Each landowner must use the land according to the category of land use specified in the title. If a landowner wishes to change the use of the land (for instance, from agriculture to industry), they must apply for a change of land use under Sections 124 and 124A of the National Land Code.
Changing the category of land use typically requires approval from the State Authority, and an additional premium is charged upon approval. This premium is calculated based on the improved value of the land after the conversion.
How to Calculate the Conversion Premium in Selangor
The conversion premium in Selangor is calculated based on the improved value of the land, which refers to the value of the land after its category of use has been changed (e.g., from agriculture to industrial or residential). To determine the final improved value, the Department of Valuation and Property Services (JPPH) provides the required valuation.
For example, if Mr Sia plans to convert his agricultural land into residential land in Selangor, he will first need to determine the land’s value based on its future residential use. Once the improved value is known, Abu can calculate the conversion premium using the Selangor Land Conversion Premium Calculator. This tool provides an estimate of the additional fees payable to the state for the conversion.
Calculation: Improved Value x Conversion Premium Rate = Conversion Premium
| Conversion Premium in Selangor | % Premium Rate |
|---|---|
| Agriculture to Residential | 15% |
| Agriculture to Commercial | 30% |
| Agriculture to Light Industrial | 20% |
| Agriculture to Medium Industrial | 25% |
| Agriculture to Heavy Industrial | 30% |
| Residential to Commercial | 15% |
| Industrial to Commercial | 10% |
Investing in industrial land requires careful consideration of several factors, including location, size, and zoning regulations. Logistics parks are a common type of industrial land development that offer ready-to-use facilities for the transportation and distribution of goods. Furthermore, understanding the concept of land conversion and how to calculate the conversion premium can help you make informed decisions when investing in industrial land.
Explore Your Investment Options
At My Industrial Specialist, we specialize in helping businesses find the best industrial land, detached factory, semi detached factory, terrace factory or warehouse for their needs. Whether you’re looking for raw industrial land or ready-to-use space in a logistics park, our team can guide you through the process. Contact us today to start your industrial investment journey and make the most of Malaysia’s dynamic property market.
