PETALING JAYA: The new tax treatment for the Malaysian real estate investment trusts (REITs) could still weigh on sector sentiment and marketability, despite not affecting earnings.
According to Maybank IB Research, the removal of preferential REIT withholding tax rates would reduce the appeal of post-tax distribution yields for certain investor groups.
“We believe the sector may now see a sharper investor preference for REITs with stronger organic distribution per unit growth, visible rental reversion, asset enhancement upside and acquisition catalysts to offset the drag from lower post-tax yields,” the research house said in a note.
The Inland Revenue Board’s Practice Note No. 2/2026 has formalised the tax treatment for REIT and property trust fund unitholders from the 2026 assessment year onwards, confirming that the previous 10% withholding tax (WHT) regime for most non-corporate investors has ceased to apply.
“While we view this as a dent to the Malaysian REIT sector, particularly to foreign and tax-sensitive investors, our estimates suggest net yields could still average at 4.7 to 6%, and remain attractive relative to most sectors,” stated Maybank IB Research.
From 2026 assessment year, resident individual unitholders will be taxed based on prevailing individual tax rates with no withholding tax deduction, while non-resident individuals and foreign institutional investors will no longer enjoy the previous flat final WHT treatment.
Meanwhile, non-resident corporate investors remain subject to a 24% final WHT.
Maybank IB’s top pick for the sector is Paradigm-REIT, followed by Capitaland Malaysia Trust
and Al-Salam-REIT.
Tax treatment aside, BIMB Securities Research said Malaysian REITs’ earnings visibility into 2026 remains supportive, underpinned by healthy occupancy, visible acquisition pipelines, ongoing asset enhancement initiatives (AEI), and stable payout profiles.
The research firm has maintained its “overweight” stance on the sector.
“We continue to expect the Malaysian REIT sector to remain resilient, supported by stable industrial demand, gradual improvement in selected retail assets, and visible external growth opportunities through acquisitions and AEI.
“We remain positive on REITs with healthy occupancy, resilient rental structures, supportive payout visibility, and prudent balance sheets that can support further portfolio expansion without materially compromising distributions.”
Within the REIT sector, BIMB Securities Research has “buy” calls on Axis-REIT, AME-REIT and Al-Salam REIT.
It noted that Axis-REIT continues to expand its industrial footprint through a visible acquisition pipeline, with recent and pending deals in Bukit Raja, Telok Gong, Northport, Seberang Perai Tengah, and Senai.
Portfolio fundamentals remain solid, with 94% occupancy, 4.4 years weighted average lease expiry, 15 million sq ft under management, and asset value of RM5.36bil.
AME-REIT continues to benefit from healthy industrial tenant demand within the Johor Singapore Special Economic Zone, visibility from its sponsor pipeline, and ongoing portfolio optimisation.
Al Salam-REIT should continue to benefit from the ongoing rejuvenation of Komtar JBCC shopping mall, where occupancy improved to 71% in the financial year of 2025 (FY25) from 64% in FY24.
Together with rental growth initiatives, ongoing AEI, and occupancy optimisation across its diversified portfolio, this should help support firmer income resilience and earnings delivery.
Commenting on the REIT sector results for the fourth quarter of FY25 (4Q25), BIMB Securities Research said the outcome was “encouraging”.
One of the three REIT names under its coverage beat expectations, while the other two came in broadly within expectations, supported by resilient industrial and retail rental income, acquisition contributions, and firmer operating margins.
“Within our REIT coverage, Al Salam-REIT was the clear standout, with FY25 realised income of RM14.1mil, up 222.1% year-on-year (y-o-y), coming in above expectation at 117.2% of our forecast.
“The stronger result was driven by better retail income, notably rental, parking and promotional income, alongside firmer industrial contribution and stronger cost absorption, which lifted FY25 net property income margin by 3.3 percentage points to 68.8%.
“Axis-REIT’s FY25 realised profit after tax of RM203.3mil, up 25.8% y-o-y, came in within expectations, supported by firmer rental income contribution and disciplined cost control.
“AME-REIT’s nine month of FY26 earnings also landed within expectations, reflecting resilient contribution from its enlarged industrial portfolio and positive rental reversion,” stated the research house.
In a separate note, RHB Research said the REIT sector’s fundamentals remain intact, supported by high occupancy levels and stable rental reversions.
Separately, RHB Economics expects Bank Negara Malaysia to maintain an accommodative stance, with the overnight policy rate projected to hold steady at 2.75% in 2026, which should help contain borrowing costs and support REITs to continue pursuing acquisitions.
On the demand side, Malaysia’s inbound tourism expenditure expanded by about 41% y-o-y to RM107bil in 2024, surpassing pre-pandemic levels.
“We expect this recovery momentum to continue, supported by initiatives such as Visit Malaysia 2026.
“This should benefit retail REITs with meaningful variable rent exposure.
“For the office segment, sentiment has remained weak, with many office REITs still trading below book value.”
However, RHB Research believes a gradual recovery may be emerging, as net absorption has turned positive for four consecutive quarters, indicating improving occupancy conditions.
Meanwhile, industrial REITs should continue to benefit from structural demand drivers, supported by policy initiatives such as the New Industrial Master Plan 2030 and the National Energy Transition Roadmap, which are expected to support demand.
On the 4Q25 results, RHB Research pointed out that all eight stocks under its coverage met expectations.
Looking ahead, while the dividend yield spread has compressed toward its long-term mean due to valuation gains since last year, the research house still views sector valuation as fair.
“We believe investors’ appetite for defensive and domestic-centric earnings and regular dividend distributions remains strong, especially with the recent geopolitical tension.”
