Malaysia will not allow foreigners to buy residential units in the $100bn Forest City project in its southern state of Johor bordering Singapore, Prime Minister Mahathir Mohamad said on Monday.
The project has faced uncertainty since Mahathir's coalition scored a shock victory at a May general election, as developer Country Garden Holdings Co looks to revive faltering demand for a city planned to be home to 700,000 people.
"One thing is certain, that city that is going to be built cannot be sold to foreigners," Mahathir told a news conference in Kuala Lumpur, the capital.
"We are not going to give visas for people to come and live here," he added. "Our objection is because it was built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats."
A Country Garden official said the company did not have any immediate response to Mahathir's comments.
Opposition to the project helped drive Mahathir's election campaign, during which he called it, and other Chinese-backed projects, evidence of his predecessor selling Malaysia to China.
Malaysians living in Johor complained of large numbers of Chinese people snapping up properties in Forest City, besides concerns of environmental damage, a glut in the property market, and the impact of land reclamation on fisheries.
Country Garden has developed just a fraction of the planned reclamation of 20 sq km, where Chinese nationals accounted for about 70% of apartment buyers last year.