Forest ownership is considered as a vital aspect for sustainable management of forest and its associated biodiversity. The Global Forest Resources Assessment 2015 reported that privately owned forest area are increasing on a global scale, but deforestation was found very active in privately owned hill forest areas of Malaysia. Penang State was purposively chosen as it has been experiencing rapid and radical changes due to urban expansion over the last three decades. In this study, analyses of land-use changes were done by PCI Geomatica using Landsat images from 1991 to 2015, future trends of land-use change were assessed using EXCEL forecast function, and its impact on the surrounding environment were conducted by reviewing already published articles on changing environment of the study area. This study revealed an annual deforestation rate of 1.4% in Penang Island since 1991. Trend analysis forecasted a forest area smaller than the current forest reserves by the year 2039. Impact analysis revealed a rapid biodiversity loss with increasing landslides, mudflows, water pollution, flash flood, and health hazard. An immediate ban over hill-land development is crucial for overall environmental safety.