Do I need to exit and re-enter schengen zone if I arrived on schengen visa and later switched to residence permit
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It's not particularly clear from a legal point of view. Residence permits and type D visas are governed by national law, and different national law may have different things to say about it. It may depend, for example, on whether you are in Malta or some other Schengen country when the permit is issued.
For the most part, this is an issue at the end of a permit's validity rather than at the beginning. In particular, some countries require you to leave when the permit expires; others accept that one can switch automatically to a visa-free short stay (if eligible) without leaving and re-entering.
From a practical standpoint, there is unlikely to be any need for you to leave. The practice of granting residence permits to people on C visas (or visa-free short stays) is by no means rare.
If I were you, I'd ask the Maltese authorities whether it's necessary to leave and re-enter, and then do what they say. No non-Maltese authority is going to give you any trouble once you have the Maltese visa or residence permit in hand.
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