Expats Guide to the Philippine Real Estate Scene

Expats Guide to the Philippine Real Estate Scene

One of the first questions expats in the Philippines often ask is if foreigners can own land in the country. The answer is no, they cannot. The Philippine Constitution has entrenched laws that limit ownership of land to Filipino citizens, except under the following circumstances:

  • Land was acquired under the 1937 Constitution

  • Land was inherited from a Filipino spouse

A natural-born Filipino who has adopted another citizenship may also buy and own land in the country, but with certain restrictions, including the following:

  • Only a total of two lots in two different municipalities or cities

  • A maximum total area (for one or two lots) of:

    • 1,000 sq.m. of urban land and one hectare of rural land for residential use

    • 5,000 sq.m. of urban land and three hectares of rural land for business use

  • Only either urban or rural land may be owned, and not both at the same time

Alternatives to owning land

For expats in the Philippines, one way of owning land is by investing in a Filipino corporation that owns or purchases land. A Filipino corporation is one with at least 60% Filipino ownership. As with Filipino nationals,Filipino corporations are allowed to purchase and own land in the country.

Foreigners may also lease land on a long-term basis, specifically for 25years, renewable for another 25 years. They can then have ownership of any structure or produce they build or grow on the land they lease.

A foreigner may own 100% of other real estate property types, including houses, buildings and condominiums, but not the land where these structures sit on. A good option in owning a house or building is to build it on leased land. As an exception to the rule, under the Philippines Investors’ Lease act, foreigners may lease land for 50 years renewable for 25 years if the lease is for the sole purpose of investment and under such terms and conditions under the said law.

Condominium ownership

A foreigner may have 100% ownership of a condominium unit, as stated in the Philippine Condominium Act. In order not to circumvent the land ownership law, however, the following restrictions are imposed:

  • A condominium corporation may only have up to 40% foreign ownership, if the building was built on Filipino-owned land, and the condominium is owned by a Filipino corporation

  • A condominium building erected on leased land may have up to 100% foreign ownership

  • Foreign owners of condo units may not be elected as officers of Filipino-owned condo corporations. However, they may act as representatives in the corporation’s board of directors in a number proportionate to the corporation’s foreign ownership.

Real estate transactions in the Philippines

Buying land as part of a Philippine corporation requires due diligence, particularly in the following:

  • Establishing land ownership – many land areas in the country have not yet been titled, or have titling tied up in bureaucratic red tape or claim disputes. Land ownership is evidenced by an Original Certificate of Title or a Transfer Certificate of Title, the original copies of which are held by the Registry of Deeds. It pays to check the original documents before agreeing to a sale.

  • Checking for encumbrances, liens, mortgages, pending suits, and others

  • Reviewing land use – zonal restrictions may apply on certain land parcels. For example, agricultural land may not be used for any other purpose, unless it has been reclassified through a city or municipality ordinance.