Can it be Done in the Philippines?

As anyone who has looked at purchasing land in the Philippines has found, whether for personal use or for investment,  the laws here are very restrictive when it comes to foreign ownership. The law is quite simple. A foreigner, on his own, can just not own any land, pure and simple. Does this mean that a foreigner should not pursue investments in this highly lucrative sector of the Philippines economy? The answer to that question is slightly more complicated.

If some one has the mindset that they need that “title” of ownership to something they pay for, well they should just keep their money in their pockets and move on. However if they can get beyond that thought and look at an investment purely on the basis of whether an investment will put more money in their pocket at the end of the day, the Philippines can be a place where their Return on Investment(ROI) can be in the mid teens and beyond.

In this article I will not get into how and why those returns can be so lucrative but rather look at some of the ways for people to protect their investment once the decision is made to invest.

Land Corporations

It is generally considered that the best way for a foreigner to protect his real estate investment is for the property to be held by a “Land Corporation” duly incorporated with the Securities and Exchange Commision of the Philippines (SEC). In the Philippines, foreign ownership of the corporation is restricted to 40% but that does not mean that direction and control of the corporation cannot be in the hands of a foreigner. A foreigner may be the only person on the Philippine corporation bank account once  the Philippine corporation has been formed, provided the foreigner has the necessary Philippine Visa, as well as power of attorney agreements. This structure allows the foreigner absolute control over the money derived and disbursed  through the Philippine Corporation and from the income or sale of the asset or real estate property within the corporation. The most common of these scenarios is the Condominium whereby each condominium owner owns a percentage of the corporation that holds title to the land and common areas of the property.

This same type of structure can be used outside of the normal apartment type”condominium” complex development and applied to a housing type subdivision. In these cases a foreigner can be a shareholder in the Land Corporation with an assessed value equal to that of his designated lot. He can then own the actual brick and mortar structure constructed on that lot and would be issued a long term lease personally from the corporation for use of that lot.  When sold, the new purchaser “buys” out the the sellers shareholder value in the corporation, as well as purchasing the structure owned personally by the seller. At that time a new agreement to lease the land would be entered into between the new building owner and the corporation he is now a shareholder in.

In respect to an individual or a group of people whose main goal is purchasing multiple properties for investment purposes, again a corporation works well and is perfectly legal.  Though restricted to 40% foreign ownership, as outlined in the previous paragraphs, complete control can be held by the foreign investors and all investments thus protected.

A fourth common scenario is when a single foreigner incorporates a company to hold title to a single parcel of land for personal use. This is usually done when it it not community type setting and the property is solely for the use of  one foreign individual. Again, foreign ownership in the corporation is limited to 40% and will require Filipino partners holding the remaining 60%  In these setups, there are increased risks that at some point the question might be raised whether the intent was simply for the purpose of sidestepping Philippines statutes regarding foreign ownership and whether the Filipino partners are in fact true partners. Finding of such subterfuge can be prosecuted under very severe Anti-Dummy laws enacted in this country.

Please note that should you make the decision to invest in Philippines Real Estate in any fashion, that this article is intending solely for broad information. It is highly recommended that you retain a trusted Attorney to guide you and protect your interests before any money leaves your accounts. The Philippines is littered with countless number of people who lost their investment by not setting up the proper protection mechanisms at the outset.

Remember : You are the only one responsible for protecting you investment in real estate in the Philippines !


The Philippines foreign investment acts can be studied in more detail at this link,  Chanrobles

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