A Foreigner's Guide to Buying Property in the Philippines: Condominiums, Condotels, and Corporate Ownership
The Philippines has become a prime destination for foreign property investors due to its beautiful landscapes, booming real estate market, and attractive investment potential. While foreign nationals are generally restricted from owning land in the country, they are allowed to own specific types of property such as condominium units, condotel units, and shares in corporations that can acquire land. This guide will walk you through how foreigners can legally buy property in the Philippines and highlight key considerations when navigating the real estate market.
Can Foreigners Own Property in the Philippines?
While foreigners cannot own land directly, they have several legal options for acquiring real estate in the Philippines:
- Ownership of condominium units or condotel units: Foreign nationals can own condominium units, provided that the foreign ownership in the entire building does not exceed 40%.
- Corporation investment: Foreigners can hold up to 40% of the shares in a corporation that owns land, with the remaining 60% held by Filipino citizens. This arrangement allows indirect ownership of land for business and investment purposes.
Buying Condominium Units or Condotel Units
Under Republic Act No. 4726, also known as the Condominium Act, foreigners can legally own condominium units in the Philippines. However, foreign ownership is limited to 40% of the total number of units in a condominium project, while the remaining 60% must be owned by Filipinos.
What is a Condotel Unit?
A condotel (condominium-hotel) is a hybrid type of property investment where units are sold to individual owners who can then choose to live in them or rent them out through a hotel management system. Condotel units are popular among investors who want the benefits of owning property without managing it themselves, as the hotel manages rentals and maintenance.
Steps to Buying a Condominium or Condotel Unit
Research and Choose the Right Property Begin by identifying the location and type of condominium or condotel unit that fits your needs. Popular areas for foreign buyers include Metro Manila, Cebu, and Palawan. Condotels, especially in high-tourism areas like Boracay, San Vicente Palawan, and BGC, offer excellent returns on investment through rental income.
Check the Foreign Ownership Cap Before proceeding with the purchase, verify that the foreign ownership in the project does not exceed the 40% limit. This is crucial because projects that exceed this limit cannot legally sell units to more foreign buyers.
Conduct Due Diligence Work with a licensed real estate broker or lawyer to conduct thorough due diligence on the property. This includes verifying the Condominium Certificate of Title (CCT), checking for any encumbrances or disputes, and confirming that the developer has all necessary government permits. Licensed brokers are registered with the Professional Regulation Commission (PRC), and you should always verify their credentials by asking for their PRC ID and checking it on the PRC website.
Secure Financing If needed, local banks in the Philippines offer financing options to foreigners, though requirements can vary. Alternatively, you may use financing from your home country. It’s important to ensure that all financial details are clearly laid out in the Contract to Sell.
Sign the Contract and Finalize the Purchase Once you’re satisfied with the due diligence and terms, you can sign the Contract to Sell. After payment, the developer or seller will transfer the Condominium Certificate of Title (CCT) to your name.
Work with Licensed Brokers Only Make sure you are working with a licensed broker. In the Philippines, brokers must be registered with the PRC. Never rely on a DTI certificate, as it is not proof of being a licensed real estate broker. Additionally, even if someone works in a realty office, that does not automatically make them a licensed broker—they could be a sales agent or staff member. Always verify credentials before engaging in any transactions.
Buying Property Through a Corporation
Another option for foreigners who want to own land indirectly is to acquire property through a corporation. Foreigners are allowed to hold up to 40% of the shares in a corporation that owns land, while the remaining 60% must be owned by Filipino citizens.
How Corporate Ownership Works
Forming a corporation can be an effective strategy for foreign investors who wish to develop land for business or commercial purposes. The corporation can purchase land, and as a shareholder, you can indirectly control the property.
Key requirements include:
- At least 5 incorporators: A corporation must have at least five incorporators, with Filipino citizens holding at least 60% of the shares.
- Foreign ownership limit: Foreigners can own no more than 40% of the shares. This means that while foreigners can invest in and manage the property, they must collaborate with Filipino partners to hold the majority ownership.
Steps to Securing Property Through Corporate Ownership
Form or Join a Corporation The first step is either forming a new corporation with Filipino partners or joining an existing corporation. The corporation must be registered with the Securities and Exchange Commission (SEC), and its articles of incorporation must specify the real estate investment.
Ownership and Control While you can own up to 40% of the corporation’s shares, it’s essential to work with Filipino partners who share your goals for the property. The corporation will hold the title to the land, and you, as a shareholder, will have indirect control over the property’s use.
Comply with Legal Requirements Ensure that the corporation complies with all legal requirements, including annual reporting and tax obligations. The corporation’s shareholders, particularly foreign nationals, should understand the implications of indirect land ownership and the legal structure governing it.
Choose a Reliable Professional Just like purchasing a condominium, buying land through a corporation requires working with a lawyer or a licensed broker. This ensures that the transaction is legally compliant and that all documentation is correctly handled. A licensed broker can also guide you through the SEC registration process and assist with property negotiations.
Why Work with Licensed Brokers Only?
When buying property in the Philippines, especially as a foreigner, it is essential to work only with licensed real estate brokers. Licensed brokers are trained professionals who understand the legal and financial intricacies of real estate transactions. They are required to adhere to a code of ethics and are accountable to the PRC, which adds a layer of protection to your investment.
Risks of Dealing with Unlicensed Brokers:
- Fraud: Unlicensed individuals may not follow legal processes, increasing your risk of fraud.
- Incorrect Documentation: Without proper knowledge, unlicensed brokers may mishandle important paperwork, leading to delays or legal issues.
- No Accountability: If something goes wrong, you have no legal recourse against an unlicensed broker.
Always verify a broker’s PRC license by asking for their PRC ID and checking it on the official PRC website. Don’t be misled by DTI certificates, which only show business registration and are not proof of a real estate license.
Securing Property in the Philippines
While there are restrictions on foreign land ownership in the Philippines, purchasing a condominium or condotel unit or investing through a corporation provides excellent opportunities for foreign investors. These legal pathways allow foreigners to own property in high-demand areas and benefit from the booming real estate market.
However, it’s crucial to ensure that all transactions are conducted through licensed real estate brokers. By working with professionals who are legally recognized and regulated, you can avoid potential pitfalls and ensure that your investment is secure. Whether you are purchasing a condo, condotel, or forming a corporation, due diligence, and professional guidance are essential to making a successful real estate investment in the Philippines.
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