Can You Buy Property in the Philippines?

Purchasing real estate in the Philippines involves navigating specific regulations. While direct land ownership by foreign nationals is generally restricted, various legal avenues enable foreigners to acquire significant property interests.

Foreign Ownership of Land

The Philippine Constitution, particularly Article XII, Section 7, strictly reserves land ownership to Filipino citizens or to corporations that are at least 60% Filipino-owned. This prohibition applies specifically to the direct ownership of land, including residential, commercial, and agricultural parcels.

Foreign individuals cannot hold a Transfer Certificate of Title (TCT) for land in their own name. Any attempt to circumvent this prohibition, such as through “dummy” arrangements where a Filipino citizen nominally owns the land but control rests with a foreigner, carries severe legal consequences.

Alternative Property Acquisition for Foreigners

Despite the general prohibition on direct land ownership, several legal pathways allow foreign nationals to acquire interests in Philippine real estate. These mechanisms provide opportunities for long-term control and use of property.

Foreigners can directly own condominium units. Republic Act No. 4726, the Condominium Act, permits foreign ownership of condominium units, provided that the total foreign ownership in a given project does not exceed 40% of the total units. This means a foreigner receives a Condominium Certificate of Title (CCT), granting ownership of the unit itself and an undivided interest in common areas, but not the land beneath the building.

Another avenue is through long-term lease agreements. Foreign individuals or corporations can lease private land for extended periods. An ordinary lease can be for a maximum initial term of 25 years, renewable for another 25 years, resulting in a total of 50 years. For specific investment or commercial purposes, the Investor’s Lease Act (Republic Act No. 7652) allows foreign investors to lease private land for an initial term of up to 50 years, renewable once for an additional 25 years, totaling up to 75 years. These leases must be registered with the Register of Deeds to be enforceable against third parties.

Acquisition through a Philippine corporation is a common strategy. A foreigner can effectively control property by investing in a corporation that is at least 60% owned by Filipino citizens, while the foreign equity does not exceed 40%. This “60/40 rule” allows the corporation, considered a Philippine national, to own land directly. While the foreigner holds a minority share, operational control can sometimes be structured through shareholder agreements, though this must comply with anti-dummy laws.

Former natural-born Filipinos who have since acquired foreign citizenship possess specific rights to own private land. For residential purposes, they may acquire up to 1,000 square meters of urban land or one hectare of rural land under Batas Pambansa 185. For business or commercial purposes, they can acquire up to 5,000 square meters of urban land or three hectares of rural land, as provided by Republic Act 8179. Reacquiring Philippine citizenship under Republic Act 9225, the Dual Citizenship Law, grants former natural-born Filipinos the full rights of a Filipino citizen, including unrestricted land ownership.

A foreigner can acquire land through hereditary succession. This exception allows a foreigner to inherit land from a Filipino citizen. This typically applies in cases of involuntary transfer, such as intestate succession or as a compulsory heir. The law is generally understood to prevent acquisition through a will if it circumvents the constitutional prohibition on foreign land ownership.

The Property Acquisition Process

Navigating the property acquisition process is essential. This involves a sequence of detailed procedures to ensure legal compliance and secure the investment.

The process begins with thorough due diligence. This involves verifying the authenticity of the property’s title, such as a Transfer Certificate of Title (TCT) for land or a Condominium Certificate of Title (CCT) for units. Buyers should request a certified true copy of the title from the local Register of Deeds to cross-verify details like the owner’s name, property description, and any annotations or encumbrances. Obtain the latest tax declarations from the Assessor’s Office and verify real property tax payments with the Treasurer’s Office. Zoning and land use regulations must also be checked with local government units to confirm the property’s permitted use.

Following due diligence, the drafting and execution of contracts formalize the transaction. For a condominium unit, a Deed of Absolute Sale is prepared and signed by both parties. For a lease, a comprehensive Lease Agreement outlining terms, rental fees, and renewal options is drafted. All legal documents must be notarized to be valid and enforceable.

Payment of various taxes and fees is required. The seller is responsible for the Capital Gains Tax (CGT), which is 6% of the higher of the gross selling price or the fair market value. The buyer pays the Documentary Stamp Tax (DST), which is 1.5% of the selling price or fair market value, and the Transfer Tax, ranging from 0.5% to 0.75% of the selling price or fair market value, depending on the local government unit. These taxes are paid to the Bureau of Internal Revenue (BIR) and local government treasurers within a set timeframe after the sale or lease agreement.

The final step is the registration of the title or interest with government agencies. The notarized Deed of Absolute Sale or Lease Agreement, along with the BIR Certificate Authorizing Registration (CAR) and tax clearances, are submitted to the Register of Deeds. The Register of Deeds will then cancel the old title, if applicable, and issue a new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) in the buyer’s name, or annotate the lease agreement on the existing title.