6 Ways Foreigners Can Own Land & Buy Real Estate in the Philippines
Compared to other countries, the Philippines undoubtedly still has a highly-regulated real estate industry. There are very strict rules regarding non-Filipino citizens purchasing, owning, and investing in real estate and, by default, foreigners are not allowed to own land.
There are some exceptions to this rule, though. There are at least six (6) cases wherein Philippine laws allow a foreigner to buy and own a property — yes, including land.
So if you’re a foreign citizen looking to purchase and own land, check out our guide below to assist you regarding real estate purchase and ownership in the Philippines.
Are foreigners allowed to own land in the Philippines?
As a general rule, ownership of any land in the Philippines is exclusive and limited only to Filipino citizens. This is enshrined in the 1987 Philippine Constitution. However, there are several exceptions that would allow foreigners to own land or acquire real estate property in the Philippines. We explain them in more detail below.
Exceptions allowing foreigners to acquire land in the Philippines
- Property was acquired prior to the 1935 Constitution;
- Property was acquired through hereditary succession, with the foreigner being a legal or natural heir;
- Purchase of a unit or units in a condominium project, subject to 40% foreign ownership limit in the condominium corporation;
- Purchase of land by a domestic corporation, subject to 40% foreign ownership rule;
- Purchase by a foreigner married to a Filipino;
- Purchase by a foreigner who was originally natural-born Filipino, subject to limitations set by the law.
We explain each scenario below.
#1. Acquisition before 1935 Constitution
This is pretty straightforward. A foreign citizen who was able to purchase and own land prior to the enactment of the 1935 Philippine Constitution will retain his or her ownership rights on that property.
Even though the 1935 Constitution has been already replaced by the 1987 Philippine Constitution, the new Constitution continues to recognize the right of a non-Filipino citizen to use and own the property, including land, as long as it was acquired by the foreign citizen before the 1935 Constitution.
#2. Acquisition through hereditary succession
The Philippine Constitution of 1987 is clear and explicit in its prohibition of land acquisition by foreign citizens. However, Article XII, Section 7 of the same Constitution includes a minor exception that allows heirs to acquire the property, even though the heir may be a foreigner.
According to the relevant section of the 1987 Constitution:
“Section 7 (Article XII). Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.”
Simply speaking, if the foreign citizen is a legal or natural heir by hereditary succession and was duly included and instituted in the “Last Will and Testament” by a property owner, then that foreigner is allowed by Philippine laws to acquire said real estate property.
Again, the law will still have to check if the foreigner instituted in the will is a “compulsory heir” by virtue of “hereditary succession”. According to Article 887 of the Philippines’ New Civil Code, “legitimate children and descendants, with respect to their legitimate parents and ascendants” are considered compulsory heirs.
This was also reiterated by Atty. Persida Acosta of the Public Attorney’s Office (PAO) in her column in The Manila Times: “if the said non-Filipino has been instituted in a will as an heir to a real property; he is capacitated to acquire the said real property on the basis of the will. The provision of the Constitution is clear that even non-Filipino citizens can own real properties in the Philippines by virtue of hereditary succession.”
The same rules apply for “intestate succession” or in cases where the land owner died without leaving a “Last Will and Testament”. The foreigner, by virtue of intestate succession, is allowed by Philippine laws to own and acquire the land.
Specifically, the order of intestate or hereditary succession recognized by the law is as follows, starting from the first (#1) to the last (#7):
Order of hereditary or intestate succession under Philippine law
- Legitimate children or descendants of the deceased;
- Legitimate parents or ascendants;
- Illegitimate children or descendants;
- Surviving spouse;
- Siblings (brothers and sisters), nephews, and nieces;
- Other collateral relatives within the fifth degree; and finally,
- The State (Philippines).
Can a foreigner, who is not related at all to the land owner, be legally assigned in the last will and testament as heir who will inherit the land? Philippine laws do not allow this. Foreign citizens are allowed to inherit land only by virtue of hereditary or intestate succession (dying without leaving a will).
Testamentary succession, or inheriting land merely by being included in the will, is not allowed. Current laws disallow this because this could be used as a circumvention of what’s prescribed in the Philippine Constitution. If this was allowed, foreigners can just pay any land owner to assign them to be their testamentary heirs so they can inherit and thus own land.
#3. Purchase of a condo unit
This third scenario is perhaps the easiest to understand since this has been typically cited as the most common way for a foreigner to own property in the Philippines.
Under the Condominium Act of the Philippines or Republic Act (RA) 4726, foreign citizens are allowed to buy condo units in any condominium project, as long as foreign ownership of that project does not exceed 40%.
For example, let’s say Condominium Project X is currently offering 100 units for sale. Under the law, all 100 unit owners become owners of Project X Condominium Corporation, the residual owner of the condo building. The condo developer may market and sell condo units to foreigners as long as the percentage of foreign ownership in that project will not exceed 40%.
So if for example, the following groups of foreigners bought the following units of Condominium Project X:
- 20 Chinese citizens bought 1 condo unit each = total of 20 units
- 8 Korean citizens bought 2 condo units each = total of 16 units
- 1 American citizen bought 4 condo units = total of 4 units
- Total condo units in Project X owned by foreigners = 40 units
Given that the foreigners’ ownership in the condo project is a combined total of 40 units out of 100, the required 40% foreign ownership limit is met and this is, therefore, allowed. Anything above that, say 41 units or more, is illegal and a violation of the law.
But who’s in charge of monitoring the foreign ownership percentage of the condo? Definitely, it will be unfair to pass that burden to the foreigner buying the unit. This responsibility lies with the management of the condominium corporation or the condominium homeowners’ association. They are in charge of regularly and religiously checking that foreigners only own up to 40% of the units sold in that condo project.
Wait, does it mean that since foreigners can own condo units, they also own the land where the condo is situated on? No, not really.
The land where the condo was built is not owned by any individual owner. In reality, the land is owned by the Condominium Corporation. (However, in cases where the land is merely leased and not bought and acquired by the condominium corporation, the land is likely owned by another company and will revert to the latter upon extinction of the lease of the condo building.)
For lands owned by the Condominium Corporation, upon termination of the corporation (usually after 50 years from its incorporation), the unit owners will vote and decide what to do with the land. These are their typical options:
- choose to demolish the building and erect a brand-new condo, while simultaneously instituting a new condominium corporation that will own the new building; or
- decide to sell the land where the existing building is situated on, while sharing among themselves the proceeds of the sale depending on their ownership stake in the condominium corporation.
#4. Purchase of land by a corporation
A valid and legal loophole used by foreigners looking to own land in the Philippines is through the creation of a domestic corporation. This simply requires the establishment of a company to be registered with the Securities and Exchange Commission (SEC).
The only requirement is that the corporation must still abide by the 40% foreign ownership rule, which means Filipinos must still have majority ownership — at least 60% stake in that corporation.
Once approved by the SEC, the corporation may now purchase any real estate property, including land, house and lot, condominium units, or commercial buildings. As part-owner of this corporation, the foreigner can enjoy the use and benefits of the acquired property. However, the foreigners’ combined stake in the ownership is limited to just 40%.
Upon dissolution of the corporation, the foreigner is entitled to receive his proportionate share in the remaining assets of the company, but this doesn’t mean he can get to own the land owned by the corporation. The land may be sold and the cash proceeds distributed to the owners, including the foreigner.
#5. Purchase by a foreigner married to a Filipino
If a foreigner is married to a Filipino citizen, the foreigner is allowed to buy land but — here’s the catch! — the title of the land (called the TCT or Transfer Certificate of Title) will be in the name of the Filipino spouse. The foreigner’s name may be included in the Contract or Deed of Sale, but it cannot be in the TCT or land title.
Yes, the foreigner may have purchased and acquired the land but in reality, he does not “own” it. For one, he is not allowed to dispose the land unilaterally, that is, without the explicit permission of the Filipino spouse who is the actual “owner” as per the land title.
In the event of death of the Filipino spouse, the foreigner becomes the natural heir of the property. Since the foreigner is not allowed to own land, the available options include:
- Disposing the property within a reasonable amount of time and collecting the proceeds of the sale;
- Passing ownership to the children or legal heirs; or
- Passing ownership to the Filipino spouse’s relatives, in case the couple is childless.
#6. Purchase by a foreigner who was natural-born Filipino
Natural-born Filipinos who lost their Filipino citizenship and acquired foreign citizenship are eligible to own lands in the Philippines under the 1987 Constitution. The relevant provision states that:
“Section 8 (Article XII). … a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.”
This simply means foreign citizens, who were former natural-born citizens of the Philippines, are eligible to acquire and own lands.
First things first, what is a “natural-born Filipino”?
The Philippine Constitution defines a natural-born Filipino as a “citizen of the Philippines from birth without having to perform any act to acquire or perfect their Philippine citizenship.”
Specifically, the following people are classified as natural-born Filipinos:
- A citizen of the Philippines at the time of the adoption of the 1987 Constitution;
- Born after January 17, 1973, whose fathers or mothers are citizens of the Philippines at the time of their birth;
- Born before January 17, 1973, may be born anywhere in the world, to a Filipino father; or to a Filipino mother and that person elects Filipino citizenship upon reaching the age of majority (which is 18 years old)
- Naturalized under the Philippines’ Naturalization Law;
- A citizen of the Philippines who married a foreigner but have not renounced their Filipino citizenship
- Those who acquired Dual citizenship (i.e., Filipino and another citizenship);
- Those who acquired Derivative (origin or descent) citizenship (i.e., the unmarried child, legitimate or not or adopted, below 18 years of age, of those who re-acquired Philippine citizenship upon effectivity of RA 9225 or the Citizenship Retention and Re-acquisition Act of 2003)
The specific laws governing land ownership rights of natural-born Filipinos, who acquired foreign citizenship, are Batas Pambansa 185 (BP 185) enacted in 1982 and Republic Act 8179 (RA 8179), which amended the Foreign Investment Act of 1991.
Land ownership rules for foreigners who were natural-born Filipinos
Here are the limitations for land ownership of non-Filipino citizens who were originally natural-born Filipinos:
1. Lot area limits for acquisition of land to be used for residence:
- 1,000 square meters (sqm) of urban land
- 1 hectare of rural land
2. Lot area limits for acquisition of land to be used for business or commerce:
- 5,000 square meters (sqm) of urban land
- 3 hectares of rural land
Either of the spouses (who are both former natural-born Filipinos) may avail of this privilege, but the total acquisition shall not exceed the maximum area allowed.
In addition, those who acquired urban or rural land for residential purpose while still a Filipino citizen may acquire additional urban or rural land for residential purposes, provided that when added to that already owned, the total shall not exceed the maximum area stated above.
Similarly, the same rules apply to those who already own urban or rural land, while still a Filipino citizen, to be used for business purposes.
The same land ownership guidelines state that a natural-born Filipino may acquire not more than two (2) lots which should be situated in different municipalities or cities anywhere in the Philippines, provided that the total area of those lots do not exceed 1,000 sq. m. for urban land or one (1) hectare for rural land for use as residence, or do not exceed 5,000 sq. m. for urban land or three (3) hectares for rural land for use in business.
The law also disallows a person who already acquired urban land for residential purpose to acquire rural land for residential purpose and vice versa. We have a specific example explaining this in the FAQ below.
In addition, under Section 4 of Rule XII of the Implementing Rules and Regulations of RA 704 as amended by RA 8179, a transferee who has already acquired urban land shall be disqualified from acquiring rural land and vice versa. However, if the transferee has disposed of his rural land, he may still acquire rural land and vice versa, provided that this will be used for business.