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Loans and Real Estate for Foreigners

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General Rule: Foreigners are not allowed to acquire land in the Philippines. There have been many proposals to amend this law but only Filipino citizens have the right to own land. The simplest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase a property under his/her name.

 

 

Exceptions:

Corporations or partnerships that is at least 60% Filipino owned are entitled to acquire land in the Philippines. An exception to this rule  is foreign acquisition of a Philippine real estate in the following cases:

 

  • Acquisition before the 1935 constitution.
  • Acquisition through hereditary succession if the foreign acquire is a legal or natural heir. This means that when you are married to a Filipino citizen and your husband/wife dies, you as the natural heir will become the legal owner of his/her property. The same is true for the children. Every natural child (legitimate or illegitimate) can inherit the property of his/her Filipino father/mother even if he/she is not a Filipino citizen.
  • Purchase of not more than 40% interest in a condominium project.
  • Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law. (natural born Filipinos who acquired foreign citizenship is entitled to own up to 1,000 square meter of residential land, and 1 hectare of agricultural or farm land) 
  • Filipinos who are married to aliens who retain their Filipino citizenship, unless by their act or omission they have renounced their Filipino citizenship.

 

Owning of houses or buildings is legal as long as the foreigner does not own the land on which the house is build.

Setting up a corporation with 40% of the stocks in the foreigner’s name and 60% to Filipinos is a good alternative. There must be a minimum of 5 stockholders, and foreigner can have the Filipino stockholders sign blank transfer of the stocks for security.

 

Rent

The land can be leased by the foreigner or a foreign corporation on a long term contract for an initial 50 year period and renewable every 25 years. A foreigner can rent a lot and at the same time legally own the house on the rented land.

 

Loans

Foreigners are not eligible to apply for a loan in Philippines banks. Some will allow car loans but the foreigner must be married to a Filipino. Most banks will demand that a ‘co-signer’ who also lives in the Philippines also sign the contract. The co-signer will become responsible for the loan, lease or debt document should the primary borrower default or stop making payments. In family situations, a co-signer may not ask for money or compensation, but they could if they wanted to. In corporate situations, it is a type of business agreement and the co-signer often is paid some amount or given an interest in future profit.

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