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  • Writer's pictureZiggurat Realestatecorp

The Real Estate Law Review: Philippines

09 March 2023 Introduction to the legal framework

i Ownership of real estate

Ownership of real estate located in the Philippines differs for certain categories – land, buildings and condominium units. Ownership over land is generally reserved for Filipino nationals and domestic corporations, at least 60 per cent of whose shares of stock are owned by Filipino nationals. Foreign nationals intending to own land do so through investing in domestic corporations and joint ventures, albeit limited to a 40 per cent equity. The restriction is mandated by the 1987 Constitution of the Philippines,2 its supreme law, to guarantee local ownership even in the future. It is a necessary consequence that the Philippines' oversight mechanisms for land transfers provide for a strict and meticulous evaluation of a potential landowner's qualifications. Buildings, however, may be owned by foreign nationals on the condition that they do not own the land on which they are built. Condominium units may likewise be owned by foreign nationals, provided that there is a condominium corporation set up and at least 60 per cent of its members are Filipino nationals.3 The responsibility to ensure compliance with the rule typically falls on the persons charged with the management of the condominium project. Regardless of ownership, foreign nationals are allowed to enter into long-term lease contracts over land, buildings and condominium units.4

ii System of registration

The Philippines subscribes to the Torrens system of registration as it is believed to be the most convenient for proving real estate ownership and minimizing ownership disputes. Under the Torrens system, certificates of title are issued to real estate owners after a thorough evaluation of the deed of conveyance; the applicant's qualifications to own real estate; compliance with Philippine laws, rules and regulations; and payment of applicable and sufficient taxes. Registration under the Torrens system creates a general guarantee that the certificates of title are conclusive in favour of the owner named in the registration certificate.5 It also makes the conveyance effective and binding not only upon the parties to the conveyances but also against third persons.6 It further allows registered owners a certain degree of expediency in a subsequent conveyance as potential transferees may largely rely on certificates of title without prior due diligence. Despite the Torrens system's safeguards, it does not create but merely confirms ownership. A failure to register real estate under the system does not divest the owner of legal ownership, although establishing ownership may prove to be more difficult. Regardless, where real property is registered under the system and the registered owners or the potential transferees are aware that fraud or suspicious circumstances are present in the acquisition, conveyance or registration process, the Torrens system will neither serve to protect those persons nor divest the legitimate owner of his or her rights.

iii Choice of law

The Civil Code of the Philippines7 states that real properties are governed by the law where they are situated. Necessarily, transactions involving real properties located in the Philippines must be governed by Philippine law. While the Civil Code8 acknowledges that parties to an agreement have autonomy to stipulate terms and conditions, they must not be against law, morals and public policy, especially considering that Philippine laws are deemed incorporated in every contract. Consequently, Philippine real estate laws are read into every contract of sale, lease or other disposition involving real estate.

Overview of real estate activity

The frenetic growth that the real estate sector (particularly in the residential and office markets) experienced from 2017 to 2019, fuelled largely by foreign buyers and investors,9 met an abrupt end in 2020 with the onset of the covid-19 pandemic. As a result, 2020 figures show a 49 per cent decrease in sales by foreign buyers compared to 2019. Major property developers could only deliver 11,000 units for 2020, 4,000 units fewer than original projections.10 Further shrinking the market is the fact that thousands of overseas Filipino workers have lost their employment abroad and have been forced to return to the Philippines. There has also been an imposition of additional government restrictions on overseas online gaming operators, who have been the main drivers in the surging demand for residential and office space in the Philippine business districts. The industrial sector held up generally well despite the Philippines being subjected to the world's longest lockdown.11 In fact, according to the Philippine Export Processing Zone Authority (PEZA), as of October 2020, 90 per cent of its locators are back to pre-pandemic levels of operations.12 Further expansion in the industrial sector continues to take place, particularly in PEZA-run ecozones in Cebu city.13 There has also been a gradual phase-in for the office market as government restrictions on social distancing have been relaxed and allowed employees to return to their offices. While initial reactions to the lockdown were quick to announce the extinction of the office and its replacement by working from home, property analysts maintain that the office will remain central to daily business life.14 In January 2020, the Securities and Exchange Commission (SEC) issued the revised implementing guidelines to Republic Act No. 9856 (Real Estate Investment Trust Law of 2009),15 thereby ushering in a valid alternative and viable source of raising capital for expansion plans in the real estate sector. As of November 2022, there are seven real estate investment trusts (REITs) that have been licensed to do such business.16 The interest in REITs has been linked to renewed optimism in the property sector due to the gradual improvement in the business climate and the resumption of big infrastructure projects that were delayed by the pandemic.17

Foreign investment

Foreign investors are generally prohibited from directly owning land situated in the Philippines, as land ownership is reserved for Filipino nationals and domestic corporations and joint ventures that are deemed Filipino nationals.18 Domestic corporations and joint ventures are considered Filipino nationals where at least 60 per cent of their equity is owned by Filipino nationals. Foreign investors may therefore indirectly own land by investing a maximum equity of 40 per cent in domestic corporations or joint ventures. There is, likewise, a foreign ownership limitation on condominium projects in that foreign membership of a condominium corporation is limited to 40 per cent.19 Similarly, foreign investors may indirectly own condominium units through domestic corporations and joint ventures in the same way described above. Conversely, there is no foreign ownership limitation on owning buildings, provided that the land is owned by a Filipino individual or company. As an alternative to owning land, foreign individuals and entities may lease private lands located in the Philippines for a period of 25 years, renewable for another 25 years.20 Foreign investors, however, are allowed a 50-year lease, renewable for another 25 years, over private land 'in connection with the establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for tourism, industrial or commercial use, and other similar priority productive endeavours'.21 The latter type of long-term lease is subject to approval by the pertinent government agency. Foreign investors may likewise be accorded an income tax holiday and special tax rates, depending on, among other things, the location of their operations and their registrations with the Board of Investments and PEZA.

Structuring the investment

As a general rule, a foreign national cannot own land in the Philippines, unless the foreign national:

  1. inherited land through succession;22

  2. is a former Filipino citizen;23 or

  3. is a former Filipino citizen and has reacquired Filipino citizenship under Republic Act No. 9255 or the Citizenship Retention and Reacquisition Act of 2003.

Nonetheless, any foreign individual or corporation wishing to invest in real estate in the Philippines can do so using the following means.

i Philippine corporation Foreigners can indirectly own private land by acquiring up to 40 per cent equity in a Philippine domestic enterprise that can either own land as a capital asset or as part of its inventory if the company is in the real estate business. This type of corporation is considered a Filipino national under Philippine law, and therefore allowed to buy and own private land. Stockholder liability in the dealings of the corporation is limited only to the extent of the shareholder's equity in the corporation. As a general rule, the shareholder will not be personally liable for debts of the corporation.

ii Condominium corporation

Instead of directly owning private land, foreign nationals are permitted to directly purchase condominium units in condominium projects duly constituted under Republic Act No. 4726 as amended (Condominium Act) and registered with the Housing and Land Use Regulatory Board (HLURB), provided the total foreign interest in the condominium project does not exceed the 40 per cent limit set by the Condominium Act and the Constitution. Under law, a condominium is not limited to residential use, as it can also be classified as a commercial or office building. Thus, in the construction of office buildings, it is typical to allow foreign nationals to own specific areas of a project as long as they do not exceed, in the aggregate, the 40 per cent limitation.

iii Long-term lease

As an alternative to owning land, foreign nationals can enter into lease agreements covering real property. While, as a general rule, private corporations may enter into lease terms of up to 25 years that are renewable for another 25 years, the Investors' Lease Act, however, permits a longer-term lease by foreign investors of up to 50 years that is renewable for another 25 years if the purpose of the lease is for the establishment of industrial estates, factories, processing plants, agro-industrial enterprises or commercial and tourism uses.24 The investment contemplated by the law involves equity that is duly registered with the SEC and a lease agreement that has the prior approval of the Department of Trade and Industry. Similarly, foreign companies that are registered in government-established economic and industrial complexes, through PEZA, can enter into long-term lease agreements recognised by the Investors' Lease Act.25 Generally, these leasehold rights may also be sold, assigned or transferred, except when the buyer or assignee is a foreigner. Any limitations or conditions on use as prescribed by law will continue to be applicable.26

iv Ownership of real property other than land

While there are strict nationality restrictions on land ownership, there are no such limitations applicable to foreign nationals and corporations regarding improvements or real property constructed on land. Accordingly, 100 per cent ownership over buildings, equipment and other real property situated on land can be titled in favour of a foreign national or corporation who is merely a tenant of the land. Thus, it would be perfectly valid for a foreign national to have a completely separate legal title on the real property from that of the land where such real property is located. Although it is generally accepted that the accessory follows the principal, whereby the ownership of the property (land) produces the right by accession to everything that is integrated or attached to it, whether naturally or otherwise, this rule, nonetheless, allows for an exception.27 As a result, a tax declaration filed with the local assessor's office can serve as evidence of ownership over the structure and real property other than land28 by expressly indicating such buildings and equipment as owned by the foreign national. Under these circumstances, and where the land is registered in the name of a corporation deemed as a Filipino national, the foreign owner of the building can also partake of up to 40 per cent of the allowable equity in the Philippine corporation.


A REIT is a stock corporation established principally for owning income-generating real estate assets,29 where indirect investments in real property can be made. Although designated as a 'trust', the REIT does not have the same technical meaning as a trust under existing laws and is solely used to be consistent with internationally accepted best practice. A REIT is required to have a paid-up capital of 300 million pesos. It should also maintain its status as a public corporation as defined under Republic Act No. 9856 and should, thus, have a minimum of 1,000 public shareholders, each with at least 50 shares under their names and who, in total, should own a third of the outstanding capital stock of the REIT. Although the REIT is not subject to the minimum corporate income tax rate, it is, however, subject to the regular corporate income tax rate of 25 per cent.30 Declared dividends distributed as income are deemed as allowable deductions.31 In addition, unless expressly exempted by law, the sale, exchange or disposition of real property, plus any accompanying security interest to this type of corporation, will incur income tax and value added tax if the subject property is classified as an ordinary asset, or capital gains tax if the property is reported as a capital asset. Noteworthy, though, is that documentary stamp taxes due on transfers to REITs and the transfer fees are generally 50 per cent less compared to ordinary transfers of real property.32

Real estate ownership

i Planning Real estate development in the Philippines is regulated by the national government and provincial and city governments. At the micro level, city governments are required to consult with their stakeholders to create a comprehensive land use plan, which governs the development, utilisation and management of lands within their respective territories.33 City governments may issue or modify zoning ordinances to complement the plan. The plan, however, must comply with zoning rules and regulations set forth by the national government. Real estate investors must first examine the zoning ordinance of the locality they wish to operate in, lest they end up with real estate that cannot be utilised for the purpose sought. Prior due diligence is of utmost importance as a locational clearance is a prerequisite to securing a building permit or a permit to operate business from the city government. Non-conformance with the designated land use may be allowed under zoning ordinances, subject to compliance with their conditions.

ii Environment

The Philippines has several laws in place to prevent contamination, whether on land, or in water or air. However, the term contaminated land is not strictly defined by Philippine laws, rules and regulations. Among these laws is the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which aims to avoid, among other things, land contamination. The Act and its related rules and regulations institute mechanisms to monitor the manufacture, importation, storage, use and disposal of chemicals and chemical substances and mixtures with a view to avoiding pollution and harm to the environment. Failure to comply with the rules and regulations for the mentioned activities, including the failure to report such activities to the pertinent government agency, is punishable by imprisonment and administrative fines. The Act further prohibits the entry of hazardous and nuclear wastes in the Philippines and penalises by imprisonment the persons responsible for it. Another pertinent law is the Ecological Solid Waste Management Act of 2000, which penalises, among other things, the following:

  1. dumping waste matters in public places;

  2. open burning of solid waste;

  3. construction or operation of waste management facilities without an environmental compliance certificate; and

  4. the construction of an establishment within 200 metres of an open or controlled dump or sanitary landfills.

The persons responsible for the prohibited acts may be penalised by fine or imprisonment.

iii Tax

The sale of real estate from a previous owner usually entails the payment of capital gains tax and stamp tax if the transferor is not in the business of selling real estate. Depending on the agreement between the parties to the conveyance and acquisition, the amounts of the capital gains tax and stamp tax may be passed on to the person acquiring real estate. The relevant tax rates and bases are as follows:

Capital gains tax34

6 per cent of the highest amount from the following values:

  • zonal value determined by the Commissioner of Internal Revenue

  • fair market value in the schedule of values determined by provincial or city assessors

  • selling price or fair market value

Stamp tax35

15 pesos for every 1,000 pesos or fractional part in excess thereof in relation to the purchase price

Where the transferor is in the business of selling real estate, the sale of real estate is subject to the above-mentioned stamp tax and a 12 per cent value added tax,36 while profits gained are subject to the transferor's income tax. Tax-free exchanges of property are recognised in the Philippines under the National Internal Revenue Code37 for the following instances:

  1. a corporate party to a merger or consolidation exchanges property for stock in another corporate party to the same merger or consolidation; or

  2. property is transferred to a corporation in exchange for stock in said corporation and, as a result of such exchange, the transferor, alone or together with no more than four other persons, gains control of the same corporation.

iv Finance and security

A mortgage may be constituted over real estate to secure credit transactions. Mortgage contracts are valid as long as the mortgagor has absolute ownership and free disposal over the real estate.38 Foreign mortgagors, however, can expect more stringent requirements when transacting with financial institutions. For the protection of creditors, mortgages are usually registered with the Deed of Registry under the Torrens system.39 The act of registration makes the mortgage binding on third persons.40 Nevertheless, the mortgage or its registration does not prohibit the mortgagor from disposing of the mortgaged property.41 Even then, real estate investors very rarely invest in mortgaged real estate due to complications, except when they intend to pay off the mortgage. Similarly, bidding on foreclosed properties is not attractive to investors. While foreclosed properties may appear less costly, they are sold as is and without regard for hidden expenses such as depreciation and unpaid realty taxes.

Leases of business premises

Commercial lease agreements are generally governed by the provisions of the Civil Code. By and large, there is no standard format for a commercial lease agreement and the terms and conditions of a lease of commercial space are left to the parties to decide, save for some legal restrictions and for what is customary in the location of the leased premises. The underlying principle of any lease agreement is as follows: with the lessee's obligation to pay the rent being satisfied, the lessor, in turn, warrants a tenantable area and peaceful and quiet possession in favour of the lessee.42

It is optional for a lease agreement to be recorded in the Registry of Property (the Land Registration Authority).43 However, absent this recording, the lease agreement is not binding on third persons.

As discussed above, lease terms can last for up to 25 years and are extendible for another 25 years; more so for leases entered into under the Investors' Lease Act (50 years and extendible for another 25 years).

Under the Civil Code,44 if the term of the lease has not been agreed upon, the term would be from year to year if the rent to be paid is made annually; month to month if rent is paid monthly; and so forth.

Unless otherwise agreed by the parties, the lease term ends on the day fixed by the agreement. When the tenant continues to occupy the premises at the end of the term with the acquiescence of the lessor, for more than 15 days from expiration of the original lease term, there is an implied renewal of the lease.45 The term of the renewed period will be based on the paragraph immediately above.46

A typical commercial lease agreement would require payment of rent on a monthly basis. For those on long-term leases (five years and above), it is not unusual for the lessor to require the first year to be fully paid in advance. Otherwise, it is generally acceptable that the tenant be made to pay advanced rent, equivalent to two to three months' worth of rent, alongside a security deposit, also equivalent to one to two months' worth of rent. The security deposit is intended to cover costs of repairs for the loss or deterioration of the leased premises as it is presumed that this is the lessee's responsibility. The burden is on the lessee to prove that the damage was not his or her fault.47

The lessee is obliged to return the leased premises after the term of the lease in the same condition as it was received, as much as possible, except for any loss or impairment due to ordinary wear and tear or from force majeure.48

Most commercial properties for lease are run by professional property managers who have developed tailor-made contracts over the years, depending on the type of business that the lessee operates and the location of the premises being leased. This situation provides minimal opportunities for the lessee to negotiate for special concessions outside of the length of the term and the rental rates.

As an offshoot of the covid-19 pandemic and the series of lockdowns imposed by the government on businesses in 2020, the Department of Trade and Industry issued a number of guidelines49 affecting the rights and obligations of both lessors and lessees during and after the quarantine periods. In particular for commercial leases, it allowed micro, small and medium enterprises (MSMEs) or those businesses with capitalisation of less than 100 million pesos to avail of a rent moratorium, including interest-free amortisation of rent falling due during the quarantine and protection from eviction. Note that these benefits are only available to those MSMEs that were forced to temporarily close down during the lockdowns. Furthermore, and subject to the non-impairment clause guaranteed by the Constitution, the same guidelines encouraged all lessors to grant rent reprieves and discounts, including the possibility of renegotiating the terms of the existing lease agreement.

Developments in practice

i Philippine Competition Law

The enactment of Republic Act No. 10667 in 2014 resulted in the creation of the Philippine Competition Commission (PCC) and the declaration of the government to promote free trade and fair competition, and to strictly monitor any merger, acquisition or commercial activity that may be deemed as anticompetitive or an abuse of a dominant market position. Due to the broad powers and objectives granted by the law, a considerable number of real estate transactions have become the subject of the regulatory functions of the PCC. They include several share purchases or mergers involving real estate companies50 that exceed the transaction value threshold set by the law, and thus require prior notification to the PCC before the agreements between or among the parties can be entered into. With the recent passing of Republic Act No. 11494 (or the Bayanihan to Recover as One Act) into law, however, all activities after 15 September 2020 shall be exempt from the compulsory notification requirement provided that the transaction value is below 50 billion pesos. This two-year exemption is meant to address the deleterious effects of the covid-19 pandemic to the Philippine economy, and to encourage investment and cooperation among businesses. The PCC has also had occasion to resolve an issue related to an allegation of abuse of dominant position where the property developer of several condominium projects was accused of restricting the provision of internet services to a particular company that it had a commercial arrangement with, to the exclusion of all other internet service providers.51 The enforcement division of the PCC deemed this an abuse of the dominant position by the property developer and a complaint was filed before the PCC. This was eventually resolved amicably, whereby the property developer agreed to open up its properties to other service providers and with due notice to its unit owners and tenants.

ii Department of Finance versus PEZA

For the past 25 years, PEZA has been spearheading the government's efforts to attract foreign investment. PEZA is a creation of Republic Act No. 7915, or the Special Economic Zone Act of 1995. Under this law, it is believed that by the establishment of these ecozones as a separate customs territory, where tax and duty-free incentives are made available to locators, foreign investors will be encouraged to establish their businesses, factories and processing plants there. Recently, however, the Department of Finance (DOF) adopted a position that the tax incentives being granted to ecozone locators in the past two decades have resulted in lost potential revenue in the amount of 879 billion pesos, all within a two-year period covering 2015 to 2017.52 By relying on this belief, the DOF has pushed for the enactment of a bill, the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which intends to do away with the fixed tax incentive rate (5 per cent on defined gross income) for ecozones and to instead replace it with the standard, but a tiered and reduced, corporate income tax rate, applicable to all corporations regardless of location. The DOF also posits that a stable tax and regulatory environment are more important factors that investors should consider, rather than whether incentives are available, and that the CREATE tax reform package will address these.53 In response, PEZA, which is an agency under the DOF, maintains that the ecozones should be exempt from the coverage of CREATE, believing that the removal of the special tax incentive rate reserved for locators will prompt existing investors to leave the country and relocate elsewhere, and discourage prospective locators from proceeding with their investments. To justify its position, the PEZA leadership reported that, due to the uncertainty brought about by the possible passing of CREATE into law, a reduction in foreign investment commitments was recorded in 2020 when compared to 2019.54 On 26 March 2021, Republic Act No. 11534 (CREATE Law) was passed. Despite its open opposition to the passage of the law, the PEZA leadership expressed optimism that the CREATE Law will create stability in the taxation regime and that PEZA's role as the top investment promotion agency in the country can be sustained.55 As expected, CREATE Law removed the 5 per cent tax incentive available to PEZA registered businesses. They are, however, given a 'sunset period' of four to seven years for the 5 per cent tax incentive even with a tax holiday in place, depending on the type and location of the activity. Once the sunset period expires, PEZA enterprises will be taxed at the same rate as any other corporation, which under CREATE Law is now 25 per cent. CREATE Law also centralised the formulation and granting of tax incentives through the office of the President and the Fiscal Incentives Review Board (FIRB), which, previously, was only tasked with granting tax subsidies to government-owned or controlled corporations.56 This leaves not only PEZA but also other incentive promotion agencies, such as the Board of Investments and other chartered ecozones, with less autonomy in creating or granting incentives to registered businesses. Furthermore, central to the role of the FIRB will be the approval of the strategic investment priorities plan (SIPP), which took effect in June 2022.57 Under the transitory provisions of the CREATE Law, however, registered businesses can still qualify for new incentives depending on what the SIPP provides.

iii Proposed reclamation projects along Manila Bay

The proximity of the highly populated cities of Manila and Pasay to Manila Bay has made the Bay one of the first sites in the Philippines that underwent reclamation projects. The projects in the 1970s led to the creation of the Philippine Reclamation Authority (then the Public Estates Authority), the government agency tasked with regulating all reclamation projects in the Philippines. The burgeoning population and the limited land available in Metro Manila have prompted various real estate developers to continuously look at reclamation as an option, especially in the Manila Bay area.58 Despite this real interest coming from investors, both local and foreign, there are existing legal and environmental concerns that have made reclamation, especially in the Manila Bay area, a topic that is constantly surrounded by controversy. First among these is the writ of mandamus issued by the Philippine Supreme Court in the case of Metropolitan Manila Development Authority, et al v. Concerned Residents of Manila Bay, et al, decided on 18 December 2008.59 The case involves a complaint filed by concerned citizens fearful of the unabated pollution affecting the ecology of the Bay and the health of inhabitants of the areas surrounding the Bay. The complaint took to task certain government agencies for their failure to preserve the cleanliness of Manila Bay. The writ requires a number of agencies to perform certain functions relating directly or indirectly to the clean-up, rehabilitation, protection and preservation of Manila Bay. As a consequence of the case, all establishments and projects in Manila Bay must comply with the policies currently being implemented and those that may be imposed in the future by government agencies in relation to the restoration, rehabilitation and preservation of the water quality of Manila Bay. Pursuant to the writ, Administrative Order No. 16 was issued on 19 February 2019 by the Office of the President, creating the Manila Bay Task Force, whose primary role is to ensure enforcement of all laws relevant for the protection of the Bay. Another issue involves the declaration of President Rodrigo Duterte that he is against any proposal for private corporations to engage in reclamation activities in Manila Bay, citing compelling environmental considerations in arriving at his decision.60 In fact, as early as 2019, through Executive Order No. 74 and invoking similar concerns, the power to approve reclamation projects was transferred to the Office of the President from the Philippine Reclamation Authority, with the agency's role reduced to being merely recommendatory in nature. By 2019, four reclamation projects had nonetheless been approved by the Office of the President:

  1. the Navotas City Coastal Bay Reclamation Project;

  2. the Pasay 360-Hectare Reclamation Project;

  3. the Pasay 265-Hectare Reclamation Project; and

  4. the Horizon Manila 418-Hectare Reclamation Project.61

In February 2021, the Manila Solar City 148-Hectare Project was given the green light by the Office of the President and the Philippine Reclamation Authority. Meanwhile, the proponents of the Manila Waterfront City 318-Hectare Reclamation Project, which had been given conditional notice to proceed in 2020,62 has been acknowledged by the PCC. In March 2021, the PCC approved the joint venture between Manila City and Waterfront Manila Premier Development, Inc for the 'Manila Waterfront City' and stated that the reclamation project will not lessen competition in the real estate development market.63


The previously cited REIT law was passed in 2009, but no listings have taken place due to difficulties posed by the stiff requirements under the old implementing rules issued by the SEC and the lack of tax incentives provided. In 2020, however, both the SEC and the Bureau of Internal Revenue (BIR) issued a new set of guidelines applicable to REITs that have paved the way for applications to be filed under the REIT law.64 On the part of the SEC, the new rules lowered minimum public ownership requirement to 33 per cent. The BIR, however, had allowed asset transfers to the REIT to be exempt from value added tax, unlike the old rules, provided that the REIT acquires at least 51 per cent of the outstanding voting capital stock of the transferee.65 In addition, the escrow requirement was removed. REITs are an interesting option for the average investor as, historically, REITs provide higher yields when compared to the more traditional investment products such as bonds or time deposits.66 REITs also allow investors the benefit of owning income-generating assets even with minimal capital.67 Moreover, due to REITs being publicly listed, shares can be easily transferred, which may not necessarily be the case for direct investments in physical properties or other private companies.68 As confirmation of the real interest spurred by the new guidelines, seven local property developers are now duly listed under the REIT law.

Outlook and conclusions

There is no denying the immense impact that the covid-19 pandemic has had on the Philippine economy and the real property sector in particular. Worst hit among the commercial property sub-sectors were those in hospitality, tourism and retail. Even when quarantine restrictions eased in the last quarter of 2020, customer response was tepid, creating a lot of uncertainty among real property developers in these types of businesses.69 Those in the industrial and office sectors, however, fared much better; with the latter recovering fairly well despite prolonged quarantine measures mandated by the government. It is believed that the office sub-sector will benefit from the expected growth of IT and business processes outsourcing services in the post-pandemic phase.70 Furthermore, with minimal changes in the project pipeline for investments in the industrial sector, the need and demand for industrial property should stay near pre-covid levels.71 The resumption of infrastructure projects that were halted by the onset of the pandemic also augurs well for this sector. With the country well into recession, the residential market has also suffered a considerable setback. Noticeable are the lack of residential project launches and the cessation in housing construction projects.72 Housing mortgages are also down, which is a clear indicator that activities in this sector have taken a downturn.73 To alleviate some of the pressure brought about by the sagging economy while attempting to balance the interests of the developer and buyer or landlord and tenant, the government set out new legislation and guidelines at the height of the lockdowns. Republic Act No. 11494, or the Bayanihan to Recover as One Act, mandated a two-month moratorium on all payments for financial loan obligations in the last quarter of 2020. Under the same law, grace periods to pay utility bills and rent were also granted for those covered by the lockdown, with the Department of Trade and Industry providing its own guidelines on rent and utilities. Admittedly, in the larger scheme of things, these can be characterised as palliative measures meant to address an immediate need and not designed for long-term health or survival. They were, nevertheless, necessary. The recent developments in REITs remain a bright spot for the real estate sector. The loosening of the listing requirements should spur fresh activity in this type of financial product. The eventual outcome of the tax reform push on the part of the DOF through the passage of the CREATE Law will undoubtedly play a significant role in the capability of the Philippines to remain as a viable option for foreign investors in the real property market. With the economy in dire need of a boost, there will be a constant barrage of balancing tests for the government, as it will be asked to weigh considerations in favour of loosening restrictions to allow foreign investment, ostensibly, to improve the economy at the expense of sacrificing safeguards meant to protect the environment or to preserve patrimony, among other things. This will be the ever-present scenario for reclamation projects, where environmental concerns will perpetually exist, and yet its proponents continue to grow in number. Finally, for a nation that has had an absolute prohibition on foreign ownership of land for almost a century, there appears to be a softening of this position. In December 2019, the congressional committee on constitutional amendments recommended that the restriction be modified into a statutory limitation rather than a constitutional one, thereby leaving the discretion entirely with the legislature whether the prohibition will stay or not.74 Footnotes

1 Manolito A Manalo is managing partner of and Joan Roshen M Dueñas is a senior associate at Ocampo Manalo Valdez Lim. 2 Section 7, Article XII, 1987 Constitution. 3 The Condominium Act, Republic Act No. 4726 (18 June 1966). 'Whether Foreign Individuals and Foreign Businesses Are Allowed to Own Land in the Philippines', DOJ Opinion No. 038, Section 2018 (17 July 2018). 4 Investors' Lease Act, Republic Act No. 7652 (4 June 1993); and Fixing a Maximum Period for the Duration of Leases of Private Lands to Aliens, Presidential Decree No. 471 (24 May 1974). 5 Spouses Dominador Peralta and Ofelia Peralta v. Heirs of Bernardina Abalon, G.R. No. 183448, 30 June 2014; and Heirs of Bernardina Abalon v. Marissa Andal, et al., G.R. No. 183464, 30 June 2014. 6 Property Registration Decree, Presidential Decree No. 1529 (11 June 1978). 7 Article 16, Civil Code of the Philippines. 8 Article 1306, ibid. 9 Venzon, Cliff, 'Chinese eye bigger slice of Manila as real estate prices tank', Nikkei Asia, 5 June 2020,, last accessed on 8 January 2021. 10 ibid. 11 Olanday, Dan and Rigby, Jennifer, 'Inside the world's longest and strictest coronavirus lockdown in the Philippines', The Telegraph, 11 July 2020,, last accessed on 8 January 2021. 12 Cayabyab, Jeanne Christine, 'Post-lockdown market shift: sustaining economic growth with warehousing, coworking, and townhouses in the Philippines', 20 October 2020,, last accessed on 8 January 2021. 13 Cordero, Claro Jr., 'Philippine property market news (November 2020)', 7 December 2020,, last accessed on 8 January 2021. 14 Allan, Roddy, 'Are we overestimating the impact of COVID-19 on Asia Pacific real estate?', 2020,, last accessed on 8 January 2021. 15 Revised Implementing Rules and Regulations of Republic Act No. 9856, otherwise known as the Real Estate Investment Trust (REIT) Act of 2009, SEC Memorandum Circular No. 01-2020, (20 January 2020). 16 SEC Clears Offerings by Citicore Energy REIT, Figaro Coffee Group, Arthaland, 17 November 2021,, last accessed on 13 December 2021. SEC Clears Robinsons Land, Megaworld REIT Offerings, 4 August 2021,, last accessed on 13 December 2021. SEC Approves Filinvest Land's REIT Offering, 6 July 2021,, last accessed on 13 December 2021. SEC Okays DoubleDragon's REIT Offering, 17 February 2021,, last accessed on 13 December 2021. SEC Clears Ayala Land's REIT Offering, 10 July 2020,, last accessed on 13 December 2021. SEC Approves Vista REIT, 5 May 2022, 17 See footnote 13. 18 Section 7, Article XII, 1987 Constitution. 19 See footnote 2. 20 See footnote 3. 21 Implementing Rules and Regulations of Republic Act No. 7652, IRR of RA 7652, (29 November 1994). 22 1987 Constitution of the Philippines. 23 ibid. 24 See footnote 3. 25 Special Economic Zone Act of 1995, Republic Act No. 7916 (24 February 1995). 26 See footnote 15. 27 Maria Torbela v. Spouses Andres T Rosario and Lena Duque-Rosario, et al, G.R. Nos. 140528 and 140553, 7 December 2011. 28 Magdalena T Villasi v. Filomeno Garcia, G.R. No. 190106, 15 January 2014. 29 See footnote 12. 30 National Internal Revenue Code, Republic Act No. 8424, as amended. See also Section 6 of Republic Act No. 11534. 31 See footnote 12. 32 ibid. 33 Department of Human Settlements and Urban Development Act, Republic Act No. 11201, (14 February 2019). 34 Section 24 (D), National Internal Revenue Code, Republic Act No. 8424, as amended. 35 Section 196, ibid. 36 Section 106, ibid. 37 Section 40(C)(2), ibid. 38 Article 2085, Civil Code of the Philippines. 39 Article 2125, ibid. 40 ibid. 41 Article 2130, Civil Code of the Philippines. 42 Article 1654, ibid. 43 Frequently Asked Questions, Land Registration Authority,, last accessed on 8 January 2021. 44 Article 1687, Civil Code of the Philippines. 45 Article 1670, ibid. 46 ibid. 47 Article 1667, ibid. 48 Article 1665, ibid. 49 These guidelines include DTI Memorandum Circular No. 20-12, DTI Memorandum Circular No. 20-29, and DTI Memorandum Circular No. 20-31. 50 Philippine Competition Commission, Commission Decision No. 16-M-013/2020: Proposed Acquisition by DMC-Urban Property Developers, Inc of Assets of PLDT, Inc, 3 September 2020; Commission Decision No. 11-M-009/2020: Proposed Acquisition by Century Properties Group, Inc of Voting Shares in Century City Development II Corporation, 11 August 2020; Commission Decision No. 30-M-024/2019: In the Matter of the Proposed Joint Venture between Pasay Harbor City Corporation and the City Government of Pasay, 26 September 2019; Commission Decision No. 03-M-021/2019: In the Matter of the Proposed Acquisition by Universal Robina Corporation (URC) of Assets of Central Azucarera Don Pedro Inc (CADPI) and Roxas Holdings Inc (RHI), 12 February 2019; and Commission Decision No. 24-M-022/2018: Acquisition by Alveo Land Corp of Assets of Antel Land Holdings, Inc, 24 July 2018. 51 Philippine Competition Commission, Commission Decision No. 01-E-001/2019: Competition Enforcement Office of the Philippine Competition Commission v. Urban Deca Homes Manila Condominium Corporation and 8990 Holdings, Inc, 30 September 2019. 52 Kritz, Ben, 'PEZA DoF flame war continues', The Manila Times, 3 October 2019,, last accessed on 8 January 2021. 53 ibid. 54 Palabrica, Raul J, 'Employment opportunities in ecozones', Philippine Daily Inquirer, 17 November 2020,, last accessed on 8 January 2021. 55 Gonzales, Anna Leah E., 'PEZA welcomes signing of Create', The Manila Times, 8 April 2021,, last accessed on 13 December 2021. 56 'DOF says FIRB to promote good governance, enhance grant of tax incentives to firms, 2 October 2020,, last accessed on 13 December 2021. 57 Cahiles-Magkilat, Bernie, 'SIPP to start in January 2022', Manila Bulletin, 26 April 2021,, last accessed on 13 December 2021. Koty, Alexander, 'The Philippines 2022 Strategic Investment Priority Plan', 58 Gonzales, Anna Leah E., 'PCC approves joint venture for 265-hectare project', The Manila Times, 1 October 2019,, last accessed on 8 January 2021. 'R-II Builders takes on P7.4B reclamation project to expand Manila Harbour Centre', PortCalls Asia, 25 July 2016,, last accessed on 8 January 2021. Abanes, Mariel, 'A Sneak Peek At Manileño: The City Of Tomorrow', METRO, 23 October 2020,, last accessed on 8 January 2021. 59 Metropolitan Manila Development Authority, et al v. Concerned Residents of Manila Bay, et al, G.R. Nos. 171947-48, 18 December 2008. 60 Parrocha, Azer, 'Duterte still not inclined to allow Manila Bay reclamation', Philippine News Agency, 7 April 2020,, last accessed on 8 January 2021. 61 ibid. 62 Philippine Reclamation Authority, 'Targets and Accomplishments (as of 30 December 2020)',, last accessed on 13 December 2021. 63 In the Matter of the Proposed Unincorporated Joint Venture Between Waterfront Manila Premier Development, Inc and the City Government of Manila, Commission Decision No. 03-M-004/2021, 9 March 2021. 64 See footnote 12. 65 BIR Revenue Regulations No. 3-2020 (29 January 2020). 66 'Why invest in Philippine REIT (real estate investment trust)', Pesolab, 5 January 2021,, last accessed on 8 January 2021. 67 Lee-Tan, April, 'Why buy REITs?', Philippine Daily Inquirer, 17 February 2020,, last accessed on 8 January 2021. 68 ibid. 69 Reyes, Rizal Raoul, 'Developers maintain a bullish outlook in the next 2 to 3 years', BusinessMirror, 22 September 2020,, last accessed on 8 January 2021. 70 ibid. 71 ibid. 72 Tomlinson, Peta, 'Philippines real estate: does Metro Manila's move towards flexible online payment and virtual luxury home inspections make now a good time to invest?', South China Morning Post, 30 October 2020,, last accessed on 8 January 2021. 73 ibid. 74 Diaz, Jess, 'House backs expansion of foreign ownership in Philippines', The Philippine Star, 12 December 2019,, last accessed on 8 January 2021.


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