One of the pain points for foreign investors who want to venture into the Philippines is the limitation on foreign ownership of real property. Generally, only Filipino citizens and corporations or partnerships that are 60% Filipino-owned are allowed to acquire and own land in the Philippines. Foreign investors are allowed to lease private land for 50 years, renewable only once for another 25 years, provided the lease has made social and economic contributions to the country, among other conditions. However, if the allowable land lease period for foreign entities is extended to 99 years, the longer guaranteed lease term would put potential investments in a more competitive position, comparable to holding freehold property interest. This would put us in a similar situation as Singapore and Hong Kong. At the same time, it still limits foreign ownership to leasehold arrangements, which means freehold interest remains with Filipinos.

Last July 2024, the Legislative Executive Development Advisory Council (LEDAC) announced that one of their priority measures is making amendments to the Foreign Investors’ Long-Term Lease Act (Republic Act 7652). There is no bill filed for this amendment yet, but Senate President Chiz Escudero hopes to push for a 99-year lease term for foreign investors. This may be a more effective and less risky path to effectively bypass the foreign ownership restriction on private land.

A 99-year land lease term for foreign entities would boost our competitive position, drawing more foreign investment into the country. It makes for a considerably more attractive investment option than a 50-year leasehold.

Development autonomy
For now, foreign developers can only enter the market through partnership with local entities. If they want free rein in the project planning and execution, they may want to enter the market without a local partner. If they enter the market under a 50-year lease, there will be limited time for planning, project execution, and recovery of their investment—especially for a large-scale development. An extended land lease term will give proponents more time to execute their vision and carry it to maturity before the lease period ends.

Opportunity for redevelopment

A leasehold arrangement ensures that the property will revert to the owner after the expiration of the lease term. This will give an opportunity to the owner to continue with current operations on the property, redevelop the property themselves, or to lease it out again to another entity.

Risk of freehold land ownership for foreigners

If foreign entities are allowed freehold ownership of land in the Philippines, it will open up the market to an influx of foreign buyers who find properties here less costly than real estate in their home countries. This is already evident in our residential condominium developments, although they are still limited to owning only up to 40% of the projects. Freehold land ownership for foreign entities will invite more developers, and they can bring in their buyers from overseas. Then, increased demand, especially for prime areas, will push prices up, precluding Filipinos with their locally sourced and comparatively lower salaries, from even buying. There may come a time when Filipinos will be forced to rent properties from foreign landlords because of the affordability issue in freehold properties. Limiting ownership interests helps manage pricing and demand, which might become prejudicial to the Filipino market if unrestrained.

A 99-year allowable leasehold term is a win-win for Filipinos and foreign entities. Foreign investors are given a longer period to generate returns on their investments, they have the option to have full autonomy in real estate development, and Filipino entities will be able to retain freehold ownership of land at the end of the lease term. Moreover, foreign funds will bolster the local economy with a favorable investment option compared to a shorter land lease term.