Foreign Ownership Limits for Philippine Real Estate Corporations

This article pulls together the constitutional rules, statutes, case doctrines, and practical structures that govern how much foreign ownership is allowed in corporations that deal with Philippine real estate—from landholding companies and developers to condominium corporations, REITs, and JV project vehicles. It’s written for counsel, founders, CFOs, and investors who need a one-stop, practice-oriented reference. (Philippine context.)

1) The constitutional baseline: 60–40 in favor of Filipinos

Private land ownership is reserved to “Philippine nationals.” Corporations must be at least 60% Filipino-owned (and controlled) to own private land. The foreign cap is 40%.
Foreigners may not own land, save hereditary succession (by operation of law).
The 60–40 rule applies whether the land is residential, commercial, or industrial (agricultural land has separate agrarian/use issues but the constitutional foreign-ownership cap is the same).

If a corporation is more than 40% foreign-owned at any tier that directly owns land, the ownership is constitutionally infirm and subject to reversion (i.e., nullification and reconveyance to the State or to qualified nationals), apart from penalties under the Anti-Dummy Law.

2) “Philippine national,” control, and how to measure the 60–40

Who is a Philippine national? A citizen, or a corporation/partnership at least 60% owned by citizens.
Control test vs. Grandfather rule.
- Control test: If the immediate shareholder of the landholding company is itself 60% Filipino, the presumption is that the subsidiary is a Philippine national.
- Grandfather rule: If there are signs of circumvention (e.g., layers of 60/40 shells masking foreign control; voting agreements; unusual preferences), regulators and courts may look through the chain and compute effective beneficial ownership.
Voting vs. non-voting shares. For landholding entities, practice prudently treats the 60% as a real, beneficial majority—not just nominal voting control. Structures that load foreigners with excess economics via non-voting prefs can trigger a grandfathering analysis and a finding of foreign control despite a facial 60/40 split.
Boards and management. For partly nationalized activities (like landholding), majority of directors should be Filipino; foreigners’ participation in management is limited in line with equity caps (see Anti-Dummy Law, below).

Practical rule of thumb: Keep both voting power and economic participation of Filipinos at ≥60% in the landholding company; avoid side agreements that shift real control/economics beyond 40% to foreigners.

3) What foreigners can own (and not own)

A) Land

Not allowed to own, directly or indirectly (except by hereditary succession).
Allowed to lease:
- Private land: up to 50 years, renewable once for up to 25 years (Investors’ Lease Act).
- Government/public land leases have separate terms (and are generally for qualified nationals), but long-term leasehold can underpin foreign projects.
Mortgage/foreclosure: Foreigners may be mortgagees; on foreclosure, they cannot consolidate title to land. They must assign or sell to a qualified Filipino within the allowed period.

B) Buildings and improvements

Foreigners may own buildings (and other improvements) separately from the land. Common structure: foreigner owns the building; the land is leased long-term from a qualified landowner.

C) Condominium units (and parking slots)

Foreigners may own condominium units so long as total foreign ownership in the condominium corporation/project does not exceed 40% of the aggregate.
The land beneath is owned by the condominium corporation (or by unit owners in common), which must itself be ≥60% Filipino-owned.
If foreign share crosses 40%, the condo corp ceases to qualify and unit titles in excess foreign hands become problematic (registries will not allow transfers that breach the cap).

4) Corporate forms that touch real estate—and their caps

Vehicle	Can it own land?	Foreign cap	Notes
Landholding company (OpCo/PropCo)	Yes	40%	Keep Filipino voting & economics ≥60%. Watch board/management composition and avoid side letters that shift control.
Developer (with land bank)	Yes	40% at landholding tier	Can separate DevCo (services) from PropCo (titleholder) to allow more foreign equity in DevCo; PropCo must still be 60/40.
Project SPV (titleholder)	Yes	40%	Typical in JVs: PropCo (60/40) owns the lot; DevCo/PMCo may be majority-foreign if it does not own land.
REIT	Indirectly (via subsidiaries)	Land-owning subs must be 60/40	Market float and foreign ownership at the REIT (parent) level may exceed 40%, provided titleholders remain compliant.
Condominium corporation	Owns land/common areas	40% (foreign owners of condo corp & aggregate unit ownership)	Foreign ownership of units must not push the aggregate over 40%.
Leasing/operations company	N/A (no land)	No specific cap	May be 100% foreign if it does not engage in nationalized activities and does not own land.

5) Anti-Dummy Law (ADL): enforcement teeth

What it forbids: Using dummies, side agreements, or management arrangements to give foreigners control of a nationalized activity (like landholding) beyond the allowed equity.
Penalties: Criminal liability (for the foreigner and Filipino dummies), fines, imprisonment, deportation, and forfeiture of rights obtained in violation.
Red flags:
- Voting trusts or proxies giving foreigners effective control.
- “Filipino” shareholders funded by foreigners with take-back arrangements.
- Disproportionate profit-sharing or guaranteed returns to foreign side that negate the 60/40 intent.
- Board stacked with foreigners beyond the allowed ratio.

6) Layering, JV design, and safe structuring patterns

A) Safe 60/40 landholdings

Hold title in a Philippine national (≥60% Filipino) PropCo.
Foreign partner holds ≤40% of PropCo and may hold majority of non-landholding service companies (DevCo, PMCo, marketing, asset-light ops).
Avoid hidden economic transfers (e.g., “rent” or “service fees” that strip PropCo’s profits) that could evidence foreign control.

B) Lease-led developments

Long-term lease the land from a Filipino landowner into a 100% foreign BuildCo/OpCo that owns the building.
Common for office, hospitality, logistics, and industrial projects where outright land ownership isn’t needed.

C) Condominiums

Track the 40% foreign cap in real time at the project level.
Developers typically throttle sales to foreign buyers once the project approaches the cap.
Corporate buyers of units must themselves be Philippine nationals to be counted as Filipino.

D) REITs

Place land in 60/40 property SPVs; list a REIT parent that can have foreign float beyond 40%.
Ensure beneficial control of land SPVs remains Filipino; avoid shareholder agreements that cede control.

7) Due diligence & compliance checklist

Before acquiring or financing:

Cap table tracing (grandfather if needed): confirm effective Filipino interest ≥60% in any landholding tier.
Board/management compliance: majority Filipino directors; officers’ nationality where required.
Side agreements: flush out voting trusts, puts/calls, profit guarantees, development or service contracts that could reallocate control/economics.
Condo projects: verify foreign-ownership meter (units sold/pledged to foreigners vs. total) and condo-corp composition.
REIT chains: confirm titleholder SPVs comply even if REIT free float is high.
Mortgage/foreclosure protections: covenants to sell to qualified nationals if lender is foreign.
Registries: check TCT/CCT annotations, deed history, and any reversion risks.

Ongoing:

Keep share transfers monitored; pre-emptive rights and transfer restrictions to prevent breaching the 40% limit.
Periodic certifications to regulators and counterparties on nationality compliance.
Investor relations: clear disclosures on nationality caps (especially for condo sales and REITs).

8) Remedies and consequences for breaches

Contracts in violation of the constitutional cap are void as to the prohibited transfer.
Land acquired by a non-qualified corporation is susceptible to reversion actions; registries can deny transfers/annotations that would breach caps.
Parties cannot validate a prohibited ownership by clever drafting; courts look at substance over form.
Criminal and administrative exposure under the Anti-Dummy Law, plus potential director/officer liability.

9) Special topics

A) Inheritance (hereditary succession)

A foreign heir may acquire land by operation of law (e.g., intestate/successor), but voluntary transfers (sale/donation) to a foreigner are not allowed.

B) Usufruct and long-term rights

Non-ownership real rights (e.g., usufruct, long emphyteutic-like leases) can give foreigners use and fruits without violating the ownership ban—if properly structured and recorded.

C) Joint ventures with LGUs or GOCCs

Nationality rules still apply at the titleholding tier. Long-term leases on economic zones are common; land typically remains with a qualified owner/LGU while the JV leases.

D) Agricultural/forest/timber lands

Separate use and tenure rules (agrarian reform, public land laws), but the 40% foreign cap on ownership still stands where ownership is even allowed. Many projects use leases instead.

10) Worked examples (how the math is actually done)

Single-tier PropCo
- Filipinos 60 common shares; Foreigners 40 common shares → Compliant (assuming no side agreements).
Layered chain
- Foreign Parent (100%) → PH HoldCo (40% Foreign, 60% Filipino) → LandCo (100% owned by PH HoldCo).
- Effective foreign at LandCo = 40% → Compliant.
Danger zone (economic preference)
- LandCo: 60 Filipino commons, 40 foreign commons; plus huge, cumulative foreign prefs taking 95% of profits and liquidation value.
- Even with 60/40 voting, beneficial control likely foreign → Risk of disqualification under grandfathering/ADL.
Condo project cap
- 1,000 units total. Foreign buyers can hold up to 400 units in aggregate (40%). Sales desk must monitor issuances/transfers to stay under the cap.

11) Frequently asked questions

Can a 100% foreign developer operate in PH real estate? Yes—without owning land. Use long-term land leases, own the buildings, operate/lease out spaces, or sell condo units within the 40% project cap.

Can foreigners own townhouse or house-and-lot packages? They can own the house (building) but not the lot. Common workaround: lease the lot long-term.

Do preferred shares count toward the 60–40? For landholding, assume yes for beneficial ownership and be conservative: keep Filipino aggregate economics and control ≥60%. Avoid designs that shift real control/economics beyond 40% to foreigners, even through non-voting instruments.

If a condo’s foreign share creeps above 40% after resales, what happens? Registries can refuse subsequent transfers that worsen the breach; governance changes may be required to restore compliance before transfers are recorded.

Are nominee arrangements legal? Nominee/shareholder services that conceal foreign control are classic Anti-Dummy violations—criminally risky.

12) Practical playbook for transactions

Start with the dirt: Who will hold title? If any entity in that chain is >40% foreign, stop and redesign.
Choose the model: (a) 60/40 PropCo + foreign-friendly DevCo/OpCo, (b) Leasehold + foreign BuildCo, or (c) Condo product with an active 40% meter.
Design the economics: Align dividends, intercompany pricing, and service fees so PropCo keeps real economics (no disguised control shift).
Hard-wire compliance: Articles/bylaws, shareholder agreements, transfer restrictions, pre-emptive rights, and cure mechanisms for nationality breaches.
Document cleanly: Lease MOAs, development agreements, condo master deeds, disclosure to buyers/lenders on nationality caps.
Monitor and certify: Annual nationality certifications, board composition checks, and registry coordination (TCT/CCT).

13) Takeaways

Land title sits at the center of the analysis. If the titleholder isn’t a Philippine national (≥60% Filipino), you have a problem—no matter what the holding company up the chain looks like.
The 40% foreign ceiling is both a number and a reality: regulators and courts will pierce layers and instruments to see who truly controls and benefits.
Foreign participation in Philippine real estate is vibrant without land ownership: long leases, buildings, condo units (≤40% project cap), services, and REIT structures with compliant property SPVs.

Final note (not legal advice)

This is a practice guide. Specific projects can trip special statutes (e.g., agrarian reform, ecozone rules, public land laws, corporate/SEC regulations, and tax). Have Philippine counsel paper the structure and stress-test nationality compliance—before you sign or fund.