HOW TO BUY LAND IN THE PHILIPPINES

Banawe Rice Terraces

Perhaps in a move to stomp out so-called financial imperialism, the country only allows foreign buyers to purchase condo units. As mentioned, foreign buyers can’t own detached homes or acreage.

Of course, there are a series of legal loopholes. For example, we met with one developer who is building townhouse-style “condos” near a secluded beach. Each townhouse connects in one place in the back of the unit, near a storage area. Since the law doesn’t mandate how many units need to be connected in order to qualify as a “condo”, nor where they must be connected, it appears this particular development found a way to get around the spirit of the law.

But how to invest in the agriculture business?

Foreigners are allowed to own up to 40% of a Filipino corporation that has in-country business interests (they’re allowed to own 100% of corporations that sell only offshore).

And everywhere you turn, someone has a new “foolproof” way to own land in the Philippines as a foreigner.

One way is for the foreigner to own 40% while dividing the remaining 60% among numerous Filipino nominees so as to dilute the voting rights of any particular nominee.

Another way is to set up a Filipino corporation where the vast majority of the agriculture stocks to invest in is owned by a foreign corporation (i.e. a US LLC or a Hong Kong limited corporation), and have Filipino nominees fill in the remaining scraps.

You should always consult with an attorney before enacting these measures because plenty of foreigners have been screwed by flimsy schemes they thought would allow them to get around the spirit of the law.

And the spirit is clear: foreigners shouldn’t own land in the Philippines.

Of course, plenty of foreigners simply put the land in the name of their Filipino girlfriend or relative. Suffice to say, nothing — absolutely nothing — has ever gone wrong with that strategy.

Ahem.

You’d think there could be a business for having globally-minded Filipinos — such as dual US-Philippines citizens — owning land for lots of people as their nominee. However, according to a real estate expert we met in Cebu, that idea has been tried and is now being cracked down on by the government.

Foreigners do have the right to lease agricultural land, and in some cases, that strategy could be the most lucrative as long as you have a trustworthy landlord.

Typical leases run 25 years with a 25-year renewal option and a clause that allows you to buy the land for one peso if the law on foreign ownership changes during that time. Some very eager people even fund a land purchase and then lease it back from a nominee at a very low rate.

Many have speculated that foreign ownership rules could be loosened up in the next ten or fifteen years, but it’s anyone’s guess.

Rents on agricultural land can be quite cheap as well, and yields can actually be halfway decent. Most people we talk to here suggest livestock such as pigs or goats as the most profitable way to go, but some have also suggested a mix of pigs and fruits and vegetables in order to feed the pigs homegrown food and save on feed cost.

What’s important to note is that in the last quarter of 2021 there have been some regional challenges in the agricultural sector in the Philippines despite the country’s attempts to address said regional and even global challenges in 2022.

https://nomadcapitalist.com/finance/investing/invest-philippines-agriculture-without-getting-dirty/