BUYING LAND IN THE PHILIPPINES: 10 DUE DILIGENCE CHECKS BEFORE INVESTING
Buying land in the Philippines can be attractive for many reasons: a strategic location, a sea or mountain view, development potential, or simply an asking price that appears competitive.
But an attractive property is not necessarily a good investment.
Before paying a deposit or committing capital, investors should look beyond the location and asking price and determine whether the property is legally secure, technically suitable, economically viable and appropriate for the intended project.
Here are 10 important points to consider before acquiring land in the Philippines.
- VERIFY THE TITLE
The first question is fundamental: does the property have a valid title, and does that title correspond exactly to the land being offered?
The property description, boundaries and other relevant information should be checked carefully.
A buyer should not rely solely on copies or representations provided during negotiations. The title and the legal status of the property should be independently verified as part of the due diligence process.
- VERIFY THE OWNER AND AUTHORITY TO SELL
The person negotiating the transaction should be confirmed as the legal owner or as someone properly authorized to act on behalf of the owner.
This becomes particularly important where several family members, heirs, representatives or intermediaries are involved.
Before money changes hands, the investor should understand exactly who owns the property and who has the legal authority to sell it.
- CHECK FOR ENCUMBRANCES AND RESTRICTIONS
Ownership alone does not tell the whole story.
Mortgages, liens, annotations, disputes or other restrictions may affect the property.
These issues can have significant consequences for the transaction and should therefore be identified before any substantial payment is made.
- CONFIRM LEGAL ACCESS
Physical access and legal access are not necessarily the same thing.
A road or pathway may have been used for many years without providing the property with a legally secured right of access.
This distinction can become critical when developing, financing or eventually reselling the property.
Access should therefore be examined both physically and legally.
- UNDERSTAND THE LAND CLASSIFICATION
The current classification of the land needs to be compatible with its intended use.
Is the property agricultural, residential or commercial?
Will conversion or additional approvals be required before the proposed project can proceed?
These questions should be investigated before acquisition rather than after the investor has committed capital.
- VERIFY WATER, ELECTRICITY AND INFRASTRUCTURE
“Electricity is nearby” or “water is available” are not sufficient answers for an investment project.
An investor should establish where the connections actually are, what capacity is available and what it will cost to bring the necessary infrastructure to the property.
Depending on the location and scale of the project, infrastructure costs can materially affect the total investment.
- ASSESS TOPOGRAPHY AND DEVELOPMENT COSTS
A sloping property can provide an exceptional view.
It can also require substantial additional investment.
Earthworks, drainage, foundations, retaining walls and internal access roads can significantly increase development costs.
The acquisition price of the land should therefore never be considered in isolation.
The relevant question is the total cost of making the land suitable for the intended project.
- IDENTIFY NATURAL AND LOCATION-SPECIFIC RISKS
Depending on the location, investors may need to consider flooding, landslides, coastal exposure, typhoons and other natural risks.
These factors may affect not only construction costs but also design, insurance, operations and the long-term value of the investment.
They should be assessed during due diligence, not discovered during construction.
- DETERMINE THE REAL MARKET VALUE
Statements such as “below market price”, “very cheap for the area” or “the owner needs cash urgently” should not replace a proper market assessment.
The asking price should be compared with several relevant local references and, whenever possible, actual transactions.
The objective is not simply to determine whether the property appears inexpensive.
It is to determine whether the price makes sense considering its location, access, characteristics, development constraints and intended use.
- CONFIRM THAT THE INTENDED PROJECT IS ACTUALLY FEASIBLE
This is ultimately the question that brings all the previous checks together.
Can the project actually be developed on this land?
A property may be attractive and legally titled but still be unsuitable for the intended development because of access, classification, infrastructure, topography, development costs or other constraints.
Project feasibility should therefore be considered before the acquisition.
AN ADDITIONAL QUESTION FOR FOREIGN INVESTORS
For foreign investors, there is another fundamental consideration:
HOW WILL THE INVESTOR LEGALLY HOLD OR SECURE THE USE OF THE LAND?
Philippine rules restrict direct foreign ownership of land.
The appropriate structure therefore needs to be considered before the acquisition, not afterwards.
Depending on the circumstances and the project, the analysis may involve a lease, a Philippine corporate structure where legally appropriate, or another compliant arrangement.
The objective should never be to find an artificial mechanism to circumvent ownership restrictions.
The objective is to establish a legally compliant structure that corresponds to the commercial reality of the project and properly protects the investor’s interests.
FROM PROPERTY SELECTION TO INVESTMENT ANALYSIS
When assessing land, it is useful to separate three questions:
Do I like the property?
Can the intended project actually be developed on it?
Does the investment make financial sense at the proposed price?
These questions are related, but they are not the same.
A property can be beautiful without being suitable for the project.
It can be perfectly suitable but overpriced.
And it can appear inexpensive until the costs of access, earthworks, utilities, infrastructure and development are included.
For an investor, the analysis should therefore go beyond the purchase price.
LAND → LEGAL DUE DILIGENCE → PROJECT FEASIBILITY → DEVELOPMENT COST → FINANCIAL VIABILITY → INVESTMENT DECISION
This sequence can prevent an investor from making one of the most expensive mistakes in property development: committing capital first and discovering the problems afterwards.
A serious due diligence process costs far less than buying the wrong property.
HOW OPKO FINANCE APPROACHES INVESTMENT PROJECTS
At OPKO Finance, we believe that a property investment should be considered as a complete business and investment decision.
Depending on the project, this can involve assessing:
- investment and ownership structure
- financial feasibility
- preliminary development economics
- CAPEX requirements
- operating assumptions
- tax and accounting implications
- financing structure
- cash-flow projections
- return on investment
- downside scenarios and investment risks
Legal, technical and other specialist reviews should be performed by the appropriate professionals where required.
The objective is simple: before committing capital, understand not only what you are buying, but also what can realistically be done with it and whether the project makes financial sense.
For any information, please contact our team to info@opkofinance.com
