FUNDAMENTALS IN REAL ESTATE IN THE PHILIPPINES

Fundamentals in Real Estate in the Philippines is discussed by Engineer and Real Estate Broker Manuel Arengo Jr. It covers the basic laws of land ownership, the list of exceptions of land ownership, the Absolute Community Property, the limitations of ownership, the 5 professions in real estate, the types of real estate, as well as Maceda Law and Right of Refund to protect buyers from onerous developers.
FUNDAMENTALS IN REAL ESTATE
Who can own real estate? Only Filipino Citizens
EXCEPTIONS
1. Former Filipino
Residential : 1,000 sqm urban 1 ha. rural
Business : 5,000 urban 3 ha. rural
2. Corporations 60% Filipino 40% Foreigners
3. Interest of 40% in a condominium project
4. Acquisition thru hereditary succession if the acquiree is a legal heir.
5. Acquisition before the 1935 Constitution.
Basic ownership law : COMMUNITY PROPERTY
Modes of acquiring title
1. Private Grant –voluntary transfer or conveyance of private property by a private owner, such as sale or donation.
2. Public Grant – acquisition of alienable lands by government awards.
3. Involuntary Grant – acquisition of private party against the consent of the former owners, such as foreclosure sale, execution sale, or tax sale
4. Inheritance – acquisition of private property through hereditary succession
5. Reclamation - filling of submerged land, subject to existing laws and government regulations.
LIMITATIONS ON RIGHTS OF OWNERSHIP
1) Those imposed in general by the State
2) Those imposed by law
3) Those imposed by the owner himself
RIGHT TO HIDDEN TREASURE
Hidden treasure belongs to the owner of the land.
OTHER RIGHTS
SURFACE, SUBSURFACE AND AIR RIGHT
From the surface downwards to the center of the earth and extends upwards indefinitely to the skies
Types of real estate
1. Residential
2. Commercial
3. Industrial
4. Mixed Use
5 professions in real estate
 Real Estate Salesperson
 Real Estate Broker
 Real Estate Appraiser
 Real Estate Assessor
 Real Estate Consultant
Right to refund under P.D. 957
Right to refund applies when the developer fails to complete the development within the required period. Refund is 100% of total payments
PD 957 Non-forfeiture of Payments Maceda Law: RA 6552
Right to refund when the buyer has paid at least 2 years.
Refund is 50% of total payments
Additional 5% per year after the 5th year.
Maceda Law
Applicability – Applies to sale or financing of residential estate on installment payment covered by contract to sell and not sale with mortgage
Provided that this can only be availed of once every 5 years
Mortgage of Project
No mortgage of any lot by the project owner/developer without permit to mortgage from HLURB.
Permit to mortgage may be granted upon submission of proof that the loan proceeds will be used for development.
How to compute monthly amortization
Loan amount X Factor = Monthly amortization
How to get the factor:
Use factor table. ( the point where the interest and terms meet)
Use mortgage calculator application on mobile phone
How to compute Depreciation
Straight line method: 1. Separate the lot and place value on it per square meter. Lot value varies with location
2. Get the size of the total floor area
high end: 40,000 per sqm and above
middle: P30,000 per sqm more or less
Low cost: P20,000 per sqm more or less
3. Deduct Depreciation cost
ADD items 1 & 2 and deduct item 3
How to compute Depreciation Straight line method: Assumes zero value after 50 years
How to estimate property values
1. Separate the lot and place value on it per square meter. Lot value varies with location
2. Get the size of the total floor area
high end: 40,000 per sqm and above
middle: P30,000 per sqm more or less
Low cost: P20,000 per sqm more or less
3. Deduct Depreciation cost
ADD items 1 & 2 and deduct item 3
How to compute buyer’s required income
Monthly amortization divided by 0.35
How to compute monthly amortization
Use a Factor table. Get the factor after knowing the interest rate and the terms
Loan Amount X Factor = Monthly amortization
Another option is to use APPLICATION
Mortgage calculator