IN 2016, I was invited to speak at the Massachusetts Institute of Technology (MIT) Center for Real Estate in Cambridge, Massachusetts, during the 2016 MIT World Real Estate Forum. Joining me in the panel moderated by Bassim Halaby, founder of Benchmark, were notable leaders in the global real estate industry, such as Diane Hoskins, CEO of Gensler; Anna Leung, executive director of Fosun Property Holdings; and Emre Camlibel, CEO of Soyak Holding. As global leaders in real estate converged in that ideal venue, I had some interesting discussions with some of the biggest global industry players about the attractiveness of the Philippine market to foreign investors in property development. Contrary to our local perception, there was a unanimous interest among all of them to enter the Philippine market. However, this attraction was tempered by what most of them consider to be the stranglehold of local Filipino developers because of the constitutional prohibition on foreigners owning real estate. When I explained to them that there were many countries in the world which have the same prohibition yet foreign investments in real estate still prospered, they replied that those countries attracted foreign capital because they allowed foreign property developers and investors to have economic utilization of the land for almost 100 years.

Because of this constitutional prohibition, many private developers are advocating for the amendment of the Constitution to allow foreigners to own land in the Philippines. Regrettably, many foreigners, in collusion with unscrupulous Filipinos, decided to illegally go around this prohibition by engaging Filipinos as their dummies in having proprietary interest in real properties in the country. If one were to go around asking people in the community, he would not be surprised to hear people stating as a matter of fact that a certain prime lot is owned by a foreigner. Some foreign entrepreneurs or retirees do it for love — they marry a Filipino and acquire land through her as a Filipino citizen. Oftentimes, one sees them owning and running beautiful resorts. What bliss indeed it is to retire on an idyllic beach or mountain resort where you are joined by your family and earn handsomely from running it as a business as well.

With the imminent passage of the congressional bill on the extension of leasehold rights to 99 years to foreigners, the country is on the cusp of the much-needed revitalization of the real estate industry in the midst of its current slump. Without having to run the risk of political turmoil that accompanies constitutional amendments, this law shall open the gates for foreign capital investment on a large scale and high-impact property developments around the country. As I have written in previous article, the long-term usufructuary or leasehold rights serve as the key to unlocking the enormous value of Philippine real estate to drive the economy without tinkering with the integrity of the Constitution. The same bill also allows the bankability of these long-term leasehold rights which makes financing for these major real estate developments more predictable and secure.

Before the introduction of this bill, we had created a precedence for this when we began the development of Clark Green City (now New Clark City). Utilizing the opportunity presented by the BCDA charter in declaring the former Clark Air Base the Clark Freeport and Special Economic Zone, and the Foreign Investors Lease Act, which allowed direct entry of foreign investors into lease agreements, we also invoked the Civil Code provisions on usufruct and lease. To further enforce the legal stability and bankability of this commercial transaction, we secured the Securities Exchange Commission (SEC) opinion on the recognition of development and usufructuary rights (DUR) as intangible assets capable of being used as capital investment. This allowed BCDA to enter into a 99-year development agreement with one of our leading property developers.

Now that a definitive law is being passed, the present Congress must be lauded for passing this landmark legislation that will prove to be a game-changer in how idle properties in our cities and towns are designed, financed and developed. With this law, the government can create enormous value in thousands of hectares of idle assets by the development of smart cities and towns, economic and public rental housing, agro-industrial estates, tourism estates, smart transportation and infrastructures, and others. The law also allows foreign investments in the protection of the environment. The government can do this without selling these lands.

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This opportunity created by the Congress must be approached with long-term strategic vision because the leasehold itself lasts for a century. This will require embracing the culture of planning for execution, urban designs on a human scale, economic viability that brings equitable progress, balancing of food security, environmental sustainability and economic development. Every mayor and local government leader can now wield an LGU’s masterplan as its marketing tool to attract unlimited investments in its land, and more importantly, in its people.

There are challenges ahead, and we must prepare to seize the opportunities that this law has opened for our country.