How do I buy a Unit in the Philippines?
For those planning to buy a Unit in the Philippines, here are some basic guides on unit selection, signing a reservation agreement, cooling-off period and other legal requirements.
1. Select a Unit
You can select your preferred Unit from an Availability and Price list that will be provided by the developer’s marketing agent.
2. Reservation Agreement
Having selected your Unit, you will be asked to sign a Reservation Agreement. and pay a Reservation Fee. Depending on the Developer, the reservation fee ranges from P10,000, P25,000, P50,000 or in some developments it can go as high as US$ 2,000. Please note that generally the reservation fee is non-refundable.
3. Cooling Off Period
Unlike here in Australia, there is generally no “cooling off” period when purchasing a property in the Philippines.
4. Deposit
As a rule developers require a 30% deposit. This can be paid in lump sum or can be paid by instalment within a period of time as provided for in the contract. Some developers allows payment of the deposit in four equal instalments for the first four years.
5. Payment Terms
Developers prefer cash payments or shorter payment terms although most developers offer a 10 year payment term. For Cash Payments, developers generally offer a 10% discount.
Initial payment is to be made 30 days after the signing of the reservation agreement and regular payments to be made every month thereafter until the full purchase price including interest is fully paid.
6. Interest Payments
Developers offer in-house financing generally at 18% interest rates. Banks and other financial institutions offer housing loans at lower rates but with stringent qualification and documentary requirements.
7. Buy & Sell Contract
Ordinarily, the developers issues a Buy & Sell Contract to the Purchaser upon payment of the 30% deposit. This is different from the Deed of Absolute Sale which will be issued only after the full payment of the purchase price.
8. Turnover
When your Unit is completed and ready for occupancy, the Developer will inform you. This is called “Turnover” as the Unit is effectively turned over to you by the Developer at that stage. In other words, you are handed the keys.
9. Completing Ownership
On completion of your nominated payment program you will be forwarded a Deed of Absolute Sale which you should complete and return to the Developer. Subject to the payment of transfer fees, you will then be issued with your Certificate of Title.
10. Fees and Taxes
The fees and taxes that you will need to pay at that time:
(a) Documentary Stamps (i.e. Stamp Duty). This is calculated at the current rate of 1.5% based on the Contract Price or the Zonal Valuation whichever is the greater. The Zonal valuation is determined by the Bureau of Internal Revenue from time to time.
(b) Real Estate Transfer Tax which is currently at the rate of 0.5% of the Contract Price or zonal value if greater.
(c) Annual Rates
(i) Real Estate Tax
This is currently rated at 0.5% of the zonal value per annum. It can be paid quarterly. #
