What Is a Commercial Construction Loan in the Philippines?

A commercial construction loan is a short-to-medium-term financing facility designed to fund the construction of income-generating properties — think office buildings, warehouses, retail strips, mixed-use developments, hotels, and industrial facilities. Unlike a standard home loan, which releases funds in a lump sum for an already-built property, a commercial construction loan disburses funds in tranches as construction milestones are reached.

In the Philippines, commercial construction loans are offered by major universal and commercial banks, development banks, and select government financing institutions. They are typically structured as a construction period (usually 12 to 24 months) followed by a permanent loan phase where the borrower begins full principal-and-interest repayment. Understanding how each bank structures these facilities — and what they cost — is essential before you commit to a project.

How Commercial Construction Loans Work: The Philippine Structure

Most Philippine banks follow a two-phase structure for commercial construction financing:

Phase 1: The Construction Period

During construction, the bank releases funds progressively based on completion milestones verified by a bank-appointed appraiser or in-house engineer. Borrowers typically pay interest only on the amount drawn during this phase, which keeps cash flow manageable while the building is being erected. This period usually runs 12 to 24 months depending on project complexity.

Phase 2: The Term Loan Phase

Once construction is certified complete, the outstanding loan balance converts to a standard term loan. At this point, you begin paying full principal and interest amortizations. Loan terms during this phase typically run 5 to 15 years for commercial properties, though some banks extend up to 20 years depending on the borrower's profile and the asset class.

Loan-to-Value (LTV) Ratios

Philippine banks generally lend between 60% and 80% of the appraised value (or project cost, whichever is lower) for commercial construction projects. This means if your project costs 50,000,000 and the bank applies a 70% LTV, you can borrow up to 35,000,000 — and must inject 15,000,000 as equity. Larger, more complex projects or borrowers with thinner track records may find banks offering only 60% LTV, requiring substantial equity injection upfront.

Banks That Finance Commercial Construction Projects in the Philippines

Not every bank in the Philippines actively lends to commercial construction projects. Below is a rundown of the major players and what they generally offer:

BDO Unibank

BDO is the country's largest bank by assets and has an active commercial real estate lending desk. They finance a wide range of commercial projects including office buildings, warehouses, and mixed-use developments. BDO typically requires a minimum project cost of around 10,000,000 for commercial construction facilities and prefers borrowers with existing banking relationships. Their commercial real estate rates are generally priced off the bank's own benchmark rate or the BSP overnight rate, with spreads that move based on the borrower's credit standing. If you already have a residential loan with BDO, you can explore refinancing your BDO home loan separately to free up personal cash flow for your equity contribution.

BPI (Bank of the Philippine Islands)

BPI's corporate and SME banking units both extend commercial construction financing. BPI is known for relatively thorough credit assessment and tends to favor borrowers with audited financial statements showing consistent profitability. They lend across office, retail, hospitality, and industrial asset classes. BPI's construction loans typically require a detailed project feasibility study, architect's plans, and bill of quantities before approval.

Metrobank

Metrobank has a dedicated commercial real estate lending team and is active in financing mid-to-large scale developments. They are generally competitive on pricing for well-capitalized borrowers with strong project economics. Metrobank's interest rates on commercial construction loans are typically variable, repriced annually based on their base lending rate.

Security Bank

Security Bank is increasingly competitive in the commercial property space. They offer construction-to-permanent loan structures and have been expanding their SME and mid-market real estate lending. Security Bank tends to be flexible on project types and may be worth approaching for smaller commercial builds (under 20,000,000). If you have a residential mortgage with Security Bank and are looking to optimize your overall financing costs, it's worth exploring whether Security Bank housing loan refinancing options make sense alongside your commercial project planning.

RCBC (Rizal Commercial Banking Corporation)

RCBC is active in commercial construction lending, particularly for mid-market developers and business owners putting up owner-occupied commercial spaces. They offer both peso and dollar-denominated facilities for eligible borrowers and are generally open to discussions on creative structuring for mixed-use projects.

PNB (Philippine National Bank)

PNB has a broad commercial lending footprint and actively participates in construction financing for office, retail, and industrial projects. As a government-affiliated bank, PNB can sometimes offer competitive rates particularly for projects with a public-interest component or for borrowers who are long-standing clients.

Land Bank of the Philippines (Landbank)

Landbank primarily serves agriculture and countryside development but also extends commercial real estate loans, particularly for projects in provincial areas or those with a development impact angle. Their rates can be attractive but their process tends to be more documentation-intensive.

UnionBank and EastWest Bank

Both UnionBank and EastWest Bank have growing commercial lending books. UnionBank in particular has been modernizing its credit platform, making the application experience somewhat faster than traditional banks. EastWest Bank is more active in the owner-occupied commercial space for SMEs.

What Interest Rates Should You Expect?

Commercial construction loan rates in the Philippines are almost universally variable and priced as a spread over a reference rate — either the bank's own base lending rate or a market benchmark. As of 2026, indicative rates for commercial construction loans from major banks generally fall in the following ranges:

These rates are subject to annual repricing, which means your cost of borrowing can change meaningfully over the life of the loan. Unlike residential home loans where some banks offer fixed-rate windows of 1 to 5 years, commercial construction loans in the Philippines rarely offer extended fixed periods — most reprice annually. This makes stress-testing your project cash flows against rising rate scenarios critically important before you sign.

Key Requirements and Documents

While requirements vary by bank, most Philippine lenders will ask for the following before approving a commercial construction loan:

Banks will also conduct their own independent appraisal of the land and projected completed value of the project. This appraisal — not your own estimate — is what the LTV calculation is based on.

Practical Tips Before You Apply

1. Get Your Equity Ready First

Banks will not disburse a single peso until you have contributed your required equity — typically 20% to 40% of the total project cost. This means if your project is budgeted at 30,000,000 and the bank is offering 70% LTV, you need to have 9,000,000 in equity committed before the first construction tranche is released. Have your equity documented and ready.

2. Prepare a Bankable Feasibility Study

A commercial construction loan is not just a secured loan — banks are also assessing the viability of the project as a going concern. Your feasibility study should include realistic rental yield projections, vacancy assumptions, operating cost estimates, and a clear debt service coverage ratio (DSCR) analysis. Most banks want to see a DSCR of at least 1.20x to 1.30x — meaning your projected net operating income should comfortably exceed your annual debt service by 20% to 30%.

3. Compare Multiple Banks

Do not go to just one bank. Commercial construction loan pricing and appetite vary significantly across institutions. A bank that is aggressive on office building financing may be conservative on industrial warehouses. Approach at least three to five banks simultaneously and use competing term sheets to negotiate better pricing and terms.

4. Understand the Drawdown Schedule

Negotiate a drawdown schedule that aligns with your contractor's payment milestones. Mismatches between bank tranche releases and contractor payment demands are a common source of construction delays and cost overruns. Have your project manager or quantity surveyor review the bank's proposed drawdown structure before signing.

5. Plan for Cost Overruns

Construction projects in the Philippines routinely run 10% to 20% over budget due to material price increases, design changes, or permitting delays. Make sure your financing plan includes a contingency buffer — either from your own equity or a pre-agreed contingency line with the bank. Do not assume you can go back to the bank mid-project for additional funds without renegotiating terms.

Commercial Construction Loans vs. Residential Home Loan Refinancing

If you are a property owner financing a smaller commercial build — for example, converting a lot you own into a small retail strip or commercial building — it is worth understanding that commercial construction finance and residential mortgage refinancing serve very different purposes. Residential mortgage refinancing, like the kind Nook specializes in, helps homeowners reduce their monthly payments by moving their existing home loan to a lender offering a lower rate (currently as low as 5.99% p.a.). This is a separate and distinct product from commercial construction lending.

That said, some property owners use proceeds from residential refinancing — or equity freed up by refinancing — to fund part of their equity contribution to a commercial project. If you have a residential mortgage sitting at 9% or 10% and you can bring it down significantly, the monthly savings can meaningfully improve your personal cash flow position as you undertake a commercial build.

Is a Commercial Construction Loan Right for You?

A commercial construction loan is a powerful tool for business owners and developers who want to build income-generating assets — but it comes with higher complexity, stricter credit assessment, and more moving parts than a standard residential mortgage. Before proceeding, make sure you have a clear project plan, a qualified contractor, sufficient equity, and realistic income projections. Working with a financial advisor or mortgage specialist who understands the Philippine lending landscape can save you significant time and help you approach the right banks with a compelling credit package.