What Is a Commercial Construction Loan in the Philippines?
A commercial construction loan is a short-to-medium-term financing facility that funds the building or major renovation of income-generating properties — think office buildings, warehouses, retail spaces, mixed-use developments, apartment buildings, and condominiums built for sale or lease. Unlike a standard home loan, the proceeds are released in tranches tied to construction milestones rather than handed over in a lump sum at closing.
In the Philippines, commercial construction financing typically bridges the gap between the raw land you already own and the completed, tenanted building that a permanent mortgage or takeout loan will eventually refinance. Understanding how the product works — and which banks are best positioned to lend on your specific project — can save you hundreds of thousands of pesos in financing costs before you even break ground.
How Commercial Construction Loans Differ from Home Construction Loans
Filipino borrowers often confuse residential construction loans (which finance a single family home on a titled lot) with commercial construction facilities. The differences are significant:
- Loan size: Commercial projects routinely start at 5,000,000 and frequently exceed 50,000,000 or even 500,000,000 for large developments. Residential construction loans top out far lower.
- Collateral: The land and the structure under construction serve as collateral, but banks also underwrite the project's projected cash flows — rental income, pre-sale proceeds, or lease commitments from anchor tenants.
- Interest computation: During the construction period you typically pay interest only on the outstanding drawn balance, not on the full approved amount.
- Repayment structure: Once construction is complete and a certificate of occupancy is issued, the loan converts to a term facility (amortizing) or is refinanced into a long-term commercial real estate mortgage.
- Documentation: Expect to submit building permits, approved plans, a bill of quantities, contractor credentials, a project feasibility study, and sometimes a market study or pre-lease agreements.
Current Rates for Commercial Construction Loans in 2026
Interest rates on commercial construction loans in the Philippines are not published as widely as home loan rates. Banks price them on a case-by-case basis depending on the borrower's financial strength, the project's location, the loan-to-value (LTV) ratio, and current benchmark rates. That said, here is the realistic range you should expect when shopping in 2026:
- Construction period (interest-only): 7.50% to 10.50% per annum, often fixed for the duration of the build (typically 12 to 36 months).
- Term loan / takeout rate: 6.50% to 9.50% per annum for the permanent mortgage that replaces the construction facility, repriced every 1, 3, or 5 years.
- Special developer rates: Accredited developers with strong track records and multiple projects may negotiate rates in the 6.00% to 7.50% range.
For context, if you already own a completed commercial property and simply want to refinance the existing loan, Nook currently has access to rates starting at 5.99% per annum — which is relevant once your construction project converts to a permanent facility. Many borrowers don't realize that the construction loan is meant to be a temporary instrument, and locking in a competitive permanent rate at the outset is just as important as the construction rate itself.
Which Philippine Banks Offer Commercial Construction Loans?
Not every bank in the country has an active appetite for commercial construction lending. Below are the major players and what they are generally known for in this segment:
BDO Unibank
BDO is the country's largest bank by assets and one of the most active commercial real estate lenders. Their commercial construction program accommodates office, retail, industrial, and residential-for-sale projects. LTV ratios typically reach 60% to 70% of appraised project value, with loan amounts starting at around 5,000,000. BDO is known for structured drawdown schedules and relatively fast appraisal turnarounds through their in-house team. Borrowers who already carry a BDO home loan and are branching into small-scale commercial development often find it convenient to consolidate banking relationships here.
BPI (Bank of the Philippine Islands)
BPI's corporate and SME banking divisions both offer construction financing. Their rates are competitive, and they have a strong appetite for mixed-use and mid-rise residential-for-sale projects in Metro Manila, Cebu, and Davao. BPI places significant weight on the developer's track record and requires pre-selling evidence or signed lease commitments for higher LTVs.
Metrobank
Metrobank is one of the preferred lenders for large-scale commercial and hotel projects. Their commercial real estate team handles complex capital structures including syndicated loans for projects exceeding 500,000,000. For mid-market projects, Metrobank typically lends up to 60% of the appraised value of the completed project (loan to appraised value, or LTAV).
Security Bank
Security Bank has been aggressive in growing its commercial real estate portfolio. They are known for faster credit decisions on mid-market deals (5,000,000 to 50,000,000) and have flexible structures for self-employed developers and small corporations. If you are already a Security Bank home loan client looking to refinance a completed property, you can explore options through Security Bank housing loan refinance as a starting point for understanding their current rate posture.
RCBC
Rizal Commercial Banking Corporation has a dedicated real estate lending unit that handles both residential and commercial construction. RCBC is especially active in provincial markets and is one of the few major banks that will consider projects outside the top three metropolitan areas. For existing RCBC borrowers, RCBC housing loan refinance options give a window into their current pricing benchmarks.
PNB (Philippine National Bank)
PNB offers commercial construction financing particularly to government-linked projects and SME developers. Their rates are often competitive for borrowers with strong balance sheets, though their processing timelines can be longer than private universal banks.
UnionBank and EastWest Bank
Both have expanded their real estate lending books in recent years. UnionBank leans toward tech-forward processes and faster approvals for digitally-documented applications. EastWest Bank is competitive for smaller commercial builds in the 3,000,000 to 20,000,000 range.
Pag-IBIG (HDMF) Fund
Pag-IBIG's developer financing program allows accredited real estate developers to borrow against their receivables from Pag-IBIG end-buyer loans. This is technically a receivables financing program rather than a pure construction loan, but it functions similarly for developers who pre-sell units to Pag-IBIG-eligible buyers. Rates are generally below market, but accreditation requirements are stringent.
Loan-to-Value Ratios: What to Expect
LTV on commercial construction loans in the Philippines is calculated differently from residential mortgages. Banks typically use the lower of:
- A percentage of the appraised value of the completed project (LTAV), or
- A percentage of the total project cost (LTPC)
Standard LTV ranges by project type are as follows:
- Warehouse / industrial: 50% to 60% LTAV
- Office building: 55% to 65% LTAV
- Retail / strip mall: 50% to 60% LTAV
- Residential-for-sale (mid-rise): 60% to 70% LTAV, sometimes higher with strong pre-selling
- Mixed-use development: 55% to 65% LTAV depending on the residential-to-commercial mix
This means if your completed warehouse is appraised at 30,000,000, a bank lending at 60% LTV will approve up to 18,000,000. You must fund the remaining 12,000,000 from equity — which is why developers who own their land free and clear have a significant structural advantage.
How to Qualify: A Practical Checklist
Banks evaluate commercial construction loan applications across five broad dimensions. Preparing thoroughly on each before you approach a lender dramatically improves both your approval odds and the rate you are offered.
1. Borrower Financial Strength
- Audited financial statements for the past 3 years (corporation) or ITR plus bank statements (sole proprietor)
- Positive net worth and a debt service coverage ratio (DSCR) of at least 1.20x on existing obligations
- Clean credit history with no restructured or past-due facilities
2. Project Viability
- Feasibility study showing projected revenue, occupancy assumptions, and ROI
- Market study or comparable rental/sales data for the area
- For retail and office: signed letters of intent or lease pre-commitments from anchor tenants
- For residential-for-sale: documented pre-selling results (percent sold, total sales value)
3. Legal and Regulatory Completeness
- Clean title (TCT or CCT) in the name of the borrower or a related entity
- Zoning clearance confirming commercial use
- Approved building permit from the local government unit
- Environmental compliance certificate (for larger projects)
4. Construction Credentials
- Signed contract with a licensed general contractor (PCAB-licensed)
- Approved architectural and engineering plans
- Bill of quantities and construction timeline
- Contractor's performance bond or retention arrangement
5. Equity Contribution
Most banks require the borrower to inject equity (cash or land value) equal to at least 30% to 40% of total project cost before the first drawdown. Some banks require the equity to be fully deployed before they release the first tranche. Having your equity clearly documented — bank statements, land valuation, or notarized deed of assignment of the lot — makes underwriting faster.
The Drawdown Process: How Your Money Is Released
Unlike a home loan where you receive funds at settlement, commercial construction loan proceeds are released in stages. A typical drawdown schedule works as follows:
- Initial drawdown (20% to 30%): Released upon loan signing and confirmation that equity has been injected, building permit is in hand, and the contractor has mobilized.
- Progress drawdowns (40% to 50%): Released at defined construction milestones — foundation complete, structural works complete, finishing works — verified by the bank's independent appraiser or project monitoring team.
- Final drawdown (20% to 30%): Released upon certificate of completion or occupancy, final inspection, and submission of as-built plans.
During the entire construction period you pay interest only on the cumulative drawn amount. This keeps your cash outflow manageable while the project is not yet generating revenue.
Planning Your Exit: From Construction Loan to Permanent Financing
One of the most overlooked aspects of commercial construction financing is planning the takeout — the permanent loan that replaces the construction facility once your building is complete and tenanted. The construction loan is not designed to be held indefinitely. Most have a term of 12 to 36 months, after which they mature and must be refinanced or repaid.
Smart developers begin exploring their permanent financing options six to nine months before construction completion. At that point, the project has enough of a track record (pre-sales data, signed leases, occupancy projections) to attract competitive rates from multiple banks. Shopping among at least three lenders for your takeout loan can mean the difference between a 7.50% rate and a 6.25% rate — on a 20,000,000 facility over 15 years, that gap is more than 3,000,000 in total interest paid.
This is exactly where a mortgage broker adds value. Nook works with multiple Philippine banks and can help you compare permanent commercial mortgage rates without the legwork of approaching each bank individually — and the service is completely free to borrowers.
Key Takeaways
- Commercial construction loans in the Philippines are project-finance instruments with interest-only periods during the build and conversion to a term loan at completion.
- Rates in 2026 range from approximately 7.50% to 10.50% during construction, converting to 6.50% to 9.50% for the permanent facility.
- LTV ratios are based on completed project value, typically 50% to 70% depending on asset class.
- BDO, BPI, Metrobank, Security Bank, and RCBC are among the most active lenders in this space.
- Strong documentation — especially the feasibility study, building permits, and contractor credentials — is the single biggest factor in approval speed and rate.
- Plan your takeout financing well before construction ends to avoid being forced into unfavorable terms at maturity.