Published on and written by Cyril Jarnias
Purchasing real estate in Papua New Guinea is anything but a formality, especially for a non-resident. The country remains one of the last frontier markets in the Asia-Pacific region, offering high-yield potential, but also featuring a land tenure system unique in the world, complex regulations, and very real risks. Understanding this framework is essential before signing any contract.
A High-Potential but Hard-to-Access Real Estate Market
The real estate market in Papua New Guinea combines several characteristics rarely found together elsewhere. The economy is driven by extractive sectors – mining, oil, gas – as well as agriculture, with major projects creating strong, localized demand for housing, particularly in urban centers like Port Moresby and Lae or near mining sites.
Rental yields can exceed 18% for accommodations in Papua New Guinea resource project areas.
Price trends illustrate this cyclical and volatile nature, closely linked to major gas or mining projects.
Indicative Real Estate Market Trends
| Period | Economic Context (Major Projects) | Average Annual Price Change |
|---|---|---|
| 2010 – 2015 | LNG Boom (Liquefied Natural Gas) | +15% to +20% |
| 2015 – 2019 | Post-Boom, Adjustment | –2% to +3% |
| 2020 – 2022 | Pandemic, Slowdown | –5% to 0% |
| Since 2023 | Gradual Recovery | +5% to +8% |
For a foreign investor, this potential can only be harnessed by mastering the land tenure framework, because almost all land is not accessible through a traditional “freehold” purchase as in Europe or North America.
Understanding the Land Tenure System: Customary, Alienated, State Lease
The first reality to grasp is the structure of land ownership. This is not a minor detail, but the foundation of any real estate strategy in Papua New Guinea.
The Three Main Types of Land
The country essentially recognizes three land categories.
| Land Type | Estimated Share of Territory | Basic Owner | Access for Foreigners |
|---|---|---|---|
| Customary | Approx. 90% to 97% | Clans, tribes, family groups | Direct purchase prohibited |
| Alienated (State/Private) | Approx. 3% | State or individuals, titled | Accessible via State Lease |
| Freehold within Alienated Land | Tiny part of alienated | Individuals or entities (PNG citizens, some historical cases) | Prohibited for non-citizens |
Customary land, held collectively according to traditional rules, dominates overwhelmingly. It is not registered in the national land registries, and its use is passed down through generations. So-called “alienated” land corresponds to plots that have been acquired by the State from these customary owners and then titled. It is on this small proportion of territory that foreigners can operate, via leasehold rights.
Freehold Ownership Prohibited for Foreigners
The Constitution of Papua New Guinea and the law on freehold ownership establish a very clear principle: a non-citizen cannot hold land in freehold. In other words, a foreigner cannot own the land outright in perpetuity.
Even though reserved for nationals, freehold titles have significant restrictions: leasing limited to 25 years without Land Board approval, limitations in case of bankruptcy, and are poorly accepted as collateral by local banks, which prefer State Leases.
For a foreigner, the central tool is therefore the leasehold.
The State Lease: Key to Real Estate Access for Foreigners
The country has adopted a Torrens-type registration system, inspired by Australia: the title registered in the registry is considered virtually conclusive evidence. Within this framework, the main instrument accessible to foreign investors is the State Lease.
Nature and Duration of Leases
A State Lease grants the holder an exclusive right of use over a plot of alienated land for a fixed term, typically up to 99 years. This lease can be for various purposes: residential, commercial, industrial, agricultural, mission, special purpose, or urban development.
Urban development leases are a specific category, generally limited to 5 years, which allow for land preparation and infrastructure installation before the grant of a long-term lease. Their renewal after this period is always at the discretion of the State.
For a foreigner, the typical approach is either to have an existing lease transferred, or to apply for the grant of a new lease on available State land.
Standard Process for a State Lease
The Land Act of 1996 and the Land Registration Act of 1981 govern this process. Broadly, the sequence is as follows:
The example illustrates the key steps to obtain a lease on State land (State Lease) in Papua New Guinea. The process begins with identifying an available and properly zoned plot, published in the National Gazette. Next, an application is filed with the Department of Lands and Physical Planning. The file is reviewed by the Land Board, which assesses applications and makes a recommendation to the Minister for Lands for the final decision. After allocation, a topographic survey is conducted and the lease is prepared by technical services. Finally, registration of the lease with the Registrar of Titles gives it full validity and legal enforceability.
This process can take from 6 to 24 months, or even longer, due to administrative delays and the complexity of some files.
Specific Authorization for Foreigners
Foreign individuals and companies with majority foreign ownership must obtain approval from the Minister for Lands prior to the registration of any land lease or transfer of a lease. This requirement is in addition to obligations regarding foreign investment managed by the Investment Promotion Authority (IPA).
Furthermore, a reform proposal has already been discussed, aiming to reserve all formal land ownership for nationals and to limit foreigners to sub-leases or joint ventures. Even if this proposal has not yet come into force, it illustrates the sensitivity of the subject and the need to closely monitor legislative developments.
Don’t Touch Customary Land: A Quasi-Systemic Risk
On the ground, some investors are tempted to bypass the complexity of State Leases by negotiating directly with customary landowners. However, local experts unanimously warn against this practice.
Why Customary Land is So Risky for a Foreigner
The direct sale or rental of customary lands presents several major dangers.
On one hand, ownership is collective: a member of a clan does not necessarily have the authority to commit the entire group. A transaction concluded with one person can later be challenged by other clan members, sometimes years later, even after construction has taken place.
Disputes related to land boundaries and lineage are frequent and can escalate into violence, concerning various types of land (mining, road, urban). It is crucial to consider the strong local “compensation mentality”: even after a legal transfer, descendants may demand additional compensation, requiring adapted risk planning and management.
Several experienced market players, like Brian Hull of Century 21 Siule Real Estate or professionals involved in industrial projects, hammer home the same message: for a foreigner, the only truly secure path remains the State Lease on alienated land. Informal arrangements on customary land expose investors to risks of claims, site shutdowns, and endless litigation.
The ILG Option: Possible but Complex
For projects requiring access to large areas of customary land (for example, an eco-tourism resort or an agro-industrial project), a more formal route involves going through an Incorporated Land Group (ILG). This status, provided for by the Land Groups Incorporation Act, allows a clan to form a legal entity.
The ILG can conclude various agreements, some of which are reinforced by official registration, to structure its relationships with investors or companies.
The ILG can enter into these agreements with an investor to define the terms of their collaboration.
In some cases, these agreements can be officially registered to enhance their enforceability and legal security.
This structure is frequently used by mining or petroleum companies to organize royalty payments.
But this mechanism remains delicate. Identifying all rightful owners requires in-depth “social mapping” work. Internal clan dissensions and claims from future generations remain possible. Even within this framework, extremely thorough due diligence is essential, and the involvement of lawyers familiar with both statutory law and customary practices is highly recommended.
The Legal Framework: A Stack of Legislation to Master
Papua New Guinea operates on a mixed system, combining British common law and customary law. For a foreigner, real estate sits at the intersection of several legislations.
The Main Land Laws
Several key acts are central for anyone wishing to buy or rent a property.
| Act / Law | Main Role in Real Estate |
|---|---|
| Land Act 1996 | Administration of lands, types of leases, role of the Land Board |
| Land Registration Act 1981 | Procedures for registration of titles and transactions |
| Land (Ownership of Freeholds) Act | Prohibition of freehold ownership for non-citizens |
| Land (Tenure Conversion) Act | Conversion of customary land to freehold titles, regime of restrictions |
| Customary Land Recording Act 2000 | Formalization of certain customary rights |
| Land Dispute Resolution Act 2005 | Mediation and land dispute resolution mechanisms |
| Wills, Probate, and Administration Act | Succession of alienated lands |
The Department of Lands and Physical Planning, based at Eda Tano Haus in Port Moresby, oversees the management of State lands. The Registrar of Titles maintains the land register, while the Land Titles Commission and the National Lands Commission deal with issues of land conversion, titling, and conflict resolution.
Economic Authorities and Foreign Investment
The Investment Promotion Authority (IPA) plays a pivotal role for any foreign business or investor. Established by the 1992 Investment Promotion Act, it issues the Foreign Enterprise Certificates required for any economic activity that is majority foreign-owned.
A “foreign enterprise” in Papua New Guinea can be: a company incorporated abroad, a local company more than 50% owned by non-citizens, or a foreign individual acting in their own name. Operating without the required certificate constitutes an offense punishable by very heavy fines.
The standard scheme for a foreigner wanting to invest in real estate therefore often involves:
– registering a local company under the Companies Act 1997,
– obtaining a Foreign Enterprise Certificate from the IPA,
– then initiating the procedures for acquiring a State Lease via the Department of Lands.
Choosing the Right Professional: Agents, Lawyers, Notaries
In a largely unregulated market, the choice of intermediaries is crucial. There is no structured system of real estate valuation, nor an official price index. Portals like Hausples.com.pg or myPNGhome.com are beginning to publish some data, but the most reliable method remains cross-referencing opinions from several experienced agencies.
Agencies and Platforms
Several major networks are present locally, including Century 21, Strickland Real Estate, Professionals, Ray White PNG, or various smaller local brands. Hausples lists dozens of agencies and serves as a useful starting point for mapping the market.
To identify a reliable real estate agency, verify that it has a physical office, a structured team, a trust account for deposits, an up-to-date website, and verifiable references. Be especially cautious outside major urban centers, where many people present themselves as “agents” without a clear professional framework.
Lawyers and Legal Advice
The involvement of a lawyer is practically unavoidable, given how complex the system is and the little margin for error. Several large international law firms are present, such as Ashurst, Allens, or Gadens, in addition to reputable local firms (Posman Kua Aisi, Warner Shand Lawyers, among others).
Their mission is not limited to drafting the sale contract. They must also:
– verify the title with the Registrar of Titles,
– analyze the conditions of the State Lease (duration, permitted land use, development obligations, land rents),
– identify any encumbrances or securities (mortgages, easements, ongoing disputes),
– ensure the compliance of the transaction with the requirements of the IPA and the Ministry for Lands.
In most cases, they also handle the filing of the transfer file with the Department of Lands and the payment of registration fees.
The Concrete Process of a Real Estate Purchase
Once the framework is understood and the team assembled, the acquisition process for a foreigner follows a pattern quite similar to other countries, but with more administrative steps.
Search, Negotiation, and Offer
The investor starts by identifying a property on alienated land, preferably already covered by a clearly established State Lease. Online portals like Hausples or Property PNG, press advertisements, and business networks play an important role.
Offers are formalized in writing. The buyer can add conditions precedent, particularly obtaining financing, IPA approval, or validation of legal checks. In practice, sellers often request a deposit of around 10% to take the property off the market, but it may be prudent to only pay this amount once major uncertainties are resolved, and provided the offer clearly states it is “subject to finance” or administrative approvals.
The deposit must be placed in an escrow account managed by the lawyer or real estate agent. It must under no circumstances be paid directly to the seller.
Due Diligence and Checks
The due diligence phase is critical. It includes at a minimum:
– a title search at the Titles Office, based on the parcel’s cadastral references (volume and folio or lot and section numbers),
– verifying the exact nature of the right (State Lease, sub-lease, freehold reserved for a citizen, etc.),
– identifying encumbrances: mortgages, secondary leases, easements, ongoing disputes,
– checking the remaining lease term, its permitted use (residential, commercial, etc.), and imposed obligations (development within a certain timeframe, annual land rent),
– examining any unresolved claims by customary landowners.
A title search costs around 100 kina per parcel, excluding copy fees. Potential disputes must be referred to the Land Titles Commission, if necessary.
A physical inspection of the building is essential to assess its structural condition, utilities (water, electricity, sanitation), and security systems. This check is particularly important for residences intended for an expatriate clientele.
Sale Contract, Financing, and Approvals
Based on the due diligence results, the seller’s lawyer prepares a sale contract, amended by the buyer’s lawyer until agreement is reached on the key clauses: price, timeline, conditions precedent, responsibilities for repairs and compliance.
For foreigners, access to local credit remains limited. Banks often require 30% to 40% equity, or more, with interest rates potentially between 8% and 15% depending on the product, for shorter terms than in the West (5 to 15 years). Therefore, many foreign investors pay cash, sometimes by refinancing assets in their home country.
In parallel, the investor must ensure they have: sufficient capital, good market knowledge, and a clear investment strategy.
– the IPA certification if the purchase is made through a foreign or foreign-participation company,
– the approval of the Minister for Lands for the registration of a lease in the name of a foreign person or entity,
– the necessary tax registrations with the Internal Revenue Commission (obtaining a Tax Identification Number, particularly if rental income is anticipated).
Settlement and Registration
On the agreed settlement date, the lawyers exchange signed documents and organize the transfer of funds, in coordination with the bank if financing is involved. Once payment is made, the transfer file (contract, proof of price and tax payments) is lodged with the Department of Lands for registration.
The Registrar of Titles then updates the register and issues a new State Lease certificate or updates the holder details. If a loan was granted, the bank generally retains the original title until full repayment.
In practice, the total duration between the initial offer and effective registration often ranges between 3 and 6 months, but can exceed one year for complex files or in case of administrative delays.
Transaction Costs and Taxation for a Foreigner
A realistic calculation of profitability must take into account initial fees and recurring charges, which can be significant.
Stamp Duty and Registration Fees
Papua New Guinea applies a progressive stamp duty system based on the property value. For real estate transactions, rates are typically between 2% and 5% of the value, depending on price brackets in kina, while registration fees represent about 0.01% of the value, plus fixed fees.
The total costs paid by the buyer are therefore often between just over 2% and 5% of the price just for the tax and administrative component. To this must be added advisory fees (lawyers, notaries, agents).
Indicative Scale of Some Common Fees
| Cost Item | Indicative Amount or Range |
|---|---|
| Stamp Duty (property transfer) | 2% to 5% of value, depending on price bracket |
| Land registration fees | Approx. 0.01% of value, plus fixed fees |
| Legal fees (transaction) | Approx. 10,000 to 30,000 kina |
| IPA fees (foreign enterprise certification) | Approx. 2,000 to 10,000 kina |
| Land Board application fee | Approx. 500 to 2,000 kina |
| Topographical survey fee | Approx. 5,000 to 15,000 kina |
One must add the possible real estate agent commission, usually between 5% and 10% of the sale price, often paid by the seller, as well as financial costs (interest) if a loan is used.
Taxation on Income and Capital
For a foreigner, rental income from a property in Papua New Guinea is taxable locally. The main rules are as follows:
Maximum personal income tax rate for the highest brackets.
The country does not have a general capital gains tax on real estate separate from income tax. However, gains realized upon a sale may be considered business income and taxed as such, particularly if the transaction is part of a professional development or speculation activity.
The annual land rent for a State Lease is typically calculated at this percentage of the unimproved land value.
After Purchase: Management, Compliance, and Exit
Acquisition does not mark the end of the journey. A foreign investor must implement rigorous management and ensure continuous compliance with legal commitments.
Property Management and Security
Complete property management (tenant search and selection, rent collection, maintenance follow-up, management of security and maintenance providers) is usually charged between 8% and 15% of the rents collected. For high-end housing intended for an expatriate or corporate clientele, this rate can be higher if the service offering is extensive.
Insecurity in some urban areas leads many owners to install security measures and backup systems (like generators and reserve water tanks). These installations represent an initial setup cost as well as ongoing operating expenses, which can be significant.
Compliance with the State Lease and Regulations
A State Lease often includes development obligations (construction within a certain timeframe) and use restrictions (limited to residential, commercial, or industrial use). Non-compliance with these conditions can lead to penalties or, ultimately, lease termination. Periodic reports and declarations may also be required by the Investment Promotion Authority, especially for foreign-owned companies.
It is recommended to maintain complete records for a minimum period of seven years to be able to respond to any tax or administrative audits.
Exit Strategies
For exiting an investment, several options exist: direct sale of the property, sale of shares of the holding company, transfer of the lease to a third party or, for larger-scale projects, reconfiguration (subdivision, complementary development) to increase value.
The sale process follows the same steps as the purchase, with an estimated average timeframe between 6 and 12 months depending on the property type and market conditions. Cycles linked to major mining or gas operations, as well as the kina exchange rate outlook, are major parameters to monitor to choose the right exit timing.
Why a Foreign Investor Must Adopt an Ultra-Prudent Approach
Investing in real estate in Papua New Guinea can offer higher yields than other emerging markets, but the risk profile is also higher. The lack of rigorous market regulation, the dominance of customary land, administrative burdens, and land tensions demand a very structured approach.
Several pitfalls frequently recur:
Several critical pitfalls to avoid: underestimating the risk linked to customary land and clan claims; neglecting mandatory procedures with the IPA and the Ministry for Lands before lease registration; lack of thorough title and encumbrance verification; excessive trust given to unstructured intermediaries; and insufficient anticipation of operational costs (security, maintenance, compliance).
Conversely, those who patiently build a project around a solidly established State Lease, supported by experienced legal counsel, and who accept the slowness of administrative procedures, can access opportunities no longer found in more mature markets. Provided they consider time, structuring costs, and the management of political and land risks as an integral part of the entry cost.
In Papua New Guinea, buying real estate as a foreigner is never a “standard” act. It is a legal, political, and cultural operation, to be treated as such from the first contact with an agent until the final registration of the lease.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
