Buying Into Paradise – Mauritius Woos Foreign Investors

inShare5  VENTURES AFRICA – High-priced resorts are helping Mauritius to diversify its economy while offering wealthy foreigners a holiday home or a new life in the sun.
Mauritius is one of the most popular countries for foreigners looking to buy a second home. It offers great tax benefits, a good education system and a low crime rate. The excellent climate, beautiful beaches and good flight connections add to the attraction of the island country, while the main languages of English and French make it an easy option for European expats or investors. There’s a well-developed healthcare system too, so foreigners are assured of a high standard of medical treatment in an emergency.

Mauritius really is a picture-post-card-perfect tropical island, just 61 kilometers long and 47 kilometers wide, and surrounded by a coral reef. Its government is one of the most stable and progressive in Africa and has introduced deliberate and very successful policies to diversity its economy and attract foreign investment. When the sugar industry that supported the island begin to stagnate, concerted efforts were made to diversify. To do that it needed to attract new skills from overseas, so legislation was passed that now makes it one of the easiest countries to enter either as a worker or as an employer, if you have skills that will create jobs or benefit the economy.
On the property front, the government recognized that its beautiful landscape was a magnet for high-wealth individuals, bringing in foreign investment. It passed legislation allowing foreigners to buy property for the first time ever, but restricted purchases to purpose-built luxury resorts in specifically earmarked zones. Because the government is highly aware of the need to preserve the island’s beauty, it has limited the number of these residencies to just a few thousand homes. That scarcity pushes up the value, while ensuring that the pristine environment is protected. The first legislation allowing foreigners to buy property was the Investment Promotion Act, introduced in 2000. That created the Integrated Resort Scheme (IRS), which gives buyers of resort homes costing at least $500,000 the crucial and automatic right to residency. The residency permit also entitles them to apply for permission to start a business or find a job. The IRS proved so popular that in 2007 the government introduced the Real Estate Scheme (RES) that allows foreigners to buy cheaper – albeit still expensive – properties.
“The fact that the Mauritian property market was closed to foreign buyers until 2004 created a pent-up demand for homes, especially leisure property,” says Jonathan Tagg, a director of Pam Golding Properties. “Until 2008 the only available properties were within IRS schemes, where prices were beyond the reach of most buyers. In late 2008 the government introduced the RES projects and property was available from $400,000. These new developments enabled buyers to acquire property in the popular towns of Grand Baie and Tamarin, which created an additional wave of interest which has driven the market,” he says.
Pam Golding has been active in Mauritius for more than a decade, serving both the local and international markets. It is currently marketing Le Parc de Mont Choisy near Grand Baie, a golf and beach estate with units from $570,000. It is also marketing Martello, close to Tamarin in the south-west, which it touts as arguably the best value available to foreigners, with prices from $271,000.
Pam Golding is currently marketing about 20 different developments costing from $400,000 to $5 million, with mortgages available at an interest rate of 5 percent. The construction industry is well regulated, with developers putting up completion guarantees so no buyers are left with an unfinished property, Tagg says.
About a quarter of the units it sells are bought by South Africans. Most are looking to retire to Mauritius or want to work there. Many own a company in South Africa but want to base it in Mauritius to benefit from the 15 percent tax rate, Tagg says. “Mauritius is particularly suited to families as it’s very secure, has good schools and flights to most destinations. Add to this the appeal of an idyllic island lifestyle and the fact that the country has developed substantially, and it’s not difficult to see why Mauritius is increasingly sought after as a permanent residential location.”
David Gervel, a director of Mauritius Property, says foreigners buying luxury villas in IRS or RES projects prefer those where their investment automatically buys the security of residency status for their family. “They are interested in the luxury beach properties, with access to leisure, education and business facilities,” he says. “It’s very easy for foreigners to buy a property as long as you have the capital to invest. We have seen a real boom in real estate projects since 2011, with many projects set up to meet international standards.”
Gervel estimates that between 15,000 and 25,000 expats already live in Mauritius. “Foreigners can get bonds at reasonable rates if they invest in the right project at the right time because the price of real estate continues to increase and there is an interesting return on investment,” he says. “They are attracted by the lifestyle. If you want to practice your golf, relax at the beach after work or go big game fishing this is possible.” The cost of living is still attractive compared to islands like the Seychelles or the Maldives, says Gervel. The economy is booming and creating more business opportunities, making this the best time to invest as Mauritius continues to evolve.
The IRS allows luxury villas, apartments and penthouses to be sold freehold to foreigners for upwards of $500,000 in specific zones approved by the Board of Investment. Most are sold off-plan to buyers who pay a 30-percent deposit then pay in tranches as the work proceeds. Once the property is complete, the buyer pays a duty of $70,000 to the Registrar General and is granted residency. The buyer must fund the investment by transferring funds from overseas or by securing a loan from a bank in Mauritius denominated in Dollars, Pounds or Euros. They can sell the property or rent it out, with no restriction on repatriating the proceeds.
These luxurious estates include facilities such as a golf course, marina, health and beauty centers, swimming pools, sports facilities and restaurants. They also include day-to-day management services such as security, maintenance, gardening and waste disposal. The estate developers are obliged to make a social contribution by supplying community development facilities to the local neighborhood.
Rob Hudson, MD of South African property development and sales company, Hayes, Matkovich & Associates, says most buyers are from South Africa, Angola, Kenya, Europe and Russia. South Africans account for 40 percent to 50 percent of sales, and are often businessmen who want to take some of their money offshore, legally and in a hard currency. Hayes, Matkovich & Associates is currently marketing two upmarket estates for foreign investors in Mauritius, namely La Balise Marina and Villas Valriche, the latter featuring 288 villas on large plots overlooking a golf course and the Indian Ocean. Residents have 24-hour concierge services, including a butler, chef and cleaners.
According to Hudson, Mauritius has never been cheap. “Mauritius has always been pricey relative to South Africa, for example, because of the cost of the land. It’s a small island and they are not making any more of them,” he jokes. “The land is expensive but you are investing in the benefits that come with it, like a stable country, a very low crime rate, an economy that’s doing well and a lifestyle that you can’t match anywhere in the world.”
Hudson says the IRS policy has been incredibly successful in helping to diversify the economy after the depression of the sugar cane industry. “They needed to maximize the value of the land by building resorts positioned towards the top end of the market to get high net worth people to invest in the country,” he says. “It created employment and for the buyers it’s a very good investment.” The first IRS properties to be resold enjoyed an average 40-percent increase in value. Now the entry price in many resorts is no longer $500,000 but upwards of $700,000, going up to $3 million or more in some instances.
Permanent residence status lasts for as long as the owner retains their property. But there are checks in place to keep unsavory characters out. “The immigration controls are very strict, you can’t just buy your way in,” says Hudson. The buying process starts with mandatory anti-money laundering investigations. Escrow accounts must be opened to transfer the money and since escrow deposits are non-refundable if a buyer fails to raise the money, buyers generally make sure they have enough cash or sufficient loans in place before funding their escrow accounts.
The more affordable RES option was introduced as a slimmed-down version of the IRS, designed to let smaller landowners share in the property boom. The RES scheme allows small landowners to create clusters of mixed-size dwellings, again targeted at foreign buyers. Prices start from around $300,000, although anything less than $500,000 doesn’t grant the coveted status of permanent residence. Yet the buyers can still apply for residency as an investor, a professional, as self-employed or as a retired person. RES developments must offer commercial and leisure amenities in addition to residential units, and must provide support services such as waste disposal, security, maintenance, and gardening and household services.
Some people – particularly South Africans – are buying homes in Mauritius as a bolt hole or an insurance policy. “It’s a contingency plan for many South Africans,” says Hudson. “You have a wonderful holiday home to enjoy but you also have the option of going to live there. It opens up the door to going to work in Mauritius or running your business interests from Mauritius, where there is an extremely attractive tax rate of 15 percent for both businesses and individuals.”
Another benefit is that there are no ancient indigenous land claims, since the island was uninhabited before the colonialists arrived. Most of the land is owned by a handful of extended families, who have the right to do with it as they please.
Importantly, the developments for wealthy foreigners are not having a negative impact on the property market for the locals by making it too expensive to buy a decent home or making the best areas too expensive to live in. The impact and influx of foreigners is strictly controlled. “The local and foreign markets are very different sectors and foreigners don’t have access to the local market. The foreign developments are a very small part of the market and often in areas that are out of town. The developments haven’t uprooted anybody and kicked them out, rather just converted sugar cane land or non-residential land into these resorts.” The cost of local property has definitely increased in recent years, Hudson adds, but that’s because with a 91-percent employment rate, people are demanding more upmarket houses. Locals can also buy into IRS and RES resorts, so they are not becoming foreign-only enclaves.
Hudson believes that the government has a sensible attitude to conservation. “I don’t think they will over develop because they recognize that that would hurt them in the long run,” he says. Gervel agrees that the environment is well protected. Before a development is approved by the Board of Investment, research is conducted to evaluate the direct impact of the project on the ecosystem and it must meet very strict standards of environmental protection. “Because they are selling investors a beachfront property surrounded by a beautiful landscape they can’t afford to deliver real estate projects that have a bad effect on the environment,” he says.