While researching the keywords ‘invest in Mauritius’, one is flooded with real estate offers so much that it misleads people to understand that this is the only option for investment on the island. Investing in real estate is one thing but investment in general is another. Mauritius offers a much wider choice of investment opportunities for those who want to fructify their funds. The strategy to attract foreign capital and expertise revolves around quite a complete framework which includes active investment (business creation) and passive investment (real-estate, retired permit schemes). The global objective is to transform the island into a dynamic and performing economy. It’s quite painful to see real-estate being promoted under the word ‘invest’ – which clearly is not, I’ll explain my perspective below.
The aggressive use of the term investment in Mauritian real-estate context is quite misleading, more so when it is targeted towards foreign capital. The real-estate sector of Mauritius is accessible to foreigners under certain conditions and schemes as regulated under the Non-Citizens (Property Restrictions) Act. By extension, the market and the opportunities for ‘business’ are therefore limited. It is quite obvious that the natural beauty of the island (mixed with the general socio-political & climatic stability) adds to the appeal. Still these features do not justify the high priced properties available under the schemes designed for foreign acquisition. We are not to the level of major cities where life is complemented with high-level facilities (casino, night-life, road infrastructure, exclusive brands, etc.). So now, betting on the beauty of our beaches, for instance, to level real-estate prices to Paris or Malibu, does not make sense. Not at all ! Given the price, I wouldn’t even consider this as an investment. It’s annoying, passive and excessive commercial stunt.
There seem to be a global acceptance among real-estate professionals to bet on the word ‘investment’ – and this, in my humble opinion, is wrong and misleading. Buying a villa in the foreigners’ schemes cannot be an investment in the real sense of the word. First, cashing out is a very unlikely event. What is the real purpose of holding an ‘investment’ which cannot be converted into liquid asset at a profit? It is indeed quite difficult to sell at a profit seen the number of ‘new’ projects on the market. A second hand property won’t be sold at the same price as a new (if you want to add a profit on your villa for sale, it comes close to the price of a new one). Cast a look around, it seems that every single village on the island has a luxury villa site. The supply far exceeds the demand.
Add to the above, a restrictive market. The prices of these villas are not accessible to Mauritians. So if you are holding a property in those schemes; first you cannot literally sell with a profit and second, you need to mostly target a non-Mauritian. There are so many villa owners in quite a desperate situation, trying to cashout on their ‘investment’, in vain.
In these circumstances, where is the concept of ‘investment’ ? Holiday rentals of the property will never be able to match the services of our highly performing hotel industry, with all its resources. Some promoters have been promoting short-stay rentals as a major profitability argument, and clearly it is not.
In terms of profitability and dynamism, there are many other more ‘interesting’ options. Mauritius is above all a business friendly country; the overall legal and fiscal frameworks have been designed to promote entrepreneurship initiatives. Company formation is completed within 5 working days. Business incentives are numerous: 15% tax on profits (not on income), social charges are kept to a reasonable low (10% approximately of basic salary, topped at Rs16,655 max salary), training costs refunded by the government, no capital gains tax and tax-free dividends. The list can be extended where proposed business falls within the ‘encouraged’ industry sectors. The Freeport sector, for instance, allows for 0% tax, important duty-free concessions and cutting-edge logistic support, all in one of the best and safest ports in the region. Besides business incentives, the island in itself offers major advantages to those who want to invest and/or set-up their business. Stability (political, social and climatic), absence of exchange control, IT infrastructure and connectivity, air and marine access, presence of international financial institutions or the multilateral preference trade zone agreements – these are some of the reasons why Mauritius is an ideal business destination.
Now, simply ignoring these to ‘hold your cash’ in selective property with a restrictive market does simply not make sense to the intelligent and avid investor. Of course, risk is proportional to reward and no one can deny the risk involved in a business venture. That having said, who can guarantee a profitable transaction on the sale of a villa years after, in a restrictive market and in the presence of overflowing offers. All these leads me to believe that ‘investment’ is not the appropriate word in the present circumstances. You are simply ‘buying’ a villa and surely not ‘investing’.
We recommend high caution when considering the purchase of a luxury villa for the purpose of investment.
If you are looking for a return on investment, talk to a financial consultant, not a real-estate agent !