Property Buying Guide13 June 2017
Mauritius ticks a lot of boxes, combining white-sand beaches and a tropical climate with the sort of services and entrepreneurial culture usually associated with dynamic European capitals. While the traditional draws for international buyers, such as asset protection and favorable taxation remain strong, there’s a growing trend of investors waking up to the investment potential and long term security of Mauritius’s luxury property market. Young families with kids are also increasingly attracted to the island as an alternative to Europe’s high cost-high stress living.
Something of a cultural patchwork quilt, bi-lingual Mauritius combines elements from both colonizing cultures, with a French legal system, a British parliamentary system and strong trade ties with both. While it’s the French and Belgians who make up a substantial percentage of the expat market, numbers of British and South Africans are on the up.
The Property Market
Foreigners have only been able to buy property in Mauritius since 2004, sparking a steady surge of interest and an annual rate of international sales in the region of 350-400. Thanks to the relatively limited supply of luxury products, demand has remained high, supported by a growing global interest in Mauritius as both a luxury travel destination and alternative lifestyle and business hub.
Now, a series of new luxury developments have signified the maturing of the market, offering interested investors a level of variety that was previously lacking. Also, Mauritius’s property market has showed a robust approach to the global down-turn and is now on the up, with the first wave of villas specifically created for the foreign market achieving double their original selling price on re-sale.
Hailed as the Hong Kong of the Indian Ocean, Mauritius is regularly rated as the top performing country in Africa for doing business. With one of the largest GDPs in Africa, the growth rate for 2016/2017 is forecast at around 5.7%. While its the luxury real estate market and tourism that now drive GDP, Mauritius continues to develop as a hub for financial services, offshore banking and BPO (Business Process Outsourcing), an industry growing at an estimated rate of 70% per year.
Mauritius first flourished as a stop-off point for Dutch colonizers and traders on their way from Asia to Europe and it remains easily accessible from both sides of the globe, with daily direct flights from London, Paris, Dubai and China. With the time-difference to mainland Europe a mere 3 hours, jet-lag is not an issue.
Lifestyle + Investment Opportunities + Tax Benefits
- An attractive flat-rate income tax of 15% for corporates and individuals
- A growing number of beautifully designed residential developments
- A strong property market with 10% estimated growth over the next 10 years
- For non EU nationals, a Mauritian residence permit gives visa free access to Europe
- A 3 hour time difference with Europe meaning no jet-lag
- Temperate year-round climates
- A well-developed luxury tourism industry
- An intelligent, well educated work force
- A high-level of health and education available
- An open, progressive economy ranked as the best country in Africa to do business by the World Bank
Why Taxes in Mauritius add up
Mauritius levies a flat 15% tax across income for both corporates and individuals. In addition to this attractively low rate, there is no inheritance tax and no capital gains tax. Residents are entitled to tax free dividends, bank interest and free repatriation of profits. Rental income from a property is taxed at 15%. There are currently double taxation agreements in place with 34 countries.
How to invest in property in Mauritius
Foreigners investing in Mauritius are only eligible to buy property within specific luxury development schemes. These fall into 4 categories, IRS, RES, IHS and PDS. The PDS scheme is the most recent scheme, launched by the government in 2015-2016 to encompass all new developments. Developments previously approved under the IRS and RES schemes still stand, which is why it’s useful to understand them all.
1. IRS (Integrated Resort Scheme)– Launched by the government in 2004, this was the first scheme that enabled foreign investors to purchase property in Mauritius. The move was aimed to counter the faltering sugar-cane industry through enabling producers to generate value from their land. Developments under this scheme are generally larger and offer more space and a higher level of luxury. Requirements for IRS developments include:
- An area larger than 10 hectares
- A luxury hotel
- Full resort-style services, including day-to-day management
- A minimum investment value of $500,000 per property
IRS properties tend to be the largest properties available to foreigners and are now predominantly available as re-sale options. The investor may sell the property with no minimum price restriction, rent the property, elect tax residency in Mauritius and repatriate funds or revenue raised from the sale or renting of the property. Capital appreciation on these properties is significant, with re-sale rates of luxury villas under the IRS scheme currently double the original purchasing price.
2. RES (Real Estate Scheme) – A slimmed down version of IRS, RES is the second development scheme launched by the government in 2007 to cater to smaller landowners while offering more affordable options to the international market. Traditionally luxury apartments or villas with smaller gardens, RES developments require:
- A project smaller than 10 hectares
- No minimum investment value
3. PDS (Property Development Scheme) In 2015, the government launched the PDS. The PDS is essentially a demarcation from the IRS and RES in that it does not differentiate between small and large landowners and harmonizes the registration duty (the equivalent of stamp duty) to a single rate of 5%. All developments now come under this new structure and need to meet the following requirements:
- Developed on land between 0.5-21 hectares
- A minimum of 6 units
- High-class leisure facilities
- A day-to-day management service
- 25% of the buyers need to be Mauritians
- A land-Registration fee of 5% of the property value
Investing in lease-hold property
Through the IHS (Invest Hotel Scheme), you can opt to invest in a hotel development through purchasing a room or villa, which is then leased back to the seller/developer. As the owner, you have access to the property for no more than 45 days a year and receive up to 4% return on sales.
The difference between leasehold and freehold in Mauritius
All schemes related to the IRS, RES and PDS are built on freehold land. Beachfront land in Mauritius is leasehold, owned by the government and reserved for the local market. It is commonly referred to as 'Crown Land' and leased to individuals for up to 60 years.
Are you eligible?
Any one of the following is eligible to acquire property under the schemes:
- A citizen of Mauritius;
- A non-citizen of Mauritius;
- A company registered as a foreign company under the Mauritian Companies Act 2001;
- A company incorporated under the Mauritian Companies Act 2001
- A société, where its deed of formation is deposited with the Registrar of Companies;
- A trust, where the trusteeship services are provided by a qualified trustee licensed by the Financial Services.
Foreigners can access a residence permit by investing $500,000 USD in a residential property. The IRS, RES or PDS company is required to inform the Board of Investment and submit a certificate from a notary that the deed has been registered, including details of the property price.
The following documents should accompany the application form submitted for a residence permit by the main applicant and his/ her dependents.
(i) Certified true copies of passport and birth certificates for each applicant;
(ii) Two passport size photographs for each applicant;
(iii) Relevant Professional Qualifications or references
(iv) A medical clearance certificate (including an HIV test) issued by a local doctor
(v) A bankers cheque for the fee of Rs 50,000 ($1,400 approx) must be drawn in Mauritian rupees.
Permanent Residence Permits.
While most foreign investors in Mauritius will only have access to a residence permit through property investment, there are a number of scenarios that enable foreigners to secure a PRP, a permanent residence permit. One of the advantages of this is the freedom to buy a property outside the previously described luxury schemes, an option usually only available to local Mauritians.
This is of particular interest for foreign nationals interested in retiring in Mauritius. To qualify for a residence permit, you need to be over 50 and to either purchase a property of over USD 500,000 or to transfer the equivalent of USD 40,000 into a Mauritian account for 3 consecutive years. To convert a residence permit into a permanent residence permit, you need to have held a residence permit for 3 years and to have transferred USD 40,000 per year, over these three years.
PRPs are valid for 10 years, upon which time, you apply for a renewal. You will need to prove you have brought in USD 40,000 equivalent per year over the period. A holder of a PRP who can prove a monthly income of over USD 3,000 can purchase one apartment for permanent residence outside of the schemes. Retired non-citizens are requested to produce a certificate from their bank to show the amount of funds transferred to Mauritius annually.
Buying and Selling Property in Mauritius
Property law in Mauritius is governed by the highly regulated Napoleonic Code and a French legal system run by notaries. In Mauritius, notarial licenses are normally passed down from father to son, so it is important to work with a notary that comes recommended to save both time and money.
Under the PDS system, a residential property may be sold either on the basis of a
plan, during the construction phase or when the construction is completed. Where the acquisition of property is made on the basis of a plan or during the construction phase, the contract is governed by the well known and highly regarded French ‘VEFA’ system (vente en état futur d'achévement), known as ‘off-plan sales’ in the UK.
- Payments are due in relation to the different completion stages of the project
- An independent quantity surveyor signs off on when a stage is complete
- The developer is required to provide a bank guarantee that the works will be completed
- The land title passes immediately to the purchaser upon signature of the deed, enabling them to apply for a residence program
- Building contractors are liable for defects for 10 years, and are required to take out the necessary insurance, which offers additional security and peace of mind for the purchaser
The Purchasing Process
The Purchaser and seller sign a preliminary reservation contract (CRP) and 5-10% of the selling price is required as a deposit.
Once the developer has confirmed that all relevant permits are in place (legal, technical, financial), a deed of sale is signed.
A GFA (Garantie Future d’Achévement) is issued along with the deed of sale, guaranteeing future completion.
What is the Deed of Sale?
The Deed of Sale is a document where ownership of the residential unit is transferred from the developer to the purchaser. You will now be able to apply for you residence permit.
These vary from one property to another, but generally they follow a similar pattern.
Over a 15-month period:
10% Deposit at signature of document
20% At the signature of the deed of sale
5% Completion of foundations (+ 60 days)
10% Ground floor structure (+ 60 days)
10% 1st floor structure (+ 40 days)
15% At completion of roof stage (+ 90 days)
10% After installation of doors and windows (+ 60 days)
10% Frame completion (+ 60 days)
5% Completion of building work (+ 60 days)
5% Key handover (+ 30 days)
The Re-sale process
Resale is most common with IRS properties, largely because this was the first property ownership system available to non-Mauritians. There are a few guidelines to be aware of here:
- The owner of the property needs to give notice to the Managing Director of the Board of Investments 30 days prior to the sale.
- The person acquiring the property needs to submit an application to purchase that proves they have opened a bank account to complete the payment, and paid a non- refundable fee of 10,000 MUR (USD 285) application fee.
The following taxes apply:
For the Seller: A land transfer tax of USD 50, 000 or 5% of the property value, whichever is higher.
For the Buyer: Registration duty of USD 70, 000 or 5% of the value of the property, whichever is higher
For the Seller: A land transfer tax of USD 25, 000 or 5% of the value of the property whichever is higher
For the Buyer: Registration duty of USD 25, 000 or 5% of the value of the property, whichever is higher