Real estate sector : A multi-billion cash cow

The real estate sector has seen a remarkable rise in the past few years, being the only sector that attracts billions of rupees of foreign direct investment into the country. Indeed, Mauritius currently has more than 130 residential projects targeting foreign buyers and more projects are in the pipeline. But is this sector sustainable in the long run?

The construction industry is being given a new boost thanks to a booming real estate sector, after a few years of negative growth. This is also unfolding opportunities for professionals in the construction sector, as well as enterprises engaged in the supply of materials and ancillary services. Real estate agents are also mushrooming across the island.

So far, about 82 projects have been approved under the Real Estate Scheme and another eight projects under the Integrated Resorts Scheme. Since 2015, the year when the new Property Development Scheme was launched, 34 projects have been approved. Under the Smart City Scheme, there are officially six projects. In addition, there are many apartment projects in progress across the island.

The real estate sector has never been so lively in Mauritius and new incentives offered by the government are encouraging more developers to join the bandwagon. For example, since the coming into force of new regulations allowing the sale of apartments to foreign citizens, provided the apartments form part of a building comprising of at least three levels, there has been a rise in the development of such complexes. Other projects include office towers and industrial parks.

 Constraints

Labour shortage

One of the factors affecting the construction sector, especially the RES/PDS segment, is the non-availability of skilled labour. This constraint affects the overall quality of works, and cause delays in delivery of residential units to clients. With clients being very demanding, there is an increasing number of litigations between buyers and sellers that land up at the commercial court. Absenteeism is another major factor and results in rising costs of operations for promoters. Many construction companies resort to the employment of foreign labour but in many cases, the language barrier is another obstacle.

Lack of water

With summer already on, water shortage is being felt, especially in the northern and western parts of the island. Lack of water seriously affects local population and foreign residents alike. The mushrooming of residential projects across the island is having a severe impact on water distribution. The irony is that the authorities continue to approve new projects found in water-stressed zones, without seemingly assessing the water needs in the region.

This will put undue pressure on water supply in neighbouring villages. Foreign residents having acquired luxury villas have come to realise that Mauritius is not just sun, sea and sun, as depicted in glossy brochures. Those who have chosen to ‘live the Mauritian experience’ also have to put up with such miseries as water shortage, which, they are told, is an inherent feature of Mauritian life! A few foreigners have expressed their exasperation of not being able to fully enjoy their swimming pools. “My pool loses lots of water through evaporation and I am not able to top it up regularly,” exclaims Mrs Heli Marjut, a Finnish lady settled in Pereybère.

“I am also saddened to see my plants die, I have invested so much in my garden but I can’t water my plants. It’s terrible. Had I known there is water problem here, I would not have purchased a villa in Mauritius,” says Mrs Heli. “I would suggest that your government should not allow more residential developments when there is not enough water as this will affect new residents.” Mrs Heli Marjut is a renowned tour operator in Finland and she brings as many as 2,000 tourists to Mauritius annually.

Luxury villas consume two to five times more water than a typical Mauritian house and with the number of villas under construction, the situation will worsen in the years to come, and it is imperative that the authorities take stock of the situation immediately and bring remedial actions. Water shortage has also given rise to entrepreneurship as private water tankers are having a field day in supplying water for domestic use.

Real Estate speculation

Land speculation is rife in Mauritius. Landowners are always on the lookout for the best deals. Many are asking for unrealistic prices, hoping that an investor, preferably a foreigner, will come their way. Even agricultural land prices have soared. However, many sellers do not realise that foreign citizens, even though they may be willing and able to pay a higher price, are not allowed to purchase any land or property in Mauritius without approval from the authorities.

On the other hand, existing development have a bearing on the prices of land in their surroundings. Once basic infrastructures such as tarred road, electric and water lines reach an area, the price of land almost doubles.

FDI on the rise

According to the latest release from the Bank of Mauritius, Mauritius has received foreign direct investment (FDI) during the first six months of this year to the tune of Rs 9.7 billion. The amount received during the corresponding period last year was Rs 7.9 billion. More than half of the total FDI this year, i.e Rs 5.3 billion, went to the real estate sector. The IRS/RES/HIS/PDS segment accounts for nearly Rs 3.1 billion.

Property bubble

The rising number of residential projects is creating the perception of a ‘property bubble’ as the number of units on offer largely exceeds demand. Prospective buyers have wide choices and are able to compare different products. One effect of the large number of projects is the incidence on price of land.

Land in the neighbourhood of projects appreciate fast, for example, in the vicinity of Moka Smart City, land price has shot to Rs 40,000 toise. Similarly, in the north, agricultural lands devoid of any basic infrastructure are on offer for at least Rs 15 to 20 million an acre. Those next to existing RES/PDS projects have reached Rs 25 to Rs 30 million an acre. As prices soar, land becomes inaccessible to the common man. Unfortunately, there is so far no mechanism to deflate the artificial prices.

The automobile market benefits

As strangely as it may seems, the property boom has caused the automobile sector to benefit, in the form of increased car sales. The number of new car sales is likely to cross the 10,000 mark this year, a first in Mauritius. A large chuck of the new sales concerns foreign buyers. The more residential units are sold to foreigners, the more cars are being acquired.

Smart Cities in progress

Smart cities are going to change the landscape of Mauritius. Six projects are currently under way. A smart city projects benefits from a number of incentives, namely income tax exemption over a period of eight years, VAT exemption on capital goods, customs duty exemption on various goods, including furniture, land conversion tax exemption, morcellement tax exemption and also land transfer tax exemption in certain cases. The six projects are:

Beau Plan Smart City

Terragri Ltd’s Smart City project extends on a freehold land of an extent of 540 arpents at Beau Plan. The proposed smart city project comprises residential units, mixed use development, a creative park and university campus development. Existing developments such as the Aventure du Sucre, Beau Plan Business Park, restaurant, leisure facilities amongst others have been included in the smart city. Terragri Ltd through its subsidiary African Leadership University has already started construction works including University Campus over 4.9 hectares.

Cap Tamarin

Located at the entrance of Tamarin village, Cap Tamarin is a mixed-use development in the west of Mauritius by Trimetys Ltd. The Cap Tamarin Smart City Project will have an education zone, office spaces, a boutique hotel, residential units, a civic centre and public amenities including jogging and cycle tracks. The project will cover land of an extent of 105 arpents.

Mauritius Jinfei

Phase 1 of the project extends over an extent of 49.4 arpents and has started with the development of the hospitality component. Garden of Eden Square will be a unique development in the landscape of Mauritius based on Chinese architecture and will comprise a wedding and entertainment venue with shopping and entertainment facilities.

Médine Smart City

Médine ambition is to develop a smart city project in the west coast of Mauritius with a balance among residential, industrial, commercial, medical and recreational developments. The project will comprise of an educational village inclusive of universities, private schools and student accommodation, residential estates, a business park, a regional hospital, sports complex, shopping mall, the festival plaza for cultural events and bus terminal at Flic en Flac over land of an extent of 773 Arpents.

Moka City

ENL Ltd intends to transform Moka into a polycentric city model. Phase 1 of the project will be a mixed-use development comprising 2,287 residential units, commercial and offices spaces, a civic centre, education and student accommodation, sports facilities, health and medical services, a business incubator and a bus terminus over freehold land of an extent of 456 arpents at Moka.

Mon Trésor Smart City

Situated in the vicinity of the airport, the Mon Trésor Smart City project by the Omnicane Group will be a sustainable and vibrant city comprising a business gateway, offices, logistics/light industrial park, Freeport zone, 600 residential lots, 300 villas/duplexes, 100 apartments, commercial centre, leisure complex, SME’s incubator, film studio, civic centre, an education and art hub on freehold land of an extent of 184 hectares at Mon Trésor and La Cambuse.

New opportunities: syndic services

The booming real estate sector has given rise to a new activity being undertaken by innovative entrepreneurs. Syndic services at a professional level are now being provided by specialized firms. Two of them are ProSyndic Services Ltd and Smart Syndic. These companies are revolutionising the way syndic services are offered and providing tailor-made solutions to the real estate sector. Furthermore, they are creating jobs for locals.