Opportunities in paradise
Mauritius attracts investors with favourable tax rates and stable infrastructure in addition to idyllic beaches, writes Peta Tomlinson
Islands in the sun are a tempting proposition, especially when they come with white-sand beaches, turquoise lagoons and scenic landscapes as Mauritius does. Lovely to visit, no doubt, but there's far more to investment decisions than an appealing natural environment, and as one property portal asked of the diminutive African nation last year: would you buy there?
Increasing numbers of foreigners are. Granted, until a few years ago, this wasn't even possible: Mauritius only opened the door to real estate ownership by non-nationals in 2002 and, even then, as now, under strict conditions.
More compelling, though, is that unlike many still-developing locations in tropical paradises, Mauritius has already arrived in terms of economic stability and infrastructure.
As Lexpressproperty.com points out, Mauritius is well-equipped with a harbour, airport, road networks, schools and hospitals, and more improvements are planned. The Build Mauritius Plan, announced in November last year, outlines massive public sector investment in airport, port and marine services projects, focusing on "greater connectivity with the rest of the world".
The World Bank has hailed Mauritius for its "long track record of economic and institutional reforms", noting that the island has transformed from a predominantly agricultural economy, based on sugar production, to a diversified economy structured around textile exports and tourism - and lately around financial services. According to the National Bureau of Economic Research, considering the island's economic prosperity, rule of law and governance rankings, "few countries [in the African region] can top Mauritius".
KPMG notes that Mauritius "has created the right international network to facilitate investment in Africa with numerous tax treaties with developed as well as emerging economies", including China.
"It has signed various Investment Promotion and Protection Agreements with several African countries which typically provide guarantees against discriminatory expropriation, arbitrary cancellation of licences, free repatriation of investment capital and returns, and arrangement for settlement of disputes between investors and contracting states," De Buys Scott, head of the KPMG Global Infrastructure Advisory in Africa, wrote in an advisory note.
Mauritius also has one of the lowest corporate and income tax rates in the world, including a favourable foreign tax credit system, he added.
"In addition, the membership of Mauritius in major African regional organisations makes it arguably the best financial centre in which to establish any vehicles including funds to invest into Africa. The country is determined to be the financial hub of the African region and an ideal platform for investment and doing business in Africa."
There are three ways for foreigners to buy property in Mauritius. The first is the Integrated Resort Scheme (IRS), introduced in 2002, which the MW Property Group in Mauritius describes as "basically a project for the construction and sale of luxury residential units to foreigners".
The minimum entry price for units in qualifying schemes, which stand on freehold land of more than 10 hectares, is US$500,000. Buying in an IRS development also entitles the purchaser to residency in Mauritius, so long as they hold the property.
The Real Estate Schemes (RES), introduced in 2007, is IRS "light" - there is no minimum purchase price. However, a residence permit is not automatically granted.
The third option is the Invest Hotel Scheme (IHS) introduced in 2009, allowing property developers to sell hotel rooms, villas, suites or any other part of a hotel to individual buyers, including foreign citizens, during and after construction phases. Under a lease-back arrangement, the buyer has the right to use the property for 45 nights a year but does not gain residency.
Transaction costs, however, are cited as "high" by the Global Property Guide. In Mauritius, the buyer has to pay notary fees ranging from 0.5 per cent to 2 per cent (plus 15 per cent VAT), and agency fees of 2 per cent (plus 15 per cent VAT) of the selling price.
Jonathan Tagg, director for Pam Golding Properties in Mauritius, says the relaxed laws on foreign ownership have seen a decade of steady growth in the island's property market.
"Buyers are drawn to Mauritius for various reasons. We continue to see investors looking at rental returns and steady capital growth, along with relocators looking for a very tax-efficient environment. We also have leisure buyers drawn to the Indian Ocean's warm waters and great year-round weather." An automatic residency permit for IRS scheme buyers is cited as another contributing factor.
Mauritius is politically stable and welcoming of foreigners, Tagg says. He describes the island's property market as "busy", fuelled by a very low tax rate for residents and Mauritius' growth as an offshore hub. "We expect prices to continue to trend upward, especially with the limited number of property sites available for development."
Tagg points to the swift uptake of Le Parc de Mont Choisy - an approved IRS scheme located in Grand Baie in the island's north, 20km from the capital Port Louis, as a case in point. Since its launch in April last year, Pam Golding has completed 56 sales, mostly of villas in the US$1.5 million to US$2.5 million price range. Designed by Stefan Antoni Olmesdahl Truen Architects, the project will include an 18-hole championship golf course by South African designer Peter Matkovich.
Some 60 per cent of the buyers to date are European, and 25 per cent are South African. Chinese buyers are warming to South Africa, mainly in the Western Cape, and, with increasing flights from Asia, property agents expect Chinese interest to be piqued in the near future.
Mauritius is targeting a 50 per cent increase in visitor arrivals in the next five years, hence tourism is tipped as a key driver. On a tourism industry delegation to Beijing in August last year, Yang Zunshao, the Minister of Tourism and Leisure for Mauritius, said tourist arrivals from China had jumped more than 77 per cent year-on-year.
In anticipation of increasing demand, Air Mauritius has expanded its services between the two countries, and operates a direct route to Beijing along with its Mauritius-Shanghai and Mauritius-Hong Kong routes. These direct flights "have helped us attract more Chinese visitors", Yang said.