Mauritius Property - A Beginner's Guide

The Mauritius property market is exploding. Many people book a holiday to Mauritius lured by attractive advertising that says how easy it is to buy a home of your own.

Sorry, but this is dead wrong.

In the World Bank ranking of ease of registration of property, Mauritius ranks 153rd, slightly ahead of France that ranks 159th. Here lies the clue. Mauritius property law is based on the archaic and convoluted Code Napoleon, France's legal system, and this system is run by Notaries. In Mauritius notarial licenses are passed down from father to son and while the majority are fine professionals, many have very poor service levels.

Therefore, if you are going to dabble in property in Mauritius, be forewarned. Time can be lost with the wrong notary. But more than this, investing in property in Mauritius it is filled with lots of unpleasant surprises.

Unpleasant Surprise Number One:

The Non Citizens Property Ownership Act states quite clearly that a non Citizen can only purchase property (or enter into a lease exceeding 5 years) with approval from the Prime Minister's Office (PMO). What this means in plain English is that if you are not a citizen, you can't own property. Sorry.

The Good News:

This is tempered by a general dispensation from the PMO to allow non Citizens to purchase property within the IRS (Integrated Resort Schemes) and RES (Real Estate Schemes) - subject to IRS and RES regulations.

More Good News:

Permanent Residents (foreigners who have acquired permits and met certain criteria over three years) may apply to the PMO to purchase residential property. While the details of permanent residence are still being thrashed out, we are led to believe that this includes bare land, freehold property or leasehold property. One per permanent resident, it is understood.

Unpleasant Surprise Number Two:

Beach-front property is nearly all leasehold. If is commonly referred to as 'Crown Land' - it is leased by the government to individuals for a period of up to 60 years. Most of the old leases with 15 or so years left on them are currently being renewed for 60 years. The price of renewal can be up to Rs5 million per acre ($166 000) and annual government rentals as much as Rs500 000 per acre ($17 000).

Unpleasant Surprise Number Three

The costs of transfer of property can range from 20% for Freehold property to as much as 35% for Crown Land beach-front property. This includes both the seller and the buyers commitments, as well as agent's commission and notarial fees. It is common practice in Mauritius for sellers to peg their property on a nett selling price, thereby passing on all costs to the buyer. Beware!

Good News: On IRS the government fees are set at $120 000 per IRS unit (seller plus buyer) but there are still agents fees and similar to settle on top of this. This applies up to a property price of $1.4 million. After this, it is $50 000 for the seller and 5% for the buyer. This 5% rather than $70 000 change was introduced in the 2008 budget.

More Good News: No capital gains tax

Unpleasant Surprise Number Four

It is very common for prospective buyers who have settled on a price with the seller to arrive at the seller's door, contract in hand, and find the seller has changed their mind. Many sellers, particularly of beach-front property are heavily influenced by their children, most of whom are greedy.

Unpleasant Surprise Number Five

Beach-front property is probably some of the most desirable property in the world, but from a yield point of view or capital return, it can be terrible. If it is life-style that the buyer is looking for, then beach-front it must be, but if you are looking for a good return, either from a rental or a capital gain, tread carefully. The costs of transfer are big. The holding costs are high.

Unpleasant Surprise Number Six

Mauritius is not big on town planning, nor is there an even handed administration of building permits. It is possible to purchase a lovely piece of land, build a beautiful house and then have a neighbour with absolutely no taste or consideration build a monstrosity next to you.

The Good News: There are a number of gated communities springing up around the island, particularly in the north and west. These apply building standards that the residents stick to, to a large extent. They also have higher resale rates and rental rates than equivalent houses elsewhere.

I will probably add more points to this blog as I think of them. Or please feel free to add yours.