Safely buy a property ’off-plan’ (VEFA) in Mauritius
A sale of property before completion (VEFA), also known as Purchase off Plan, consists of buying a real estate property off plan which has not yet been completed. This has become a trend in Mauritius since a few years now. When the deed of sale is signed, the buyer becomes the owner of the property under future completion. However, this kind of real estate transaction is not without risk, and it is important to remain vigilant.
The principle of the VEFA
The off-plan sale known as VEFA allows the buyer to pay in several stages. There are two distinct stages. First, you sign a reservation contract. This allows you to reserve a property in a future real estate project. For the purchaser, the signature of such a reservation contract, also known as CRP, from the French initials of Preliminary Reservation Contract, must be accompanied by a deposit to be paid into an escrow account at the bank or at the notary. Generally, this down payment represents 5% to 10% of the value of the property.
When the developer is ready and he has reached the number of reservations he needed to, he advises the buyer who will have one month to come up for the signature of the final deed of sale, the VEFA, which describes the rights and obligations of the buyer and the seller towards each other and a precise description of the property within the project. This is the crucial moment when the buyer can choose not to buy if he wishes, not without losing in most cases the deposit he made when he signed the reservation contract. Once the VEFA is signed, it will not be possible to change your mind. It is this signed contract, along with the payment of an additional 20 to 25%, that will then give ownership to the buyer, who will at this stage paid between 30 to 35% of the value of the property. This is when the notary transfers the funds collected to the developer.
From there, the buyer will pay directly to the developer the funds according to the different stages of construction.
An off-plan contract: Make sure of the promoter’s reputation
"When you decide to take an important decision such as buying a property in Mauritius, it is essential to ensure the real estate developer is reliable. To do so, you can check on the quality of the projects he already built. If possible, visit his projects which are in the same range of quality than the one you are interested to buy into. A serious developer will not be reluctant to provide you with all the information you need about the future property. For example, he must be able to set a delivery time. This delivery time might not be an exact precise date but will allow you to know an approximate period of delivery. The construction period must be included in the final deed of sale.
However, for added security, you could request a late penalty clause for every day of delay but not all developers agree to do so, even if they are very good ones. The penalty is ideally negotiated in the presence of a notary or mentioned in the deed of sale.” Comments Frédérique de Beer, Executive Director of Sales at Park Lane Properties.
To avoid any of the risks pertaining to buying property off-plan overseas, it is very important to be accompanied by a professional real estate agency which will have identified the reliable developers and projects and will accompany you through the reservation and buying process and protect your interests.
A VEFA off-plan sale requires a financial guarantee
Unlike any other real estate transaction, buying off-plan involves huge risks. A failing developer can leave the project unfinished and make you lose your investment. Faced with this risk, it is essential to ensure the security of the investment. That’s why all real estate developers in Mauritius selling projects off plan to non-citizens (known as IRS, RES, PDS etc.) have the obligation by law to offer a financial guarantee of completion to the buyers.
Financial Guarantee of Completion
This guarantee, also known as GFA, (French initials of Financial Guarantee of Completion) ensures the buyer that the property he bought off plan will be built and delivered even in the event the developer defaults. This is a financial guarantee given by an outside establishment. In general, it is given by a financial institution such as a bank or an insurance company. In other words, the bank or the insurance company guarantees the full completion of the project should, for any reason, the developer fails to do so and is not in a position to complete construction.