Windfall for South Africans with property in Mauritius ?


A great opportunity for South Africans to invest in real estate in Mauritius

PORT LOUIS – A change to the regulatory requirements for property investment schemes that have lured many affluent South Africans to the Mauritian property market could boost the value of properties bought under the older, less stringent schemes.

In its 2015/16 budget, the Mauritian government announced that the Integrated Resort Scheme (IRS) and Real Estate Scheme (RES) would be restructured and replaced by a new scheme, the Property Development Scheme (PDS). The PDS would require developers to sell at least 25% of their developments to Mauritians or members of the Mauritian Diaspora (Mauritians living abroad).

Although locals were previously welcome to buy property developed in terms of the IRS and RES, there were no minimum sales requirements on developers.

The change comes amid efforts to encourage integration with the local community and seemingly also relate to government concerns that property schemes have become “ghettos” for the rich.

Since most of these properties are luxurious residences that were previously sold to affluent buyers, some expect that developers will have difficulty to meet the new requirement unless they adapt their development to include less expensive units. However, this may make the proposition less desirable for foreign millionaires looking to invest and as a result existing properties bought under the prior dispensation may become more attractive.

While most of the buyers of these luxury properties are French, appetite among South Africans has also been significant. Data from the Mauritian Board of Investment suggest that 33% of properties sold in terms of the IRS have been to French buyers whilst 22% were to South Africans and 15% to British purchasers. Fifty-two percent of RES properties were sold to French purchasers, 25% to South Africans and 7% to Mauritians.

Under the IRS, property investors had to acquire a residential property with a minimum value of $500 000 (excluding taxes). The owner and his dependents (up to the age of 24 years) obtained a residence permit as part of the scheme. The RES set no minimum investment amount, however a residence permit was only granted to the owner and his dependents where the investment in the property exceeded $500 000.


Philippe de Beer, director at Park Lane Properties, says to support the Mauritian economy, the European Union (EU) historically had a special tariff agreement with the island to buy sugar at inflated prices.

But increasing pressure from other sugar exporters like Brazil brought an end to this arrangement and over a five-year period Mauritius had to lower the price of its sugar by 36%. As a result, many sugar factories were forced to close down or merge their cultivars.

To assist the industry, government created the IRS, which allowed sugar cane producers to develop their land and to sell property to foreigners.

“Until then, foreigners were not allowed to buy property in Mauritius, except under the Permanent Residence Scheme when the non-citizens were investing substantial funds into the country,” De Beer says.

The RES was introduced in 2007 to open up the Mauritian real estate market to a wider group of smaller Mauritian landowners to allow them to also have their share in the real estate boom and convert their land into projects.

The IRS includes large property development schemes on land above 10 hectares. The RES applies to smaller developments on land from 4 220 square metres to 10 hectares.

The schemes have provided a welcome boost to the economy, accounting for roughly 30% of total FDI and have had a positive spill over effect in terms of direct and indirect job creation.

According to data from the Board of Investment, more than 800 properties have been sold in terms of the IRS and more than 700 under the RES.

While property developments that have been approved and sold in terms of the IRS and RES schemes will continue to operate under the prior dispensation, going forward any new project will be developed under the PDS, De Beer says.


De Beer says the change poses a challenge to property developers to adhere to government’s integration requirements.

Foreigners typically want to live in a luxurious, secure and secluded place.

The requirement that 25% should be sold to Mauritians or Mauritian diaspora will also be a challenge because most Mauritians won’t be able to afford the luxurious properties typically associated with these schemes. Some of these properties can easily be sold for €600 000 and beyond.

For owners of properties bought under the existing IRS and RES schemes, the move will likely boost resale values, De Beer says.

He expects property developers to be creative and to bring attractive developments to market that will respect the PDS requirements and find the buyers, potentially with a little more stretched sales periods.

“There will always be Mauritian investors seizing the opportunity to invest in properties that they can then resell later on the international market.”

Richard Robinson, President of the South African Chamber of Commerce in Mauritius, says government argues that the IRS and RES schemes have created pockets of huge wealth, which are not necessarily accessible to the local populations or adding significant value.

But these developments had to employ staff, involve local construction companies and had a multiplier effect, he says.

Robinson agrees with De Beer that it will likely be difficult to sell 25% of developments – some of them extremely expensive properties – to Mauritians.

“What happens if you can’t attract 25%?” he asks.

“I think there is going to be a reticence from the developers to actually build these big schemes and you don’t want to have 40 superb multimillion dollar establishments and right next door you have got a $100 000 type of house. That defeats the object of what you have created.

“So I am not sure how that is going to play out, but that seems to be the biggest hurdle at the moment in terms of attracting new development,” Robinson says.

In terms of the new PDS “building defects” or “decennial liability” insurance is required as well as other insurance linked to the construction, Tristan Lagesse, executive at City Brokers, says.

Although the new requirements are an added benefit for the ultimate client it will represent a cost to the developer (or project) of about 1.5% of the total value, he says.

The PDS replaced the IRS and RES in June this year. No projects have yet been approved.

This article was published by Moneyweb -