INVESTING IN PROPERTY IN MAURITIUS. IF ROI < 7%, NOT FINANCIALLY PROFITABLE.
Acquisition of property, both by Mauritians and foreigners, has seen a significant upturn, with the government having launched various schemes to facilitate land use from traditional activities like agriculture to commercial and residential activity and allowing foreigners to acquire immovable property. Approximately 40% of all property transactions occur for investment or succession purposes, rather than end use. When transacting property mainly for investment, one needs to account for the entire transaction cost, direct or otherwise. The direct associated costs for a typical transaction in Mauritius are around 8%. The indirect costs of finance are in the region of 7%. The overall transaction costs therefore are around 15% of the actual sale price of the property. Therefore, when calculating rental and other yields, apart from forecasting an asset uplift value, a net return of less than 7% is not considered financially profitable. Factors in the country of the foreign investor/acquirer such as political uncertainty, constraints on business opportunity, enhanced taxation, inflation and flight of capital, play a crucial role in making property investment decisions, and this makes a lower yield sometimes acceptable.
Having analysed the transaction costs, there are certain significant benefits and uptake to property acquisition in Mauritius, notable the absence of Capital Gains and Withholding taxes, as also guaranteed succession rights to both Mauritians and foreigners. The Government offers various routes and programs that allow foreign nationals to own residential properties through various investment schemes.