Opinion by Pierrick Pédel – Economic Manager of La Sentinelle Group.
Dream villas
At the beginning, the idea was simple. In 2002, the government launched the “Integrated Resorts Scheme” mechanism. This IRS allows the acquisition of luxury properties by foreigners by giving them the opportunity to obtain the permanent resident status. By paying a minimum of 500 000 million dollars, this status is accompanied by an advantageous tax system if the buyer’s home country is signatory of a double tax treaty with Mauritius.
The aim is clear: it consists of attracting the individual who benefits from a market power and of an important network. Today, the review is more than mitigated. The crisis happened and one million Euros villas are not being sold. Among 20 of the launched IRS villas, only five were achieved: Anahita (CIEL), Tamarina (Médine), Villas Valriche (Espral), Belle Rivière and Club Med at Albion. Two other projects are in the starting phase including La Balise Marina (Espral). Three projects will enter the achievement phase next year.
We are thus, far from the 6000/7000 villas announced in 2002 and of the billions of dollars profit they should have brought. In addition, the Government launched the Real Estate Scheme” (RES) which proposes high class residences for an average price of 500 000 dollars. Today, 23 RES projects have been adopted by the Board of Investment (BOI) which represents 1000 high class housings and a potential profit of 500 million dollars i.e. serious competition for the IRS.
The investments (earthwork structures, roads and networks development) are huge. The initial costs (agricultural land conversion, VAT and social contribution funds) turned out to be excessive. For each villa, the promoter must, for example, pay RS 200 000 of social contribution. At Espral (ENL group), 15 millions have already been paid since the beginning of the year for the villas valriche at Bel-ombre and the whole project represents 60 million.
The same level of investment has been input, so much that the project is more costly to stop than to carry on. This is from where originates the creators willingness to search for an optimisation of their expenses. The recent reorganisations of sugar industries (Mon Désert Alma-Savannah fusion and Harel Frères-The Mount, reorganisation at Médine) have as aim, a better property management for the IRS projects’ framework.
The state came to give a helping hand to promoters by giving the possibility to foreigners to contract bank loans to finance IRS properties. However, the demands are slow to come, as illustrate those villas which remained to the foundation stage or those billboards slashed with an “80% sold” tag which has quickly been removed. This does not prevent new investors to take interest into the dream villas industry. The “Sugar Investment Trust” and the South African group “Jawitz Properties” already express their interest.
