For several boom years, real estate was perceived as being a safe haven for investment, and a source of revenue and foreign investment in Mauritius. This has changed drastically over the recent past, following the financial crisis emanating from the US, but even more so with the on-going crisis of European sovereign debt and budgetary austerity measures which appears to be striking at every part of the Mauritian economy. We find today that the flagship for foreign property investment, the Integrated Resort Schemes are suffering, with projects on hold or completely abandoned; smaller scale but similar conditions are seen with the Real Estate Schemes.
As a result of this, foreign direct investment in Mauritius is drying up and the real estate and construction sector are suffering. The wider economic conditions are also having a depressive effect on the local real estate market which is running at a slow pace with few new projects coming up and a lot of projects on hold.
The real estate sector is a heavily taxed sector as admitted by the Minister of Finance during his budget speech “our system of taxation on property is erratic and sometimes excessive”. It is subject to VAT and income tax like other sectors, but this is only a part of the tax burden levied jointly on property developer and buyers. The Land Transfer Tax, which was meant to be a form of capital gains tax and registration duty which are currently levied on all property transactions at a combined rate of 10 to 15% of transaction value has for developers the effect of an income or capital gains tax to the order of 30-50% depending on the profitability of the project.
In Budget 2012, the abolition of Capital Gains Tax with immediate effect is a positive move just as the attention given to business facilitation by improving in the time taken to register a property from 15 days to 2 days.
Similarly, a boost will be given to the construction industry in the housing sector with positive measures such as:
• The exemption on payment of land conversion tax registration duty and land transfer tax.
• The removal of Land Transfer Tax for the next two years on the construction of housing estates comprising at least 5 units, at a maximum price of Rs 2.5 million each.
• Full exemption on registration duty for first time buyers under the scheme.
Source : Business Magazine - Nº 1004 - du 9 au 15 novembre 2011, page 66.
Vikram Jeetah (Chartered Quantity Surveyor)
