Mauritius – The Jewel in the Indian Ocean
Fast Facts
• No Capital Gains & Inheritance Tax.
• Recorded an average of 5% economic growth since 1968.
• Capital: Port Louis
• Population: 1.2 million
• Currency: Mauritian Rupee
Economic Overview
‘I wonder what it would be like to live in Paradise?’ Soft sandy beaches, Turquoise seas teeming with sealife……….and then you get to call this paradise……..Home :)’
But would you still consider it to be paradise once the novelty wore off? And would boredom soon set in, once you had ‘conquered’ the fishing, surfing, exploring…….?
République de Maurice (or Mauritius) is an island nation off the coast of the African continent, in the southwest Indian Ocean. In addition to the island of Mauritius, the republic includes the islands of St Brandon, Rodrigues the Agalega Islands. Mauritius is part of the Mascarene Islands, with the French island of Réunion to the southwest, and the island of Rodrigues to the northeast.
Mauritius attained independence in 1968 and the country became a republic within the British Commonwealth in 1992. The country has been a stable democracy with regular free elections (Yes, this can happen……..even in Africa !!), and a positive human rights record which has attracted considerable foreign investment, earning one of Africa's highest per capita incomes.
Since 1968, Mauritius has developed from a low income, agriculturally based economy to a middle income diversified economy with growing Industrial, Financial, and Tourist sectors.
For most of the period, annual growth has been of the order of 5% to 6%. If you don’t believe me, look at the graph :
The government's development strategy centres on Foreign Investment. (This is where things getting really interesting………) Thus far, the country has attracted more than 9,000 offshore entities; many aimed at Commerce in India and South Africa. The investment in the banking sector alone has reached over $1 billion !! :)
In order to provide residents with access to imports at lower prices and attract more tourists going to Singapore and Dubai, Mauritius is gearing towards becoming a duty-free island within the next four years.(Not that they would EVER admit to copying the idea from Dubai…….) And just to reiterate their stance on this Duty Free Issue, the Finance Minister, Rama Sithanen in the 2007-2008 Budget, reduced the corporate tax to 15%.
Mauritius has also drawn up plans to become the first nation to have coast-to-coast wireless internet access. (Can you imagine what this will do for the already fast growing Economy??!!) The wireless hot spot currently covers about 60% of the island and is accessible by about 70% of its population………
Property Market Review
The Mauritian government’s new Development Strategy, has only recently made it possible for foreigners to own property. This strategy is divided into 3 Government Schemes’:
1) Permanent Residence Scheme (PRS):
a. Under the PRS, the foreign investor can purchase up to 5,276 m2 of residential property which must be at least 100 meters away from the sea.
b. A minimum investment of US$500,000 is required.
2) Integrated Resort Scheme (IRS):
a. Under the IRS, foreigners can purchase luxury villas of up to 5.276 m2 each.
b. As a property-owner, a residency permit is also granted, which is extended to the investor’s family. (How awesome is that??!!)
3) Scheme to Attract Professionals for Emerging Sectors (SAPES).
a. SAPES is an incentive to encourage professionals to work in Mauritius, and allows foreign professionals to acquire residential property.
Mauritian Rental Law is generally pro-tenant & sets out 2 important elements to renting:
1) Rent:
a. The initial rent is regulated by the Fair Rent Tribunal and cannot be changed within the first three years of tenancy.
b. Rent increases must be justified by the landlord.
2) Tenant Security:
a. A landlord must go through the court system when evicting a tenant, as only District Courts have the power to evict.
b. In case of eviction due to landlord’s use of the property, the court can order that the tenant be compensated for any prejudice suffered.
But rental yields still give us a healthy 6.17% as below:
RENTAL YIELDS – Port Louis
To Buy:
100 sq. m. = $85,000
200 sq. m. = $160,000
300 sq. m. = $250,000
500 sq. m. = $350,000
Yield:
100 sq.m = 4.24%
200 sq. m = 4.50%
300 sq. m = 5.76%
500 sq. m = 6.17%
Probably the only thing keeping Foreigner out of Mauritius at the current moment (this is both a good and a bad thing………but I’m confident that this will change) is the high Transaction costs…….
TRANSACTION COSTS
Notary’s Fees = 0.5% - 2% (+15% VAT) (Buyer Pays)
Agency Fees = 1% (+15% VAT) (Buyer Pays)
Registration Fee = 10% (Seller Pays)
Transfer Tax = 5% (Seller pays)
Site Plan = US$1,606 (Seller pays)
Stamp Duty = US$5 (Seller pays)
Costs paid by Buyer 1.725% - 3.45%
Costs paid by Seller 18.04%
………and then the high Rental Income Tax costs:
EFFECTIVE TAX RATE ON RENTAL INCOME
Monthly Income (Tax Rate%)
US$1,500 = 12%
US$6,000 = 16.7%
US$12,000 = 17.4%
But there being no Capital Gains tax, these costs are still very reasonable……………as long as you follow the old adage,’ You make your money when you BUY, and not when you SELL’:
Conclusion
In the past, Mauritius has definitely had its share of problems: bad weather which affected the sugar cane crop which in turn affected the economic output / growth.
But now that the government has started making a concerted effort to create a ‘Mini-Dubai’, I believe that Mauritius is geared to explode onto the international scene in the next few years………..but shhhhhhhhhh, and don’t tell anyone :)
