Mauritius | Real Estate

January 16, 2013

Real Estate Acquisition by Foreigners: A Journey Full of Tricks

Acquire property in Mauritius is a dream cherished many foreigners, for various reasons. Legislation, including the 'Non-Citizens Property Restriction Act' real estate transactions governed by foreigners.

Although the law makes provision for the possibility to acquire property legally, some foreigners, with the assistance of specialist advisors, always trying to circumvent the law to become landowners in Mauritius.

Foreign nationals residing or working in Mauritius, or invest in an economic activity, must at some point, buy a property, whether it is a house, land or a building, residential, industrial or commercial. In general, the law does not allow a foreigner to buy a property in Mauritius, except under certain predetermined conditions. Even a company incorporated in Mauritius and holds a foreign shareholder has no right to acquire a property without having first obtained the necessary authorization from the relevant authorities. Despite legal constraints, even when foreigners come to circumvent the prohibitions exploiting loopholes in certain laws. These transactions remain, however, illegal.

Who is a foreigner?

An foreign is defined as a person who is not a citizen of the Republic of Mauritius or a company that has a shareholder who is not a citizen of Mauritius or 'Trust' whose beneficiaries are not Mauritian citizens.

Afford to buy a property

There are basically two options: buy residential or commercial use (for business purpose). Residential acquisition is only possible under the plan IRS (Integrated Resorts Scheme), RES (Real Estate Scheme) or under the new plan that allows foreigners to acquire a flat under the conditions of eligibility related to wages or amount invested Mauritius. The foreign has no right to buy a home outside of these plans. Business side, a foreigner can acquire a hotel room under the plan (IHS Invest Hotel Scheme) but must rent the room at the hotel that offers its clients turn.

Commercial

A foreign investor has the right to acquire property for economic activity. This can be an office, a factory, shop or agricultural land. To be eligible, the investor must engage in an activity that generates a turnover of at least Rs 4 million annually. In addition, the property must be acquired in the name of his company. The 'business purpose' discourages land speculation or purchase for rental or resale. Recently, there is a strict control on the acquisition of commercial property. The Recipient shall carry out the activity in the deadline. If a buyer abusing the situation, the authorization may be revoked and he will be forced to sell the property.

Exceptions: No license required

Note that no authorization is required to purchase occupancy rights or lease a commercial property for a period not exceeding 20 years. For residential use, no authorization is required if the lease or rental period not exceeding 4 years. About a company, a foreigner may acquire shares (or even hold the total shareholding) if the corporation has no property. A foreigner may freely inherit property or ownership through marriage. An foreign may also freely purchase shares on the Stock Exchange of Mauritius, even in companies that hold real estate.

Authorisation: PMO or BOI?

The only two institutions that grant authorization to acquire property in Mauritius are the Prime Minister's Office (PMO) and the Board of Investment (BoI). The Board of Investment is affected by direct acquisitions related to investment in economic activity. Thus, any individual who is not an investor should refer to the PMO. In addition, any indirect acquisition, for example, through shares in a company must go through the PMO. This is still the PMO which authorizes the lease over 4 years for residential or exceeding 20 years for commercial use.

Circumvent the law: subterfuge

Despite the prohibitory legislation, there has always been real estate acquisitions by foreigners circumventing legal clauses, amendments to the relevant laws recently. These subterfuges that were possible due to gaps or a different interpretation of laws have allowed foreigners to acquire real tricky. Below are a few tips:

Use a nominee

This is the easiest way. The foreigner identifies a field that does not have the right to buy and looking for a Mauritian, a friend or a professional who is willing to act as a nominee. Then a company is incorporated with the Mauritian citizen as a shareholder and abroad as director. The foreigner 'ready' then his money, without interest, the company conducting the transaction. The property is mortgaged then the 'creditor'. The foreign has total control over the property without legal title.

In September 2006, in a case involving the purchase of land by a nominee, a judgment of the Supreme Court ruled that the use of 'nominee' is illegal because any subterfuge that allows a national buy property abroad, bypassing a prohibitive law illegal. In the case in question, the judge ordered the 'Curator of Vacant Estates' to take possession of the land. "We Consider que le provisions of section 3 or 5 of the Act (Non-Citizen Property Restriction Act) can not be circumvented by the recourse to a trust / simulation as this defeat the purpose Would Clearly of the Act to restrict Which is the acquisition of real property in Mauritius by non-citizens of Mauritius, "wrote the judge.

Partnership

A company is created with Mauritians as shareholders land is acquired with the aim to develop a real estate project. The foreigner becomes a partner and finances the project as a developer. After the sale of units, profits are shared.

Shareholding to 49%

Previously, the law specified that a company incorporated in Mauritius but whose 'control and management is in the hands of foreigners could not own property without a license. Thus, to satisfy local requirements, the foreign party does not hold more than 49% of shares in a company, leaving 51% to Mauritians. However, it is quite possible for foreigners to control a corporation even a minority. So the spirit of the law is violated. Misinterpretation of relevant clauses allowed the acquisition of property by foreigners. The law was subsequently amended to eliminate confusion.

Multiple contracts 4 years

In the past, the law allowed foreigners a residential lease not exceeding 20 years. Some took the opportunity to sell land or houses to foreigners for a period of 20 years. For any period exceeding 20 years, just had a second 20-year contract starting at the end of the first contract, and so on. Sometimes, the various contracts were the names of the different companies belonging to the same people. Second, the law was amended to limit the residential lease 4 years. We can now see multiple contracts of 4 years, each contract is on behalf of another person.

Industrial lease for residential use but

According to our survey, there are also cases where an industrial lease of 20 years is used for residential purposes, which is illegal. In addition, some resort to residential sublease (sub-lease) without permission of the department.

Victims

In 2008 and 2009, the Board of Investment had investigated illegal real estate transactions and made recommendations to amend the law. Meanwhile, the Commission on Democratization of Economy was also investigated this case. At the time, many people, especially foreigners, had filed a complaint against real estate companies.

They claimed to have already paid the money but the projects are not successful. At the same time, developers spend advertisements inviting foreign nationals of these countries to buy a villa in Mauritius, while failing to specify how. According to some industry experts, it may well be that people have bought properties without realizing they are really legal owners. As the Commission of democratization, it has not produced any report that an answer given in Parliament by the Prime Minister about it December 18, 2012, June 26, 2012 and October 18, 2011.

RES: Beware of scam!

The plan RES (Real Estate Scheme) allows a small land owner to join an investor, local or foreign, to develop villas for sale mainly to foreigners. Under this plan, a foreign investor can not buy the land but must join in partnership with the owner. Landowners, especially small farmers, have blindly trust the pseudo-investors. Unfortunately, the mechanism of RES they have not been well explained. Growers thought they could get their money or the value of the land immediately. But it was not until the end of the project, and the sale of all the villas, for his money.

Commission of inquiry

The government has established a commission of inquiry to shed light on the mechanisms and processes used by foreigners parallel to circumvent the law. The commission will be chaired by Justice David Chan Kan Cheong, with assessors and Geeanduth Gopee Phalgoony Ramrekha. Work will begin in March 2013.

Testimony

A woman farmer in northern told us her ordeal: "A foreigner approached me to sell my property in Grand Bay and accepted the price I offered. He promised to pay all of the signing of the agreement. That would definitely be done.

That neither the pseudo-investor or his lawyer who works with him not explained to me is that the money he would pay me come from a bank loan in the name of the new company, where would my land collateral. Taking cognizance of this trap, I decided to withdraw from the partnership. But I later learned that following the law, I had to stay in this company for the project and also a year after the sale of the last house.

This implies that whatever happens, in case of problems with the authorities, the bank, or customers, foreign investors, who risk nothing, take the first flight and then it will be me, this shareholder company endosserais any responsibility.

However, I had a land for sale, full stop. It is clear that the laws in this type of development do not protect the citizen of Mauritius, the priority at all costs is to attract investors without even realizing that the shadow of these laws cover all a network of licensed riders. It is hoped that the inquiry on land lights Chan Kan Cheong judge and his assessors, to stop this traffic naughty but oh so juicy too easily where smallholders are ignoring the laws of evil schemers costs. "Our interlocutor regrets that the relevant institutions do not have the power to act, instead focusing on investors.

 

 

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