Property: Bubble Increases?

7 years, 5 months ago - April 17, 2014
For years the real estate sector is booming, with hundreds of projects underway or in the pipeline. Even in terms of foreign direct investment, it is always the dominant estate.

The land price is climbing and projects proliferate, despite control of the Central Bank on bank financing. Are we trying to further inflate the housing bubble?

The latest official figures show that the housing sector has attracted almost 60% of foreign direct investment in 2013. Indeed, since 2006, the real estate sizes the lion's share of investment from abroad, with an average of 40% annually. At the backstage, the construction sector is indebted to the tune of Rs 75 billion to 28 February 2014, according to figures from the Bank of Mauritius.

The landscape of Mauritius has greatly transformed in recent years. Real estate projects, whether small or large, out of earth, concrete replacing the countryside. Land speculation encouraged the decline in crop production, fertile land abandoned, the time they are assessed. The Bank of Mauritius has issued directives to commercial banks to advocate caution in granting housing loans to commercial purposes, so do not rush the bursting of a housing bubble, What an experience already known to many countries such as Spain and Greece. But rather the sector shows signs of recovery.

The rental market

The rental market is composed of different segments: rental houses by Mauritians, rental space for offices by local entrepreneurs and foreign investors and rental houses by expatriates working in Mauritius. According to figures from 2011, the year of the last census, about 89% of households own a home, with the remainder used for hire. The figures also reveal that approximately 28,000 residential units were empty, while there were also 5,900 houses used as a secondary residence.

Despite the high number of empty homes, the amount of rental accommodation will not drop. In addition, the housing stock expands to two main reasons: It is more easy to get a mortgage to buy their own home. Second, is the tendency to invest in a second home can also be for rent. Indeed, the arrival of large numbers of expatriates in Mauritius has stimulated the rental market of luxury homes, encouraging a massive investment in this sector.

To date, some 4,250 holders of residence permits (permit and Occupation Retired Residence Permit) resident in Mauritius and they all rent a house. In the last budget presented in November 2013, the great financier Xavier-Luc Duval announced its intention to increase the number of Occupation Permits granted to foreigners to 10,000 in the near future. This gives an indication of the number of units it takes to accommodate these foreign professionals. Do not forget the goal of attracting 100,000 students at home by 2020. These objectives support the development of real estate projects such as apartment blocks and villas. And if these objectives are not achieved? The risk remains.

Office rental

There has been an explosion in the number of business areas, especially in Port-Louis and Ebony, but also in other cities and even villages. The irony is that despite the extension of the offer, rent remains expensive. In Port-Louis, for example, the price of monthly rent for a small office starts from Rs 15,000 and can go up to Rs 50,000 or more. And despite the movement of businesses from Port Louis to Ebene, resulting in more empty spaces in the capital, the rent does not fall. One of the reasons is the growing number of entrepreneurs and young professionals making their own, looking for a location. Entrepreneurship and new business opportunities promote the demand for office space. Better connectivity through the expansion of the road network encourages the emergence of office space even in rural areas.

RES / IRS: rental investment down

The number of projects RES (Real Estate Scheme) lengthens. Other IRS and RES projects will be added to those already in progress, especially after the recent review of projects by the Fast Track Committee established by the Government. One of the reasons that attract foreign investors to acquire a villa in Mauritius IRS or RES, is the ability to generate a good rental revenue. However, this market segment is now challenged by emerging countries of Asia, or return on property investment is more lucrative, as property appreciation. Today, it is no longer viable to acquire a RES or IRS more than $ 500 000 then the rent within Rs 75,000 monthly. However, the RES / IRS sector continues to attract buyers who want to live in Mauritius. Despite the perception of gloom in the sector, the figures speak for themselves. There are over 65 RES projects approved to date.

The apartment projects

The number of blocks of flats under construction is increasing. Projects grow through the island. There are plans for the Mauritian customers and also to the foreign. New regulations allow certain categories of aliens, for example, retirees holding a residence permit in us to acquire a luxury apartment. This gave a boost to projects of apartments, but it should be noted that the number of foreigners in retirement is falling. While the authorities had granted 190 permits in 2008 and 191 in 2010, the number fell to 152 in 2011, 128 in 2012 and 132 in 2013. Shall also be allowed to buy an apartment in Mauritius, holders of permanent residence permits.

Agents multiply

Who says real estate agents also said projects. The number of real estate agents multiply. Among, unlicensed brokers that haunt the official real estate agencies. The real estate boom is attracting more and more entrepreneurs, and competition also plays on the web. The recent increase in the municipal license for this activity (Rs 20,000) encourage brokers to operate illegally.

Antish Teelwah by Elegant Properties: "A small bank financing affects the sector"

>Despite an increase in supply, why the price of rental homes, offices, etc.., Does not she fall?

Many people are now investing in real estate for a future return. They borrow from the bank and repay their loans monthly. Therefore, they can not lower the rent.

>How is the rental sector in general? Is that customers are there?

Rent attracts more. People now prefer to buy their own home, especially through borrowing.

>Should we continue with more projects office complexes or are we already in a commercial office space saturation?

If prices are affordable, there will always be demand. I am convinced that if developers are reviewing their construction methods and costs, business walk well. Cease construction is not a sustainable solution.

>Will it have a high demand for rental homes? Are Mauritian or foreign?

80% of expatriates should always rent a house. By cons, there is still an increase in the number of Mauritian clients.

>What are the constraints affecting the sector and your business right now?

One of the major constraints affecting the real estate sector is the limited funding practiced by commercial banks at the moment. For example, banks finance the acquisition of agricultural land by 50% only. Do you think that the customer can easily find the rest?

Price of Land Evolution

The price of land is determined by the yard and varies from region to region. In Grand Baie, Pereybere and Mon-Choisy, a fathom is in the range of Rs 15,000 to Rs 25,000. In the West, Tamarin, Black River or Flic-en-Flac, the price starts from Rs 25,000 toise in some popular areas. Large portions of land are available at Rs 10 million per acre in the area of Chemin-Twenty Feet, while in the immediate villages, agricultural land sell for Rs 7,000,000 acre. For small plots of land in the villages, the price varies between Rs 7,000 and Rs 12,000 toise. In urban areas, the prices are more or less stable.

At Coromandel, for example, you can always find good residential land less than Rs 15,000 toise. At Highlands, St-Pierre, Red Earth and Wooton, priced between Rs 8,000 and Rs 14,000. But the price is unaffordable in some areas due to recent developments. At Sorèze for example, after the construction of the Ring Road, the price to fathom rose Rs 13,000 to Rs 20,000. In the vicinity of the new road Terre-Rouge/Verdun, the price starts to climb. By cons, it is still possible to find land in the south and east than Rs 10,000 toise or Rs 7000.


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