The real estate and construction sector has been on a positive growth the last couple of years, due mainly to government stimulating massive investments in various infrastructural projects. We have seen a number of roads under construction or upgrade, construction of bridges, fly overs, stadiums, and without forgetting the biggest of the biggest, the metro. If you take out government stimulated investments, the private sector investment in real estate has been rather sluggish for a number of reasons.
Since the enactment of the smart city schemes in 2015 and further refinement in the subsequent years, the bottom line is there are too many smart city schemes by various developers that have come to market at the same time. The real estate sector depends on three segments:
1/ local domestic market
2/ diaspora and returning Mauritians
3/ foreign market (predominantly from France and South Africa)
On the local domestic front, the reality is that most (and here am not saying everyone) have at least a house or an apartment, and some even have more than one residential unit. The ownership ratio in Mauritius is quite and in fact very high compared to other emerging markets. And that stem not from the current new generation, but rather previous generations of Mauritians, whereby working hard, saving and investing in a primary residential market was a priority or priorities. We have also seen from previous generations, investments being made into land “bank” or a secondary residential unit as a mechanism for savings. This has been accelerated over the last 15 years, as savings rate kept falling (welcome to the new era of low rates globally), and hence Mauritians’ preference to invest in property. How often have we heard “property is good, it always go up in Mauritius or we are a small island and access to land is restricted”. So with this in mind, money has been channelled to real estate rather to the stock exchange or in other investments instrument. The issue however, is given the high ownership ratio, the domestic market on an annual basis is pretty small and hence is not able to stimulate demand in such a way that would sensibly stimulate growth in the real estate and construction sector.
As for the diaspora and returning Mauritian market, I think it has been a totally missed opportunity to-date. Across the world we have Mauritians who are well settled and who might want to buy something home, be it a plot of land, a house, or a bungalow or an apartment, or even a room of a hotel under the Invest Hotel Scheme (IHS). But let’s face it, how many real estate developers or real estate agents have ever focused their sales and marketing efforts to the Mauritian diaspora? And yet we know of other emerging markets that have successfully done so. That for me has been a complete waste of opportunity. We shouldn’t forget, when someone is earning Euros or Pound Sterlings or Canadian Dollars, buying in Mauritius will always be cheaper as the rupee constantly depreciates (the era of a strong rupee is gone!).
Turning to the foreign market, we have seen the opening of the residential ownership market since the enactment of the IRS scheme in 2002/03 and subsequently various schemes such as RES, IHS, PDS and so on. There’s a feeling that there are too many foreigners who have bought in Mauritius which by the way is untrue. Since 2002 (18 years ago!), a total of 3000 units have been sold to-date, that is an average of 166 per year. That’s the fact. Let’s digest these numbers properly to clarify a lot of misunderstandings. And since 2015 where Mauritius sold the highest number of residential units to foreigners, the yearly number has been on a downward trend and most developers are struggling to get their projects off the ground. Don’t get distracted by schemes on paper. Architects and master planners have been having a great time drawing various fancy schemes (one just have to open the newspaper to see projects for sale), but again speak to the “genuine” sales agents. Sales have dried up and even before the Covid-19 crisis, this year would have been the worst over the last 10 years.
Unlike places like Portugal, Malta, Cyprus, Carribean islands and so on, Mauritius has struggled for a number of years to restructure its real estate sector. And for a very simple reason. It is a sector which unfortunately has never professionalise itself. Most of the operators in the sector are not born and bred real estate specialists. What is needed is a professional global firm in the likes of a JLL, Knight Frank, CBRE, or other real estate specialists, to review the real estate sector and advise what the best course of action should be. We have seen how other sectors (sugar, textile, tourism, aviation, financial services etc), have had recourse to professionals from overseas to help review and map out the possible future. So it’s high time that the government and the private sector stakeholders try to come up with a masterplan for the whole island. This place is so small and easy to lay out a masterplan so that we know how much land should be used for real estate (vs other things as agriculture as an example), how much land to be allocated to developments for the local vs foreign market, how many office hubs, hospitals, schools etc will be required over time. And what type of developments and what is the size of the overall market and more importantly how to target the various markets. At least then we have a plan. Today there’s no plan! And it’s almost the situation of the blind leading the blind in the real estate sector. We need to professionalise and bring experts to guide us.
Let me end this to say that Land is not an issue, or rather supply of land is not an issue. Take for example Medine sitting on 10,000 hectares of land. If we assume in a very simplistic manner (on a 75% efficiency ratio) that a foreigner will build a house on an average plot size of 1000square metres, Medine’s land would be sufficient for 75,000 residential units. Now add the others Alteo, Terra, Omnicane, ENL, etc. Land is not an issue. What is an issue, is we need professionals to tell us what should be done. A Masterplan for the whole island that everyone can subscribe to rather than continuing our mode of “bate bater”.
