Richard Haller: “Real-estate FDI will decrease in 2017”

After the tremendous increase in 2016, Richard Haller expects a decrease in the Foreign Direct Investment (FDI) this year. The Managing Director of Pam Golding Mauritius also thinks that Portugal is not a threat for Mauritius.

BUSINESSMAG. Since the replacement of the IRS/RES by the PDS, how is the sector doing?

The market continues to operate without much change. The IRS/RES terminology being replaced by that of PDS does not make much difference to the clients. Most importantly, the prospect of permanent residency by purchasing over USD 500,000 remains and is important for certain key markets. What has made PDS easier for developers is the recent removal of the mandatory sale of 25% of units in PDS to Mauritian citizens.

BUSINESSMAG. The BoI announced an increase in FDI, particularly in the real estate sector…

My feel is that 2016 was a good year for real-estate FDI, with a significant boost from the Mont Choisy le Parc IRS development in Grand Baie, where Pam Golding International has sold over 200 units totalling over Rs 8 billion in sales values. A number of these were converted to title deed in 2016.

BUSINESSMAG. According to you, how will this sector perform in 2017?

My estimate is that FDI will decrease in 2017, as compared to 2016. As mentioned above, I believe 2016 was an outlier in good performance. I expect 2017 to be somewhat lower. However, there are so many factors that can impact the market; it’s difficult to speculate so early in the year.

BUSINESSMAG. Can we say that this sector will become one of the pillars of our economy in the future?

I would say that the real estate sector is already an important pillar of the economy driving FDI into Mauritius. Also, off the back of real-estate sales, there are experienced and talented individuals spending time or settling in Mauritius. This is important in that it contributes to a growing know-ledge economy.

BUSINESSMAG. Moreover, in your opinion, is it dangerous for an economy to attract more FDI through the real estate than other sectors?

Having too much reliance on any one sector is risky for the economy. From what I can see from the BOI’s strategy is that they are supporting a more diverse economy, which spans a number of sectors. This aims to reduce the risk on the economy by being too reliant on any one sector of the economy, for instance real estate.

BUSINESSMAG. Some operators in this sector argue that this IRS/RES segment could bring a new dynamism to the national economy by giving these owners a residence permit.

One of the founding principles of the real estate sector for foreigners has been to provide a Mauritius residence permit. This creates a sense of comfort for clients.

BUSINESSMAG. Do you think that Mauritius is not enough open to foreigners?

I think that the segmentation of the market between Mauritius citizens and foreigners is a sound principle, and this prevents the Mauritius citizens from being outpriced of the market. It is very difficult to compete with purchasers who have Euro and USD purchasing power. If the entire market was open to foreigners, the natural effect would be the driving up of pricing in the local, due to an increase in demand. Those with weaker purchasing power then get priced out of the market. My opinion is that the gradual relaxation of market rules, as we have now seen in the G+2 legislation, is the correct way to slowly open the market.

BUSINESSMAG. Returning to the IRS/RES/PDS sector. Have customer requirements changed?

No, I don’t see that customer requirements have changed substantially. The important principles such as location, quality and reputation continue to be paramount to clients. As with all markets, customer requirements adapt and the products on offer need to adapt to those shifts.

BUSINESSMAG. Portugal is increasingly taking a lead in this sector. Your impressions?

The Portugal Golden visa program has been very successful in attracting FDI into the country. The main driver behind clients purchasing via this program is the ability to get EU residency, and then ultimately Portuguese citizenship. The main markets have been the Chinese and South Africans. This appears to have slowed somewhat given the decision for Britain to leave the EU. I don’t see Portugal as a threat to Mauritius as each program appeal to different objectives and, in essence, different buyers.

BUSINESSMAG. How can Mauritius differentiate itself from these competitors in this sector?

I don’t believe that Mauritius has to differentiate its program, or compare it to those such as Portugal. What I believe should be focused on is the improvement of value-add, for those purchasing in Mauritius. When I say value add, I refer to infrastructure improvements and continuing to add world-class facilities and infrastructure in Mauritius.

So, the reasons to visit, buy or reside in Mauritius become stronger. Coupled with this, the continued attention on attracting business investors and corporations to be based in Mauritius as the gateway to Africa further supports the real-estate market both in sales for FDI as well as rentals within the entire property market on the island. The rental market is a good vehicle to allow funds to filter down to local home owners and investors.

BUSINESSMAG. Mauritius is particularly attractive to investors in Europe. Will the situation in France and the Brexit have an impact on the IRS/RES/PDS sector in Mauritius?

The social uneasiness currently being experienced in France and some other countries in Europe do have an impact on the amount of French and Europeans buying in Mauritius. Similarly with South Africans purchasing on the island, Mauritius is considered one of the conflict-free countries and therefore appeals to those looking for a feeling of greater security and safety.

BUSINESSMAG. Do you think Mauritius should diversify these markets?

Pam Golding International continually looks at possible new markets. However the main markets remain France, rest of Europe and South Africa. The markets of China and India may become more important, but this will only happen off the back of government policies and legislation. Once it becomes important and attractive for Chinese and Indians to reside in Mauritius, only then will the real-estate market develop for those nationalities.