Protecting Real Estate Investors

Investment in the Real Estate Sector  can be an attractive alternative  and has proved to be sustainable over the years.The recent ‘Ponzi Scheme’ scandal has highlighted the need for the government to come forward with a legislation; regulating the real estate operators, thereby protecting investors.

Real estate agents, active on the market, regularly come across unethical cases from certain so-called “real estate agents” by either inflating prices or acting illegally on behalf of land owners.  It would be in the interest of the real estate sector to have a formal “authority” to control and license professional real estate players.

Such licensing could be based on the following:

1. The Director/ Manager of the real estate companies must be interviewed and access their knowledge on the real estate market/local and international laws etc.

2. The real estate companies before obtaining the license to operate must make a minimum deposit /bank guarantee of Rs 1 million. Such deposit /guarantee can be claimed in case investors/buyers are penalized. If such guarantee is claimed by the buyer/investor, the license is suspended until dispute is resolved.

3. At least one of the staff of the Real Estate Companies must be a professional member of a recognized body/institution offering professional training/courses in real estate/construction.

4. At the time of incorporation of a real estate company, the “objects” must be clearly defined that such company deals in the real estate industry.

5. Real Estate Companies must have a complaints log book and the database of clients must be disclosed to the commission so that such databases are used for random check.

6. Appropriate certificates and Licenses obtained from the authorities must be made visible in the office of the agents.

7. The commission to issue identification badges to real estate agents so that they are easily recognized by all potential investors.

8. At least once a year, operators together with their staffs must follow a CPD programme so that they are kept aware of all legal changes (such as changes in Registration duty, changes in land transfer tax, BOI guidelines for foreign investors etc).

9. A compulsory valuation of a property that is subject for sales if the sales figure is above Rs 2.5 Million. Such a measure would protect sellers who are not aware of the market value of their properties and thus protecting them from unethical “agents”. Such valuation to be carried out by a Chartered Valuer.

10. Ensuring that all new properties acquired is accompanied by a “decennial liability Cover”. This will avoid buyers running after promoters for “bad workman ship” and structural defects. Real Estate Agents must ensure that such cover is given to the client at the time of purchase.

The above are some of the salient features that could be dealt with by the authority/commission to come forward with a legal framework that would regulate Real Estate Companies and Real Estate Agents.

We have been promoting Mauritius to high net worth foreign investors and the recent financial scam should be repeated in the real estate sector, which would tarnish the reputation of our country.

By having a legal framework for the real estate operators, the authority will have a better control on the overall activities related directly and indirectly with the real estate sector and many other potential sources of conflicts would be avoided such as:

A. Under Valuation of properties thus causing a shortfall in the land transfer tax and land registration duty.

B. Disputes with the authorities on amount of registration duty and land transfer tax would be reduced drastically.

C. There will be more professionalism in the real estate sector thus projecting a positive image of the country on the international scene.

D. There will be less and less of  victims dealing with “fake real estate agent”

E. The growth in the industry will be easily calculated and projections easily made.

F. With the transparency in real estate transactions, it would help establishing a property price index

G. The application of the measures set by the commission will by default create a code of conduct for Real Estate Operators.

H. Last but not least, there will be less and less of “uncompleted buildings” that are becoming ”eye sores” these days with the recent scam we have seen in the north.

As a proactive measure, it would be desirable for the authorities to set up a body to regulate the real estate sector thereby promoting best practices.