Mauritius has a developed housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Mauritius is eight percent, as of September 2016, and requires at least a 20 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 32 000, which is for a 120 square metre unit. Cement prices are lower than the continental average, at US$ 6.60 for a 50-kilogram bag.
Demand for affordable housing remains, both for rental and purchase. Housing microfinance will play an important role in increasing the supply of housing for the poorest, and efforts to increase access should be undertaken. Banks tend to rely on deposits for funding, supported by the high rate of financial inclusion. The Mauritius Housing Company (MHC) is the leading mortgage lender to low and middle income households, with home ownership rates at 89 percent. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Mauritius can afford.
Find out more information on the housing finance sector of Mauritius, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2016 edition, which has up-to-date profiles for 51 African countries.Download yearbook
Mauritius is a small island country of only 2 000 km2 in the Indian Ocean, with a population of about 1.26 million people, or 359 000 households. The Mauritian economy is well run, with sound political and economic management practices. In 2016, for the eighth year in a row, the World Bank ranked Mauritius as the easiest place to do business in Sub-Saharan Africa (and 32nd globally out of 189 countries).
Despite the country’s exposure to external shocks in the world economy (Europe accounts for nearly two-thirds of the country’s exports and a similar proportion of the tourist arrivals), the economy grew slightly from 3.4 percent in 2014 to 3.5 percent in 2015. This is due to ongoing efforts to diversify the economy, a modest improvement in European growth and increased exposure to faster growing emerging economies.
While the government appears to be moving away from economic policies based on redistribution and state intervention, towards an emphasis on private sector led economic growth, the government will remain deeply involved in efforts to diversify the country’s “four pillar economy” (based on sugar, textiles, tourism and financial services). In order to increase competitiveness and resilience to shocks, the country will invest in education and infrastructure to boost productivity and shift towards a more service-oriented economy (particularly focusing on financial services, information and communications technology and business outsourcing). Another element of the economic strategy is the further development of the fishing sector and continued restructuring of the sugar sector. The luxury real estate sector, supported by a beneficial tax regime and government-backed programmes, will also become an increasingly important part of the economy as authorities seek to establish the island as a business centre linking Africa with the Middle East and Asia.
During the delivery of its 2015/16 national budget, the Government of Mauritius announced the set-up of the “Smart City Scheme” to provide an enabling framework and a package of attractive fiscal and non-fiscal incentives to investors for the development of smart cities across the island. The smart-city concept is about providing investors, nationals and foreigners, with options for living in sustainable, convenient and enjoyable urban surroundings. These new cities will be built around the “work-live-play” lifestyle in a vibrant environment with technology and innovation at their core.
Macroeconomic conditions remain stable but the authorities face macro-financial challenges stemming from the recent collapse of a large financial conglomerate, which affected the real economy, as well as risk exposures and potential spillovers from the massive offshore sector and its sizeable inter-linkages with domestic banking activities.
In November 2015, the Bank of Mauritius (BoM, the Central Bank), cut the repo policy rate from 4.65 percent to 4.40 percent due to concerns about economic growth in the small Indian Ocean island.
Access to Finance
Penetration of financial services is generally good, with 80 percent of Mauritians having bank accounts. Mauritius lost 6 points in terms of ease of getting credit bringing it from 36th place in 2015 to 42nd in 2016, out of 189 countries in the World Bank’s Doing Business indicators. This is mainly due to banks being more stringent on approving credits. According to the International Monetary Fund, there are about 105 commercial bank branches and 210 ATMs per 1 000km2.
As at end-June 2015, 23 banks were licensed to carry out banking business in Mauritius, of which eight were subsidiaries of foreign-owned banks and four were branches of international banks. Two banks were involved in private banking business and one bank conducted Islamic banking exclusively. Twelve banks offer housing related finance.
All of the banks have licenses to carry out banking business locally and internationally. The Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM) are among the largest banks in the East African region. The banking system is highly concentrated, with four of the major banks accounting for 85 percent of the whole banking system’s assets and 70 percent of the country’s financial sector.
The country’s commercial banks are well capitalised, well regulated, liquid and profitable. The capital adequacy ratio (17.2 percent in June 2015) comfortably exceeds the regulatory minimum of 10 percent and the overall quality of assets is good. On the back of the slowdown in economic growth and declines in the construction sector, the ratio of Non-performing loans (NPLs) increased from 3.9 percent in June 2014 to 4.9 percent in 2015. NPLs are highest in construction sector following a period of elevated lending growth, although NPLs are also high for trading, manufacturing and individuals. Nevertheless analysts agree that local banking groups are well placed to absorb these losses. Coverage ratio (provisioning to NPLs) was 40 percent in June 2015.
As at end-June 2015, total advances represented 78.2 per cent and 57.4 per cent of total deposits and total assets, respectively, compared to 89.4 per cent and 62.2 per cent as at end-June 2014.
The Bank of Mauritius issued a number of new guidelines and reviewed existing ones with a view to enhancing the financial soundness of financial institutions falling under its purview.
A set of macro-prudential measures were introduced in October 2013 that aim at addressing potential systemic risks and emerging vulnerabilities in the financial system. These measures include, inter alia, a LTV for residential and commercial property loans; a debt-to-income ratio (DTI) for residential property loans; additional portfolio provision; and sectoral credit limits for the construction, tourism and personal sectors.
Besides traditional banking facilities, banks offer card-based payment services, such as credit and debit cards, internet banking, and phone banking facilities. Specialised services such as fund administration, custodial services, trusteeship, structured lending, structured trade finance, international portfolio management, investment banking, private client activities, treasury and specialised finance are also offered by banks. The international banks offer a wide range of global banking and financial services to corporate, institutional and private clients.
Deposits, which represent banks’ main funding source (78 percent of the total banking sector) grew by 23.3 percent during the year under review. The advances-to-deposits ratio, which indicates the extent to which funds mobilised by way of deposits have been utilised to finance lending activities, decreased from 89.4 per cent as at end-June 2014 to 78.2 per cent as at end-June 2015.
Bank credit to the private sector (excluding the GBL sector) continued to expand in 2015 at the rate of 4.3 per cent, though at a much lower pace than the growth rate of 6.3 per cent in 2014. There was a slight increase in share of credit to the private construction sector (from 25.4 to 26.3 per cent) during the same period.
Some 15 banks offer mortgage finance, and the use of mortgage finance is generally high by African standards, although it has declined recently. According to the Mauritius Housing Census, just over 12 percent of houses were mortgaged in 2011, versus 16 percent in 2000. Mauritius has a relatively large pension industry, and 51.4 percent of the labour force are contributors. The national pension fund is also involved in the housing sector and, for example, lends money to the Mauritius Housing Company (MHC).
A key mortgage lender targeting low and middle income earners is the MHC, which emanates from the former Mauritius Housing Corporation, a parastatal body set up in 1963. The MHC was incorporated as a public company in 1989 to address the housing finance requirements of the population, with a special attention to the low income households. In 2015, the MHC held a 10 percent market share. The MHC offers a diverse range of products. A major contribution of the MHC has been the introduction of a special savings scheme in the year 1982. This scheme encouraged Mauritians to save with the MHC so as to be later eligible for a housing loan.
There are constraints to the growth of the Mauritian mortgage market. Affordability constraints as well as informal incomes undermine access to mortgages, and lenders feel that the cost and time of foreclosing on a property increase risk. The Borrowers’ Protection Act of 2007 aims to ensure responsible borrowing and lending, and provides for a Commissioner to examine and have a say in cases of foreclosure. This has resulted in a worsening of the country’s insolvency resolving capacity (from 36th in 2015 to 39th in 2016 in the World Bank ranking). Furthermore, while there are no private credit bureaus, over half of the population (56.3 percent) are included in the public credit registry.
As at end-June 2014, the public credit bureau (MCIB’s) participation base comprised 44 institutions, including the 17 banks, 9 leasing companies, nine insurance companies, the Mauritius Housing Company Ltd, the Development Bank of Mauritius Ltd, the National Housing Development Co Ltd, The Employees Welfare Fund, the Mauritius Civil Service Mutual Aid Association Ltd and three utility bodies, namely, the Central Electricity Board, the Central Water Authority and the Waste Water Management Authority.
According to Bhotish (2012), home ownership has been steadily increasing since the 1980s; and in 2011 household ownership in Mauritius stood at approximately 89 percent (compared to eight percent that rent or sub-rent, and another three percent who were living for free in the housing provided by their relatives or employers).
Although Mauritius is a middle income country, a segment of the population is unable to afford their housing. In 2015, Mauritius had an unemployment rate of 8 percent, or over 40 000 people. According to the Central Statistics Office, about 1.5 percent of people earn below US$2 a day. According to UN-Habitat, there are some incidences of squatting as a result of unemployment and the decline of solidarity networks that previously supported vulnerable households.
Mauritius has a relatively comprehensive social security system that includes a range of government subsidies for housing. The government uses state owned companies such as the MHC to improve affordability for housing. Another government driven scheme to increase affordability is offered through the National Housing Development Company (NHDC). This parastatal body was set up in March 1991 to serve low income Mauritians. It offers both fully developed units and site-and-service options at subsidised rates. The NHDC site-and-service scheme provides applicants a portion of state land through a lease. There is an income criterion, requiring a monthly income of between Rs10 000 (US$281.6) and Rs25 000 (US$704) to qualify for the land. This means that while the products cover the majority of the population, a small minority of the working population, the lowest paid, still cannot afford to meet their housing needs. Due to the incidences of squatting, the government’s National Empowerment Foundation (NEF) is now looking after this category of the population.
The cheapest newly built house by a formal developer costs around US$32 000 excluding the land, and is 120m2 with three bedrooms, a living and dining room, kitchen, toilet/washroom and small veranda. Minimum plot size is 250m2 in urban areas. A bag of 50 Kgs of cement costs US$6.60 (incl. VAT).
Sheet iron costs are as follows: Profilage Type – Galvanised and pre-coated roof sheeting: US$ 2.15 per running foot (incl. VAT), thickness of 0.56 mm and width of 800 mm; US$ 2.60 per running foot (incl. VAT), thickness of 0.63 mm and width 800 mm, Type 3: US$ 3.07 per running foot (Incl VAT), thickness of 0.75 mm and width of 800 mm, lastly ordinary S sheet Galvanised corrugated roof sheeting US$ 1.06 per running foot (incl. VAT), thickness of0.50 mm and width of 800 mm.
The 2011 Housing and Population Census reports that there are 356 900 housing units in Mauritius and Rodrigues. According to the Housing and Population Census of 2011, 99.4 percent of households have access to electricity and 94.2 percent have access to water inside their home. Most housing stock in Mauritius is of good quality. 91 percent of the dwellings are durable with only 4.8 percent of the population living in iron/tin walled houses. The Census also found that 90.5 percent of residential dwellings were used as a principle residence, 1.7 percent as secondary dwellings and 7.8 percent were vacant. Semi-detached houses and blocks of flats went up to 16.6 percent of total stock, from 11.5 percent in 2000.
Successive government budget proposals have ensured that all citizens have a house providing decent living conditions. The strategy focuses on Housing Empowerment Schemes, Social Housing and Home ownership for low-income families are worth mentioning.
- The Housing Empowerment Scheme targets middle-income families earning up to Rs50 000 (US$1 408) a month. Under the scheme, banks require only five percent as minimum down-payment on the purchase of a property instead of the usual or more 10 percent currently applicable, i.e. they advance loans up to 95 percent of the cost of a residential unit. The loans also carry a moratorium period of two years on capital repayment. To make this possible, Government is guaranteeing 20 percent of the loan amount. In addition, to reduce the cost of acquiring a housing unit, Government reimburses VAT up to an amount of Rs300 000 (US$8 448) on the construction of any house or purchase of an apartment costing less than Rs2.5 million (US$70 402). For its part, the Mauritius Housing Company provides, free of charge, at least 12 types of architectural plans for each house of an area of 1 000 and 1 200ft2. The interest rate is 2.5 percent above the repo rate, presently at 4.40 percent.
To this effect, the Mauritius Housing Company and the Mauritius Bankers’ Association signed a Memorandum of Understanding outlining agreed conditions between the Government and the commercial banks. Twelve banks are involved in this project.
- The 2014 Budget also announced the launching of a major Social House Construction Programme in 2014, where 1 765 families will benefit from either a housing unit or a serviced lot. Thus:
- 576 social housing units will be constructed and 80 serviced lots will be completed for delivery throughout the island.
- 588 social housing units and 151 serviced lots are also in the pipeline.
- Provision for an additional 450 social housing units to vulnerable families in 2014 through the National Empowerment Foundation.
- Provision of Rs250 million (US$7.04 million) to improve living conditions in NHDC and ex-CHA Housing Estates through the rehabilitation programme, and Rs80 million (US$ 2.25 million) for the casting of roof slab scheme.
As part of the social housing policy, the Ministry of Housing and Lands endeavours to ensure housing estates of moderate size, (50 m2) which will facilitate integration in local communities and reduce offsite infrastructure cost.
- In line with the new approach of the National Home Ownership Programme, the Social Housing Fund has been revamped into a National Habitat Fund with wider objects. Hence, the Minister of Housing and Lands brought legislative amendments to give to those families who have a housing unit on leased land belonging to the State, the option to buy the land at a nominal price not exceeding Rs2 000 (US$56.32) per plot. It is a measure that will empower some 17 000 families with very modest means to have full ownership of their lands.
These programmes complement the extensive investment that the public and private sectors have made in housing development. From 2011, the NEF has constructed more than 300 core housing units of 32m2 each. It is projected to build 700 additional such units within the next two years. Furthermore, by 2012, the NHDC had built more than 12 000 units, and a further 10 000 units were in the pipeline. An innovative subsidy scheme offered by government through the NHDC promotes self-build approaches. Households with a monthly income of between Rs10 000 (US$281) and Rs25 000 (US$704) and who have neither received a grant previously nor already own a property are entitled to apply for land that is periodically made available. The land is made available on a lease arrangement and the beneficiary is required to pay the fee. The construction of a housing unit on the land must begin within six months following the signing of the lease agreement, and be completed within 18 months. Beneficiaries can apply to the MHC to finance the construction and can access architectural services from the MHC for Rs2 (US$0.06) per ft2.
Throughout the NHDC, the government also grants up to Rs75 000 (US$2 112) for casting a roof slab of up to 210m² to first time homeowners earning up to Rs10 000 (US$281) a month. The government also grants up to Rs65 000 (US$1 830) to households earning not more than Rs10 000 (US$281) a month to buy building materials. The grant applies to a maximum area of 100m². For a house of 50m², the grant is Rs40 000 (US$1 126) on a pro-rata basis. Although the NHDC programmes target low income earners, the requirement of a minimum financial contribution means that some households are still unable to participate.
Furthermore, there is also an incentive for developers to develop residential units. Requirements are that the land for development must be non-agricultural and have access to main infrastructure lines and amenities. In addition, developers should provide all basic infrastructure and 25 percent of the development must be for low income households, for which the sale price is determined by the government. A Social Housing Development Fund was also established, capitalised with Rs1.5 billion (about US$42.2 million) to encourage the creation of not-for-profit Housing Development Trusts. A Marshal plan against poverty was also announced in the Budget 2015. Under this project, as part of their social responsibility will have to take under their wings pockets of poverty situated in the region where the companies are located. Thus the private sector will also assist in poverty alleviation.
The global economic problems have to some extent affected the higher end property market in Mauritius, but this seems to be recovering, and government expects the real estate sector to be a primary growth driver. The market segment is closely tied to the economic fortunes of Europe and the US because of the deliberate efforts by government to encourage greater foreign ownership. The Permanent Residence Scheme, the Integrated Resort Scheme and the Scheme to Attract Professionals for Emerging Sectors all encourage foreign investment and settlement. New tax laws in France have created more demand for property in Mauritius amongst French buyers. After this, South African property buyers are also significant.
According to the World Bank’s 2016 Doing Business Report, it takes 14 days and four procedures on average to register property (which ranks Mauritius as best on the continent and 65th globally). The registration process costs on average 10.6 percent of the value of the property.
Housing Policy and Regulations
The planning and management of housing and land in Mauritius is the responsibility of the Ministry of Housing and Lands set up a fairly comprehensive array of support and initiatives to address housing needs. Subsidy programmes target both new build construction and self-help housing, and government has made an explicit effort to deal with those with no affordability at all. Spatial data for land use management and planning is facilitated by the Land Administration Valuation and Information Management System.
Prior to 2006, social housing was solely the responsibility of government. But as demand kept growing and the government could only build around 900 units a year (with a waiting list of 25 000 housing units in 2015), the private sector was called to participate through various Public Private Partnership (PPP) projects. An interesting aspect of the Finance Act of 2009 requires companies, as part of their corporate social responsibility, to pay two percent of their book profit after tax into a Corporate Social Responsibility Fund. This Fund can be used on approved projects, amongst which social or subsidised housing is a high priority.
Housing Sector Opportunities
Mauritius has been emerging as an international financial centre since the early 1990s, and is the easiest place to do business in Africa. It is a favoured country for structuring cross-border investments into Asia and Africa, and particularly into India and China. This reputation as an offshore financial hub should see it continue to become an important player in international financial flows. The country also has preferential access to markets in the Africa region (such as the African Union, SADC, the Common Market for Eastern and Southern Africa (COMESA) and the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC), pointing to its strategic location.
According to the African Executive (2014) in order for Mauritius to become a high income country, it needs to start attracting foreign skilled labour. If labour flows are similar to those experienced by Dubai, Hong Kong and Singapore at a similar stage, over the next decade Mauritius should be ready and willing to accommodate some 5 000 to 20 000 foreigners annually, with a total of 100 000 to 200 000 for the period. In the short run such an influx could be accommodated in the various real estate projects. However, going forward, this offers a greater opportunity in middle to higher end housing finance, as foreign investment and wealth increase in Mauritius.