Economic pillars: The property sector losing its shine?

While the Smart Cities have been dominating the news for months, we now hear both the Prime Minister and the Chairman of the Board of Investment saying that real estate development should not be a priority. Sir Anerood Jugnauth states that the country cannot depend on the property sector for growth while Gerard Sanspeur wants to instead promote the manufacturing and ICT sectors. Is the sun setting on the property sector? The economic boom and the promised ‘economic miracle’ were said to rely mainly on the development of ‘Smart Cities’. These futuristic cities were presented as the solution to all our problems, to the point that the population began to get used to them. Last year’s annual Budget devoted an important section to Smart Cities under the theme ‘Maurice: Un Vaste Chantier de Développement’. Indeed, 13 mega projects were announced across the country, and requiring 7,000 acres and an investment of around Rs 120 billion, with a potential to create jobs for thousands of persons. Job types Although the creation of thousands of jobs by the Smart Cities has been announced several times, it has never explained what types of jobs would be created. Gerard Sanspeur, Chairman of the Board of Investment and recently appointed as Special Adviser, wonders what will happen once the buildings are constructed. Instead, he advocates the promotion of productive sectors like manufacturing and information technology, while encouraging high value-added projects. The Prime Minister has meanwhile said that “Real estate is a development to make easy profit. I do not consider it as real development.” He was speaking to the press after a meeting with the top brass of the private sector, as part of pre-budget consultations. He urged the private sector to focus on productive activities that generate a higher value addition and create national wealth. [[{"type":"media","view_mode":"media_large","fid":"16222","attributes":{"class":"media-image wp-image-27354 aligncenter","typeof":"foaf:Image","style":"","width":"478","height":"293","alt":"Construction1"}}]] Speculation Real estate development encourages speculation and pushes up the price of land and houses. Lands located in the vicinity of the big luxury projects, such as Real Estate Scheme or Property Development Scheme, are experiencing soaring prices. Similarly, land located in the surroundings of the future ‘Smart Cities’ are currently much sought after by investors and other individuals, hoping to sell them more expensive in the future. Speculation discourages the use of land for agriculture and contributes to the abandonment of these lands. This has an impact on food production and commodity prices. Competition Small entrepreneurs in the construction industry are awaiting the opening of major projects to benefit from sub contracting works. The construction sector has shown some sluggishness in recent years and industry players are eagerly awaiting recovery. However, many small entrepreneurs are complaining that foreign contractors, posing as ‘investors’ have been able to obtain residence permits in Mauritius to exploit the already limited local market. These foreign contractors are taking local opportunities, depriving our small contractors of their livelihood. Worse, the work of some foreign pseudo-investors is poor and they do not pay local subcontractors their worth. Rising debt level According to the latest report from the Bank of Mauritius on the level of credit allocated to the private sector, it appears that the construction industry is indebted to the tune of nearly Rs 86 billion as at 29 February 2016. This represents about 25% of total credit allocated by financial institutions to the whole private sector.

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[[{"type":"media","view_mode":"media_large","fid":"16221","attributes":{"class":"media-image aligncenter wp-image-27353","typeof":"foaf:Image","style":"","width":"676","height":"334","alt":"construction-B"}}]]

[[{"type":"media","view_mode":"media_large","fid":"15821","attributes":{"class":"media-image wp-image-26655 alignleft","typeof":"foaf:Image","style":"","width":"199","height":"199","alt":"Vidur Ramdin"}}]]Vidur Ramdin: “Put Disaster Management First”

Vidur Ramdin, a professional researcher at university level, advocates an effective ‘Disaster Management’ in the real estate development in Mauritius. “We must rethink the property sector. Smart cities, for example, do not comprise of only buildings, but also a well planned inclusive system with efficient transportation, distribution of water, sewage system and clean energy, for the betterment of the daily lifestyle of Mauritians. We had a recent flooding experience. Such events force us to plan ahead better. Regarding Smart Cities, it is important to consider the topography and also the vulnerability of the surrounding environment. We must identify risks and also how to mitigate them.”

[[{"type":"media","view_mode":"media_large","fid":"16223","attributes":{"class":"media-image wp-image-27355 alignright","typeof":"foaf:Image","style":"","width":"199","height":"295","alt":"Vikram Jeetah"}}]]Vikram Jeetah: “The sector currently facing a slowdown”

Vikram Jeetah, Quantity Surveyor, says the construction sector is currently facing a slowdown and needs a boost. However, he agrees that we should concentrate on other productive sectors as well. “We must define our priorities. For example, when talking about Smart Cities, we must know the time frame for implementation. Is it a masterplan for the next 20 years? The next 50 years? The duration will determine what we want and how to do it. Furthermore, Mauritius relying mainly on tourism, we cannot erect concrete buildings everywhere,” he says. He proposes that professionals in the sector be able to voice out their opinions constructively to find durable solutions s to the country’s problems.    

[[{"type":"media","view_mode":"media_large","fid":"13174","attributes":{"class":"media-image wp-image-21682 alignleft","typeof":"foaf:Image","style":"","width":"199","height":"251","alt":"Arvind Nilmadhub"}}]]Arvind Nilmadhub: “The real estate sector supports other sectors”

Economist Arvind Nilmadhub believes that the real estate sector is important in the Mauritian economy. This sector supports other sectors, he says. “We must not forget that the construction sector is not limited to the construction of buildings. There are also various services associated to real estate and they provide huge employment opportunities to professionals also. I am thinking here of architects, engineers, electricians, plumbers, decorators, cabinet makers, carpenters, surveyors, notaries, hardware shops, truck service providers, real estate agents, aluminum assembly workshops, landscaping agents, etc. The government is also benefiting through taxes, Registration Duty and VAT that is applied during transactions. In the case of projects targeting foreign clients, including Real Estate Scheme or Property Development Scheme, non-citizens living among us create jobs for other categories of persons who could not be absorbed by the services sector, the ICT sector or manufacturing sector. Many of these foreign buyers do not live here permanently but travel frequently, thereby contributing indirectly to other economic activities. The real estate sector also helps to enhance the image of the country through its major projects, its intelligent buildings and luxury villas. But we must also consider other important things, like the provision of drinking water and energy to meet the growing demand generated by this sector. It also requires better urban planning to avoid problems such as flooding and bad neighbourhood. Real estate is not limited to the construction of buildings. There are so many things to consider and review. That said, I agree that our real estate industry is too much geared towards foreign customers, so we could now come forward with real estate development projects aimed for local customers.” He further adds that a lack of investment alternatives encourages land speculation. “Mauritians consider real estate as a safe and sustainable investment. Now, we must encourage people to invest in alternatives, such as promoting the Stock Exchange, through the creation of Investment Clubs at all levels: schools, workplace, etc. We must simplify procedures and democratise access while promoting ‘financial literacy’. In parallel, we need to put more efforts on our productive sectors,” says Arvind Nilmadhub.

[[{"type":"media","view_mode":"media_large","fid":"15820","attributes":{"class":"media-image wp-image-26654 alignright","typeof":"foaf:Image","style":"","width":"200","height":"200","alt":"Ameerah Jameer"}}]]Ameerah Jameer: “Real estate sector is one like others”

“The real estate is a sector like any other sector and provides livelihood to many people. There are large and small developers, large and small contractors as there are large and small real estate agents. If the sector generates huge profits, it does not necessarily benefit everyone in the sector. It is however important that we focus more on other productive sectors, but not to the detriment of the property sector, a sector that has taken years to reach where it is today and which generates jobs and opportunities for all at all levels,” says Ameerah Jameer of Think of Property agency.

[[{"type":"media","view_mode":"media_large","fid":"15819","attributes":{"class":"media-image wp-image-26652 alignleft","typeof":"foaf:Image","style":"","width":"198","height":"198","alt":"Prithviraj Fowdur"}}]]Prithviraj Fowdur: “Let’s give priority to productive sectors”

Prithviraj Fowdur, economist and former senior official of the public sector, says he agrees with the argument of the Prime Minister that we should not depend only on the property sector for economic growth. “While the real estate sector is indeed important to the extent that we need good infrastructure to promote other sectors, we must not let this sector become an industry in itself, or the emphasis will always be on the ‘quick gains’, encouraging speculation and poorly planned urban development that do not necessarily meet the needs and aspirations of the country. It is in the services sector that we will create more sustainable jobs and entrepreneurial opportunities. We have to concentrate for example on the education and training sector, the manufacturing sector needs urgent innovation, and agriculture must be given its former glory,” says Prithviraj Fowdur. “Mauritius needs to be productive and not speculative! Our priority is to improve productivity... Improvement in public transport will definitely contribute to workers moving faster and less time wasted. We waste so many man hours waiting for buses to and from work,” he adds.