Since the Mauritian real estate market is expanding and taking an international perspective
in terms of demand, we are noticing a strong trend towards off-plan properties. Also known as the VEFA in Mauritius (Vente en l'État Futur d’Achèvement in French), this concept finds its roots in the French law, and therefore automatically encourages French buyers to adopt it. However, the South-African market is more reluctant to buying a property that has not yet been built, and would rather invest in projects that have already been completed.
The VEFA is defined as a contract commonly used in the sale of real estate to be built. The main specificity of this acquirement method is that the building operations have not yet begun at the time of the signature,
How does the VEFA work?
The VEFA allows the buyer to acquire a property in Mauritius following the disbursement of instalment payments. Future owners then have the opportunity to participate in the conception of the plans of their property, especially in the interior design of their residence.
The VEFA model comes from the French Civil Code, which inspired a great part of the legal system in place in Mauritius as a consequence of its colonial past. The VEFA will be formalised by a contract of “Vente en l'État Futur d’Achèvement”. This contract clearly protects and safeguards the interests of the buyer as it requires the builder to subscribe to a Final Completion Guarantee or a GFA in French (Garantie Financière d’Achèvement). The buyer then only has to disburse a small portion of the final amount when signing the reservation contract. Thereafter, when the promoter sold 70% of the available units in his project, he will be able to subscribe to a GFA with a financial institution. The latter will guarantee, regardless of the economic situation of the promoter, the financing of the construction as per the terms previously established in the sale contract, ensuring proper delivery of the project.
The introduction of the VEFA in Mauritius has created disruption in the local real estate market, generating a climate of trust and allowing the market to open to an international clientele. The guarantee and protection the VEFA offers to minimise all the risks associated with the acquirement of an off-plan property.
As a matter of fact, the buyer does not need to disburse the totality of the sum before the beginning of the construction, but only needs to make steady instalments throughout the development of the project. It is a safety mechanism that has revolutionised the acquirement of properties in Mauritius and thus cleaned up the market.
What does the law say?
According to the article 1601-3 of the Code Civil, the VEFA is “the contract by which the seller transfers immediately to the acquirer his rights on the soil as well as the propriety of the existing constructions. Upcoming works become the acquirer’s propriety as things progress in the execution; the acquirer is held to pay the price according to the progression of the works. The seller preserves the powers of master of the works until the reception of the construction”.
When opting for a VEFA, the promoter imperatively has to subscribe and obtain a GFA which guarantees the buyer, the financing of the project and thus, the delivery of the acquired real estate property, in case of failure from the promoter.
The GFA can be applied based on two distinct ways of functioning:
The intrinsic way, where the promoter guarantees himself the completion of the real estate project by immobilising the necessary funds for the finalisation
The extrinsic, where an external third party (a financial institution) gives the mentioned guarantee. Most of the time, promoters prefer the extrinsic model.
The Sales Contract according to the VEFA
Furthering the protection and preservation of the acquirer's interests, the VEFA unfolds in two steps which are locked by a contract:
Preliminary Reservation Contract
(Le Contrat de Réservation Préliminaire ou CRP)
This is the first contract that the acquirer signs with the promoter. It contains many compulsory mentions and allows to reserve a property in a future real estate project. When signing the contract, a deposit is required from the buyer and represents the guarantee – the full amount will be deposited to an escrow and safe account with a notary. When the amount reaches 70% of signatures of CRP, the project is then sufficiently credible and viable to access to a GFA which allows to engage the next phase and the beginning of the construction operations.
The Final Sale Contract
(Le contrat définitif de vente)
The Final Sale Contract represents the property title: it states the rights and obligations of the acquirer towards the seller. This contract is sent a month prior to the date of signature, and it must hold a precise and definitive description (notice descriptive in French) of the real estate good. The period of one month is essential for a meticulous study of the content as it is impossible to change it following the signature. On top of the notice descriptive, is attached the Final Sale Contract including the unit’s floor plans, the residence’s plans, the finishes details and the home appliances included in the delivery of the property, as well as the projected date of delivery. This contract confirms the commitments of the promoter as per the final product which will be delivered at the completion of the constructions.
The staggering of the payments
The final price of the property is therefore indicated on the deed of sale. It is thereafter payable by steps according to the following repartition:
Upon signature of the Final Sale Contract: 25%
Upon completion of foundation work: 10%
Upon completion of roof works: 35%
Upon completion of construction works: 25%
Upon delivery: 5%
The VEFA, a real security for the buyer
This contract governs the sale of the majority of the real estate projects following the multiple schemes such as PDS, RES, Smart City Scheme and G+2, all developed and accessible to foreign buyers in Mauritius.
The government required the introduction of this contract in order to create the best environment and conditions of trust and safety for foreigners wishing to acquire real estate properties in Mauritius. It is a safe and secure mechanism for investors looking to acquire off-plan properties while still benefiting from optimum guarantee and protection.
For any information about the VEFA or real estate projects available for sale, feel free to get in touch with our Property Consultants: Paul (+230) 5834 52 51 and Léa (+230) 5943 22 23.
Check out HORIZON Properties’ real estate project available off-plan: The WaterClub.