Residential projects are favoured with the emergence of a new generation of purchasers seeking a modern, practical and aesthetic housing. But before investing in the acquisition of a real estate property, it is advised to study the financing options and to understand real estate law.
Financing is a key element in every real estate purchase project. Two common methods exist regarding residential real estate projects financing. First of all: the grouping of potential purchasers in an ‘allocation civil society’. This implies that the society shall sign a contract with the promoter for the project’s construction. Once the project is delivered, the society is dissolute and each buyer becomes the owner of his housing or apartment. If some members do not respect their commitments, it will come to the other members to complete their part, until they get back the money.
“This system was very popular in the past, but it involves several deficiencies. There is no completion guarantee neither by a bank, nor any other organisation. However, it does not raise any problem if the promoter is reliable.” Explains Bernard D’Hotman, notary and the Mauritius Notary Chambers secretary.
Investments Protection
The second investment method is the ‘sale before completion. It has been made famous in Mauritius with the start of the Integrated Resort Scheme (IRS) projects. It was not used before as they necessarily required a bank guarantee from the seller. Under this system, the bank guarantee provides the insurance of the project’s financing till the project’s completion, providing the purchaser with a solid protection of his investments. This, even if the promoter goes bankrupt or decides not to go forward with the project.
“The laws for sale before completion exist since long ago but this system is not used as the cost was prohibitive. This used to cost a fortune and the banks were not used to provide this king of guarantee. With the start of IRS projects in Mauritius, it has become compulsory to use this procedure.” Underlines Bernard D’Hotman.
Nowadays, it is the best system to protect the buyers’ interests, he pursues, even if there are projects which are still modelled according to the civil society attribution method. It is the case for Le Meritt Elipsis which is actually under administration. This entailed the absence of guarantee for the project’s purchaser’s.
The solutions if the buyer wishes to withdraw
The buyer has engagements to fulfil towards the promoter. The releases of funds, as agreed in the contract, are compulsory at each step of the project’s outcome. Or else, the promoter may cancel the sale, explains Bernard D’Hotman.
It must also be noted that real estate contracts provide for lateness if they can be justify. The reasons may vary: wrong timing or problems regarding the materials’ provisioning. The lateness must be certified by the architect or the Quantity Surveyor. However, states Bernard D’Hotman, the buyer may ask for compensations for the lateness, particularly if they cannot be justified.
False Purchase Promise
The purchaser has the right to ask for the sales cancellation and the already invested funds repayment if the project does not correspond to the promise to purchase. Then, he must launch the adequate procedure, precises Bernard D’Hotman.
The Notary’s Role
The notary plays an essential part in the sale or the purchase of as real estate. It is compulsory to employ the services of a notary. He is responsible for collecting the acts, to authenticate them and to keep them. It is his duty to inform his clients about the engagement they are taking, the advantages and the potential risks, explains Bernard D’Hotman.
