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The Mauritian Budget 2025-2026 will likely feature a critical reassessment of the Smart City Scheme (SCS), potentially transforming the landscape of urban development across the island nation.
When introduced in 2015, the SCS painted an ambitious vision: create modern, technology-enhanced urban environments where people could seamlessly integrate living, working, and leisure. The government's strategy to attract developers? An extraordinarily generous fiscal package that included eight-year income tax exemptions, VAT recovery, customs duty waivers, and various land-related tax reliefs. These incentives haven't come cheap – they've cost the national treasury approximately Rs 6.61 billion in foregone revenue that could have supported essential public services and infrastructure.
Prime Minister Navin Ramgoolam signaled, early this week a potential policy shift, announcing in Parliament that these tax advantages are under thorough review. His reference to the country's "constrained economic context" hints at growing fiscal pressures that make such generous incentives increasingly difficult to justify.
This reassessment comes after mounting criticism of the scheme's broader impacts. Environmental advocates have raised alarms about agricultural land conversion, while many Mauritians express concern that luxury-focused development has contributed to the island's escalating housing costs.
Implications of possible changes
Companies currently developing or planning Smart City projects may face altered financial calculations if tax incentives are reduced or eliminated. The attractiveness of future investments could diminish, potentially slowing the pace of new Smart City developments. We're likely to see a "wait-and-see" approach for new projects, with financial models needing urgent recalibration. Some marginally viable projects may become unfeasible under a less generous tax regime. In the short term, expect potential delays in project launches and a possible temporary dip in construction activity related to Smart Cities.
Looking long-term, however, a revised SCS could actually strengthen Mauritius's development trajectory. A more balanced fiscal regime might enhance the country's credibility as an investment destination while encouraging innovation in construction and development practices. The focus could shift toward projects delivering genuine "smart" infrastructure and sustainable features rather than primarily luxury residential developments.
Importantly, non-fiscal benefits like residency permits for foreign buyers acquiring properties above USD 375,000 will likely remain a strong draw, providing resilience to the market regardless of tax changes.
#MauritiusPropertyMarket #FiscalPolicy #PropertyInvestment
