Understanding the VEFA

Investors in the real estate sector in Mauritius are increasingly going for off-plan property acquisitions. This type of acquisition means purchasing a property based on the architects’ drawings as the construction is at its planning stage.

“Buying off-plan” is commonly known as a VEFA (Vente en l’état future d’achèvement).

How does VEFA work?

Main features of VEFA:

• Buyer owns the land upon execution of the deed sale.
• Buyer gets the building ownership when the construction works are completed.

Buyers can:

• Make payments by instalments according to the construction works progress.
• Contribute to the design plan of their dream home.

Legal implications of VEFA

As a former French colony, the legal framework governing real estate in Mauritius is the French Civil Code. It requires that VEFA be binding by a contract. Under the VEFA, the promoter must provide for a GFA (Garantie financière d’achèvement).

The GFA is a financial guarantee which acts as a safeguard for the buyer if the promoter cannot respect his commitments. The GFA can be provided by either the promoter himself or a third party such as a bank.

The Sales contract

The VEFA is achieved through 2 distinct procedures each validated by a contract:

The reservation contract

Ø  The buyer needs to sign a ‘preliminary reservation agreement’

Ø  Once the contract is signed, the buyer must follow with a deposit

Ø  The payment is placed in a special account, usually opened by the appointed notary

Sale contract

Ø  This contract represents the title deed.

Ø  It settles the rights and obligations of the seller until building works are over.

Ø  The buyer can check if the project complies to commitments since he receives the contract one month prior to the signature.

Payments
According the provisions of Article 1601-3 of the French Civil Code, payments of a property sold under VEFA are thus scheduled :

• 25% when signing the purchase agreement
• 10% once foundations are completed
• 35% upon completion of the roofing
• 25% when building works are done
• 5% once keys are handed over

Article by Know House