Market in Depth

Madagascar - a poor, isolated, beautiful island

Lalaine C. Delmendo | July 15, 2019

Why buy property in Madagascar, the world's fourth largest island, and surely one of the most beautiful?

Off the coast of East Africa, it had an estimated population of 26.3 million in 2018. Its isolation in the Indian Ocean, with Comoros and Mozambique being its nearest neighbors, has allowed unique flora and fauna to flourish. There are roughly 200,000 species, a third of which exist nowhere else on the planet.

Residential developments are focused on the prime end of the market and the expatriate sector.  The very low household income means that only a small portion of the population can afford to purchase a house. In 2018, GDP per capita was just US$459, making the country one of the poorest in the world, according to the International Monetary Fund (IMF). In fact, about 75% of its people live below the poverty line of US$1.90 per day. The electricity access rate, at 15.2%, is one of the lowest in Africa.

The most popular high-end residential areas are in and around Ivandry to the north of the city centre, where many of the embassies are located, according to a 2018 Knight Frank report.

A newly-built 70 sq. m. two-bedroom house just outside the capital city is currently priced about MGA 89 million (US$25,810), according to Africa Housing Finance Yearbook 2018. With a 15-year mortgage loan at 15% interest rate, monthly repayments would be around MGA 1.2 million (US$348), which is within the reach of only a small portion of the people.

Rampant corruption discourages investors and property developers. Madagascar is ranked 152 of 180 countries globally in Transparency International's 2018 Corruption Perceptions Index. As such, it is not surprising that registering property is both costly and tedious. According to the World Bank's Doing Business 2019, Madagascar is ranked 162nd out of 190 countries when it comes to registering property, down from 161st in 2018 and 159th in 2017. The registration process can last an average of 100 days, taking an average of 6 procedures, and costing about 9.1% of the value of the property. Madagascar is also among the worst in terms of dealing with construction permits, which is ranked at 183rd out of 190 countries.

Most property transactions are done in cash.

Foreigners can own land

In 2004, legislation that allowed foreigners to own land was passed. Foreigners must invest up to US$500,000 in real estate, banking, and tourism sectors, for them to own land up to 2.5 hectares, according to a report by USAID. A one-stop office was created to assist foreign investors in those sectors.

Madagascar gdp per capita
Another choice is to lease land, which is allowed for up to 99 years. Despite these quite liberal policies, foreigners still find it hard to invest in the country because of bureaucratic obstacles.

The economy grew by 5% in 2018, up from the prior year's 4.2% growth and the biggest expansion since 2008, according to the African Development Bank. The economy is projected to expand by a robust 5.4% this year and by another 5.2% in 2020. However, Madagascar remains highly dependent on financial assistance from international donors.

Analysis of Madagascar Residential Property Market »


Economic growth accelerating, but political situation remains nervous

Since gaining independence from France in 1960, Madagascar has experienced repeated bouts of political instability, including coups, violent unrest, and disputed elections.  In 2009 a coup led by Andry Rajoelina led to five years of political deadlock, economic sanctions and international condemnation, according to BBC News.

The return of democratic elections in 2013 and the election of Hery Rajaonarimampianina as president brought fresh hope. But he suffered a (failed) impeachment attempt, and then tried to debar rivals Marc Ravalomanana and Andry Rajoelina from standing against him in the November 2018 presidential election. Weeks of demonstrations and death of two protesters followed, and his predecessor Rajoelina won the November 2018 presidential elections.

Madagascar gdp inflation

Madagascar’s economy is heavily reliant on agriculture. For almost half of the adult population, the main source of income is farming and farming-related activities. The economy was estimated to have grown by 5% in 2018, up from the prior year’s 4.2% growth and the biggest expansion since 2008, according to the African Development Bank.

The economy is projected to expand by 5.4% this year.

The budget deficit stood at 2.3% of GDP in 2018, slightly down from 2.4% of GDP in 2017. Public debt fell to 35.1% of GDP in 2018, from 38.4% two years ago.

Inflation was 7.3% in 2018, down from 8.3% in 2017 but still up from an annual average of 6.3% in 2012 to 2016, based on IMF figures.