Construction sector

A pillar set on increasingly fragile foundations

The construction sector has long been a strength of the Mauritian economy, bringing in investment and jobs, and providing the large infrastructure that the country needed to realise its ambitions. Many of these large-scale projects, which once sustained the industry, have been completed. With it has come a slowdown. Some say a period of “correction,” which hints at better days ahead. But other challenges remain, the two main ones being labour shortages and rising costs, which have fragilized the sector. Swift measures are needed, as well as proper project execution, better skills development programs, and a more flexible recruitment process, if the sector – an important indicator of the overall health of the economy – is to be revived.

The construction sector is one of the pillars of the Mauritian economy. It drives investment, employment, and national projects. Its strength was underlined by its rebound in 2021, say Economist Girisha Algoo and Rating Analyst Yidish Soobah, of CareEdge Ratings Africa, following the severe contraction caused by the COVID-19 pandemic. Construction activity rebounded strongly as projects delayed during the pandemic resumed, leading to a growth of 22.7%.

According to their analysis, that recovery was supported by favourable base effects, accommodative financing conditions, major public sector investment projects such as the Metro Express, and government measures aimed at stimulating housing demand. 

 

“When construction goes well, everything goes well.”

 

“For example, the Home Ownership Scheme introduced in the 2021/22 Budget provided Mauritian citizens with a 5% refund on the purchase of a house, an apartment or a residential plot, encouraging first-time home ownership and supporting residential construction,” they explain. 

On the private sector side, according to the experts of CareEdge Ratings Africa, the lockdown period offered an opportunity to many hotels to undertake renovation and redevelopment works, contributing to construction activity while the tourism sector was preparing for the reopening of borders and the eventual return of visitors.

Growth thereafter remained robust until 2024, with the sector expanding by 13.3%, supported by the implementation of large public infrastructure projects and heightened construction activity ahead of the general elections. 

Different stages of the economic cycle 

Yet, this momentum was short-lived. As highlighted by the Building and Civil Engineering Contractors Association (BACECA), activity has moderated over the last two years. 

Ravi Gutty, President of BACECA, believes that the sector continues to face a period of adjustment following the rebound after the COVID-19 pandemic. This view is shared by Girisha Algoo and Yidish Soobah, who are adamant that “the construction sector in 2021 and today are at two very different stages of the economic cycle.”

“Execution matters as much as announcements.”

 

Indeed, the construction sector remained under pressure in the first quarter of 2026, with gross value added (GVA) declining to MUR 7,606 million from MUR 7,741 million in the corresponding period of 2025. This figure suggests that the current weakness reflects both the normalization after an exceptionally strong growth phase and the need for a new pipeline of investment projects to sustain activity over the medium term.

The end of major public infrastructures projects

According to Girisha Algoo and Yidish Soobah, the construction sector has entered a period of correction following the exceptionally strong growth recorded in 2024. After expanding by 13.3% that year, it contracted by 2.1% in 2025, and is expected to decline further by 0.8% in 2026. The weakness has indeed persisted into the current year, with the sector contracting by 4.3% year-on-year in Q1 2026. In other words, the construction sector is currently experiencing a drastic slowdown.

At BACECA, the situation is being closely monitored. According to its president, Ravi Gutty, “activity has moderated compared with previous years, particularly in the public sector, where large infrastructure projects have significantly slowed down over the past two years, and in parts of the private market.” 

Like a domino effect, the absence of major projects has contributed to a moderation in investment activity. According to CareEdge Africa’s analysis, Gross Fixed Capital Formation (GFCF) in building and construction works has weakened following the completion of several such projects that had previously supported growth. While new projects continue to be announced, the scale and pace of investment have not been sufficient to offset the impact of these completed large-scale developments.

High construction costs

The slowdown, however, is also the consequence of other issues, as the sector is facing a multitude of problems which have made it fragile. “This fragility that appeared over the last two to three years reflects global disruptions, from the war in Ukraine to the recent conflict in the Middle East, higher costs, labour shortages, tighter financing and more cautious investment,” says Ravi Gutty, President of BACECA.

According to the latest figures from Statistics Mauritius, construction costs increased by 6.1% in a single year, and remain, according to Girisha Algoo and Yidish Soobah, “significantly higher than they were before the pandemic.”

Based on the Input Cost Index of Statistics Mauritius, they observe that “cost inflation accelerated sharply during 2021 and early 2022, with annual increases peaking at close to 5%, before moderating in subsequent years.” 

“Although recent increases have been less pronounced, construction input costs remain elevated relative to both pre-pandemic levels and the cost base prevailing around 2021. Higher prices for key building materials, together with increased labour and transport costs, continue to place upward pressure on overall project costs, reducing housing affordability and compressing profit margins for developers,” add the experts of CareEdge Ratings Africa.

According to the credit rating agency, the depreciation of the Mauritian rupee (MUR) against the US dollar has been another factor weighing on the construction sector. “Given the industry’s reliance on imported raw materials, equipment and finishing products, a weaker MUR increases the domestic cost of construction inputs. This has amplified the impact of global price increases for building materials and energy, resulting in higher project costs for developers,” say its experts. 

Consequently, exchange rate pressures have contributed to tighter margins, delayed investment decisions and slower construction activity, particularly in projects that are highly dependent on imported materials.

The labour shortages problem 

Ravi Gutty points to another sensitive issue that is hindering the economic performance of the construction sector: the lack of manpower. Indeed, the president of BACECA believes that labour shortages remain one of the industry’s biggest structural constraints.

“Labour shortages and delays in recruiting skilled foreign workers can affect project execution timelines and increase labour costs.”

“Foreign workers are essential to complement the local diminishing available workforce, but recruitment processes remain cumbersome. The recent pre-requisite for dormitories to have a specific Building and Land Use Permit before obtaining a Lodging Accommodation Permit to accommodate foreign workers is causing further delays in the recruitment process, and requires more flexibility,” he argues.

In that context, he believes that one of the possible solutions to help consolidate long-term resilience is the use of technology and digitalization for productivity improvements.

On the labour availability issue, Girisha Algoo and Yidish Soobah consider that the construction sector’s heavy dependence on foreign workers – who make up around 41% of the workforce – “means that labour shortages and delays in recruiting skilled foreign workers can affect project execution timelines and increase labour costs.”

In line with Ravi Gutty, they also believe that recent changes to Mauritius’ foreign worker recruitment framework may further intensify these pressures, as employers seeking to recruit non-citizen workers are now generally required to do so through licensed recruitment agencies rather than directly. This is expected to introduce additional agency and compliance costs, which could raise the overall cost of hiring foreign labour. 

And what of the investors?

Large construction projects have always attracted both local and foreign investors. Today, however, with a rupee that continues to depreciate, new laws concerning foreign workers, and material costs that keep rising, the question arises: does this sector still attract investors? According to the two specialists at CareEdge Ratings Africa, investor sentiment toward the construction sector can be described as cautiously optimistic. Mauritius benefits from a solid legal framework, robust institutions, and an established real estate market, which remain important assets for both domestic and foreign investors.

However, investors are now much more selective than they were during the immediate post-pandemic recovery. At CareEdge Ratings Africa, this behaviour is analysed as follows: “Rather than seeking generalized construction opportunities, investors are increasingly favouring projects with strong underlying demand, solid financing structures, and clear long-term economic value.” This includes strategic infrastructure, logistics, tourism, industrial developments, and residential projects targeting well-defined market segments.

For Girisha Algoo and Yidish Soobah, the government’s commitment to major infrastructure projects, like the modernization of the airport, the M4 highway, the port expansion, the island’s container terminal, water infrastructure, social housing, and the proposed special economic zone should ensure a steady flow of construction activity in the medium term, and continue to support investor confidence.

At the same time, investors are closely monitoring political and regulatory developments affecting the real estate market. These include the proposed revision of duties and taxes on residential property transfers under EDB schemes, adjustments to the regulatory framework for G+2 developments on state lands and the ‘Pas Géométriques’, and the introduction of a mandatory green building code for new projects. 

In addition, the already announced foreign currency settlement requirements, which oblige non-citizen buyers in eligible real estate schemes to pay 85% of the purchase price in Mauritian rupees, could also influence the attractiveness of certain real estate investments for foreign buyers.

Ravi Gutty raises another sensible issue stemming from major infrastructure projects. “Major public infrastructure has been earmarked for Indian contractors or foreign multinationals due to Indian financing, with predictably low local participation,” he explains.

Creating a positive ecosystem 

For the President of BACECA, all these issues mean that contractors are facing tighter margins, more competition, and reduced visibility. It is therefore necessary to restore confidence, maintain a predictable pipeline of projects, and improve implementation in a sector that remains a good barometer of investment and economic confidence. As the saying goes: “When construction goes well, everything goes well.”

Ajay Gunness, Minister of National Infrastructure, is of the same opinion. In his interview with Bizweek, he states that “infrastructure investment has always been one of the most effective economic stimuli.” 

The priority, now, is to convert announced investments into projects on the ground. As Ravi Gutty emphasises, “projects create value only when implementation is timely. Execution matters as much as announcements. We firmly believe the real impact will depend on implementation speed, investment continuity, fair operating conditions, and stronger links between public spending and local economic participation.” 

Girisha Algoo and Yidish Soobah, from CareEdge Ratings Africa, add another ingredient for success. The focus, they say, “should be on creating a more productive, competitive and investment-friendly ecosystem that supports sustainable long-term growth.”

They outline several measures to stimulate the sector, with the key priority being greater policy certainty. Investors and developers value a stable and predictable regulatory environment, particularly regarding property taxation, Economic Development Board (EDB) schemes, land-use regulations, foreign ownership rules, and planning requirements. Greater clarity and consistency in these areas would therefore strengthen investor confidence and encourage long-term investment.

The two specialists also emphasise the importance of improving the efficiency of the permitting process. “Streamlining approval procedures or establishing a dedicated unit to oversee construction-related permits could help reduce administrative delays, clear application backlogs and accelerate the implementation of viable projects.”

Access to finance remains another critical consideration. Although lending to the construction sector has been relatively resilient, higher interest rates have increased borrowing costs for both developers and homebuyers. Measures that improve access to financing, particularly for economically viable housing and infrastructure projects, could support investment while maintaining financial stability.

As for the labour shortages issue, alongside a significant reliance on foreign labour, the sector continues to face constraints in the availability of both skilled and semi-skilled workers. Expanding vocational training, strengthening skills development programmes, and ensuring an efficient framework for recruiting foreign workers where genuine shortages exist would help improve productivity and reduce project delays.

Finally, sustainability should be integrated into the sector’s long-term growth strategy. “Encouraging the development of internationally recognised green buildings, including Leadership in Energy and Environmental Design (LEED)-certified projects, can improve energy efficiency, reduce operating costs, attract environmentally conscious investors and align Mauritius with global ESG standards. As demand for sustainable assets continues to grow, green construction can become an important source of competitiveness for the sector,” say CareEdge Ratings Africa’s experts.

Responding to Market Needs 

To regain momentum, the construction sector must respond better to market demand. “In the early 2010s, shopping malls and large commercial developments were important drivers of investment and economic activity. They responded to rising household incomes and changing consumer preferences at the time,” Girisha Algoo and Yidish Soobah explain.

More recently, construction activity has been supported by Smart Cities, luxury residential developments, road infrastructure, and public housing.

Today, however, the situation has changed. The creation of new shopping centres is now guided by demonstrated consumer demand rather than simply the objective of stimulating construction activity. The same applies to Smart City projects. Looking ahead, CareEdge Ratings Africa argues that the concept of Smart Cities should evolve beyond real estate development and “place greater emphasis on innovation, digital infrastructure, sustainability, mixed communities, affordable housing, and job creation, so that they become genuine economic hubs rather than primarily property developments.”

According to CareEdge Ratings Africa, the most likely scenario for the construction sector is to prioritise strategic infrastructure that addresses the country’s structural needs and strengthens long-term productivity. Investments in port expansion, airport modernisation, transport connectivity, water security, climate resilience, renewable energy, logistics infrastructure, and industrial zones are expected to generate stronger and more sustainable economic benefits, while also stimulating short-term construction activity. 

“Encouragingly, the 2026/27 Budget is largely aligned with this approach, with initiatives such as the Island Container Terminal, airport modernisation, the M4 Motorway, water infrastructure, coastal protection measures, renewable energy projects, the Côte d’Or High-Tech Special Economic Zone, and social housing,” conclude Girisha Algoo and Yidish Soobah.