Financial Preparation

• Determine your total investment budget (property + transaction costs + reserves)
• Establish a currency exchange strategy (MGA fluctuates significantly against USD/CAD)
• Research historical MGA/USD or MGA/CAD exchange rates
• Set up international wire transfer capabilities with your home bank
• Consider opening a local bank account (challenging but possible for non-residents)
• Evaluate tax implications in both Madagascar and your home country
• Arrange financing if needed (likely from home country as local options are limited)

Market Research

• Identify target cities based on investment goals (tourism, rental yield, capital growth)
• Research neighborhood-specific trends and rental demand
• Join online forums for expatriates and investors in Madagascar
• Subscribe to local real estate listings and market reports
• Analyze infrastructure projects and tourism development zones
• Research tenant demographics and rental demand in target areas
• Plan a preliminary market visit to evaluate areas firsthand

Professional Network Development

• Connect with legal professionals specializing in foreign real estate transactions
• Identify reputable real estate agencies with experience working with foreigners
• Research property management companies in your target market
• Establish contact with currency exchange specialists
• Find a knowledgeable tax consultant familiar with Madagascar’s tax system
• Connect with local surveyors and building inspectors
• Join expatriate communities for on-the-ground insights

Expert Tip: Madagascar’s market has strong seasonality, with the dry season (April-October) being the most active period for property transactions, especially in tourist areas. The rainy season (November-March) can make travel difficult in some regions but may present better negotiating opportunities with motivated sellers. Plan your property viewing trips accordingly.

Recent Regulatory Change: Madagascar’s government has been working on land reform initiatives to clarify property rights and streamline processes. While these reforms aim to improve the system, they can create temporary uncertainty during transition periods. Stay informed about regulatory changes through legal counsel and official government communications.

Banking Setup

• Local Banking Options:
  • Major banks: BNI Madagascar, Bank of Africa Madagascar, BFV-Société Générale
  • Documentation required: Passport, residence permit, proof of address, reference letters
  • Challenges: Account opening may require in-person visits and extensive documentation
  • Currency restrictions: Increasing controls on foreign currency transfers
• Alternative Banking Approaches:
  • Using attorney’s client account for property transactions
  • Mobile money services (Orange Money, Airtel Money, MVola)
  • International fintech platforms with multi-currency capabilities
  • Maintaining primary banking relationships in home country
• Currency Considerations:
  • Malagasy Ariary (MGA) is the local currency but not widely traded internationally
  • Euros and US Dollars are commonly accepted for large transactions
  • Currency controls restrict large outflows of foreign currencies
  • Budget for currency exchange costs in investment calculations

Financing Options

Financing options for property acquisition in Madagascar are limited compared to developed markets:

1. Local Mortgage Financing:
   • Availability: Extremely limited for foreign buyers without established local history
   • Interest rates: Typically 15-20% annually, making them impractical for most investors
   • Term lengths: Generally shorter than North American standards (10-20 years)
   • Down payment: Minimum 20-40% of property value
   • Documentation: Extensive requirements including local income verification
2. Home Country Financing:
   • Refinancing existing properties in North America
   • Home equity lines of credit (HELOCs)
   • Personal loans or investment credit lines
   • Challenges with using foreign property as collateral
3. Seller Financing:
   • Occasionally available from motivated sellers, particularly expatriates
   • Terms vary widely and require careful legal review
   • May offer more favorable interest rates than local banks
   • Limited enforcement mechanisms if problems arise

Most foreign investors in Madagascar utilize cash purchases or financing secured in their home country due to the high interest rates and limited availability of local financing options. This cash-buyer approach can provide negotiating advantages but requires greater upfront liquidity.

Payment Processes

Understanding secure payment methods for Madagascar property transactions:

• Escrow Services:
  • Limited availability of formal escrow services
  • Attorney client accounts can function as quasi-escrow
  • Important safeguard for significant transactions
• International Wire Transfers:
  • Most common method for property purchase payments
  • Subject to anti-money laundering verification
  • May require source of funds documentation
  • Allow extra time for international clearance
• Payment Documentation:
  • Maintain detailed records of all payments
  • Ensure receipts specify currency and exchange rates
  • Document purpose of each payment clearly
  • Keep payment evidence for tax and legal purposes

Cash transactions remain common in Madagascar’s real estate market, but foreign investors should avoid large cash payments due to security risks, difficulty documenting the transaction, and potential issues with anti-money laundering regulations both in Madagascar and their home country.

Property Search Resources

• Online Property Portals:
  • MadaImmobilier – Madagascar’s largest property portal
  • Expat.com Madagascar – Listings catering to expatriates
  • Madagascar Tribune – Classified listings in French
  • Facebook groups – Increasingly important marketplace for property
• Real Estate Agencies:
  • Madagascar Properties (Antananarivo, tourism destinations)
  • Immobilier Conseil Madagascar (focus on commercial properties)
  • Eden Immobilier (residential and land specialists)
  • Note: Most agencies are small operations with limited web presence
• Direct Approaches:
  • Local legal firms often have property networks
  • Chamber of Commerce can provide business connections
  • Expatriate communities in target areas
  • Tourism operators in resort areas
• Working with Local Fixers:
  • Local guides/fixers can identify unlisted opportunities
  • Can help navigate local community relationships
  • Often work on commission basis (3-5% of purchase price)
  • Verify credentials and seek recommendations before engaging

Property Viewing Trip Planning

For overseas investors, an efficient property viewing trip is essential:

1. Pre-Trip Research:
   • Identify 5-8 potential properties before arrival
   • Schedule viewings in advance (communication can be slow)
   • Research neighborhoods thoroughly online
   • Arrange meetings with legal advisors and notaries
2. Trip Logistics:
   • Plan for longer stays (2-3 weeks minimum)
   • Allow extra time for transportation challenges
   • Schedule viewings with significant buffer time
   • Hire a driver familiar with the region
3. During Viewings:
   • Take detailed photos and videos
   • Verify boundaries and access rights
   • Meet neighbors when possible
   • Assess water, electricity, and connectivity
   • Visit during both day and evening if possible
4. Local Contact Development:
   • Meet with local officials in the district
   • Connect with utility providers
   • Identify service providers (security, maintenance)
   • Talk with other foreign property owners in the area

Property Evaluation Criteria

Assess potential investments using these key criteria:

• Location Factors:
  • Access to transportation (roads, ports, airports)
  • Proximity to tourist attractions for hospitality investments
  • Reliability of utilities (water, electricity, internet)
  • Security situation in the neighborhood
  • Distance to medical facilities
  • Community acceptance of foreign ownership
• Property Documentation:
  • Land title status (titled vs. customary rights)
  • Registration with cadastral services
  • Building permits and compliance
  • Tax payment history
  • Utility connection approvals
  • Any existing lease agreements or encumbrances
• Physical Assessment:
  • Construction quality and materials
  • Climate resilience (cyclone resistance for coastal properties)
  • Drainage and flood risk
  • Land stability and erosion risks
  • Boundary markers and fencing
  • Environmental hazards assessment
• Investment Potential:
  • Current rental market in the area
  • Tourism growth trends for the region
  • Planned infrastructure improvements
  • Comparable sales and rental rates
  • Development potential for vacant land
  • Exit strategy considerations

Expert Tip: For beachfront properties, carefully verify setback requirements and coastal protection regulations, which are increasingly enforced in Madagascar. The legal minimum distance from high tide mark is typically 25 meters but can vary by region. Also, verify any existing community fishing access rights, which are protected by law and can impact development plans. Properties with properly documented land titles (Titre Foncier) may command premium prices but offer significantly lower risk than untitled land.

Legal Due Diligence

• ✓
  Title Verification: Confirm ownership through the Service des Domaines and Land Registry
• ✓
  Land Registry Search: Verify property boundaries and registered encumbrances
• ✓
  Local Authority Verification: Check zoning, development permissions, and local regulations
• ✓
  Environmental Compliance: Verify any environmental impact studies or restrictions
• ✓
  Traditional Rights Assessment: Investigate any customary or traditional claims
• ✓
  Lease Status (if applicable): Review terms, renewal rights, and restrictions
• ✓
  Tax Compliance Verification: Confirm all property taxes have been paid
• ✓
  Building Permit Verification: Check all constructions have proper approvals

Physical Due Diligence

• ✓
  Land Survey: Commission independent survey to verify boundaries and area
• ✓
  Building Inspection: Assess structural integrity, focusing on cyclone resilience in coastal areas
• ✓
  Utilities Assessment: Test water quality, electricity reliability, internet connectivity
• ✓
  Environmental Hazards: Check for flooding risk, erosion issues, wildlife conflicts
• ✓
  Access Rights: Verify road access, easements, and public rights of way
• ✓
  Neighborhood Assessment: Evaluate surrounding properties and developments
• ✓
  Climate Resilience: Evaluate vulnerability to extreme weather events

Financial & Commercial Due Diligence

• ✓
  Market Analysis: Gather data on comparable sales and rentals
• ✓
  Financial Projections: Develop realistic cash flow and ROI forecasts
• ✓
  Tax Assessment: Calculate registration fees, property taxes, and transfer taxes
• ✓
  Currency Exposure Analysis: Evaluate MGA exchange rate risks and hedging options
• ✓
  Operating Cost Estimates: Research local maintenance, security, and management costs
• ✓
  Exit Strategy Analysis: Research liquidity and potential exit timeframes

Expert Tip: In Madagascar, land conflicts often arise from overlapping formal and customary claims. Beyond formal legal checks, conduct a “social due diligence” by meeting with local community leaders (fokontany officials) to verify there are no unresolved community claims on the property. This step, though not legally required, can prevent costly disputes later. Consider allocating funds for a community benefit project as part of larger commercial developments, which can significantly improve community relations and reduce operational risks.

Negotiation and Preliminary Agreement

1. Initial Offer: Typically presented verbally or by simple letter
2. Negotiation: Often involves multiple rounds and cultural considerations
3. Preliminary Agreement (Compromis de Vente): Written document outlining key terms
4. Deposit Payment: Typically 10-20% of purchase price

In Madagascar, negotiation often involves multiple stakeholders, including family members of the seller. Price expectations can vary widely from asking price. Having a local intermediary can significantly improve negotiation outcomes. Once preliminary terms are agreed, a deposit is typically required to demonstrate commitment.

Legal Process

1. Notary Engagement: Appoint a Malagasy notary (notaire) to handle the transaction
2. Documentation Preparation:
   • Property title verification
   • Tax clearance certificates
   • Identity verification
   • Corporate documentation (if applicable)
3. Administrative Approvals:
   • Investor approval (for qualifying investments)
   • Local authority clearances
   • Foreign investment declaration
4. Purchase Agreement:
   • Drafted by notary in French
   • Reviewed by both parties’ legal counsel
   • Includes all conditions and contingencies
5. Final Deed (Acte Authentique):
   • Formal signing before notary
   • Payment of remaining purchase price
   • Often requires presence of all parties
6. Registration and Transfer:
   • Registration with land registry
   • Tax authority notification
   • Title transfer processing (can take 3-12 months)

The timeframe from preliminary agreement to completion typically ranges from 2-6 months for straightforward transactions, but can extend to 12+ months for rural properties or those with complex ownership structures. For leasehold arrangements, the process can be somewhat faster but still requires notarial involvement.

Transaction Costs

Budget for these typical transaction expenses:

• Registration Taxes:
  • Property Transfer Tax: 6% of declared value
  • Stamp Duty: 0.5-1% of transaction value
  • Registration Fees: 2% of transaction value
• Legal Fees: 2-4% for notary and legal representation
• Title Issuance Fees: Fixed fee of approximately MGA 250,000-500,000
• Land Survey Costs: MGA 1-2 million depending on property size
• Agency Commission: 5-7% if using a real estate agent
• Currency Transfer Costs: Varies by provider (1-3% spread)
• Corporate Setup Costs: $1,000-2,000 if creating a Malagasy company

Total transaction costs for foreign investors typically range from 12-18% of the purchase price. These costs should be factored into your overall investment calculations, and additional funds should be budgeted for unexpected expenses which are common in Madagascar’s evolving regulatory environment.

Expert Tip: Power of Attorney (Procuration) is recognized in Madagascar but must be properly authenticated for use in property transactions. For foreign buyers who cannot be present for all stages of the transaction, have your Power of Attorney document notarized in your home country, then authenticated with an Apostille (for countries party to the Hague Convention) or legalized through the Malagasy embassy. The document must be translated into French by a sworn translator in Madagascar before use.

Administrative Tasks

• ✓
  Property Tax Registration: Register with local tax authority within 30 days of acquisition
• ✓
  Utility Transfers: Transfer utilities to your name or management company
• ✓
  Local Authority Registration: Register with the local Fokontany (neighborhood authority)
• ✓
  Insurance Arrangement: Secure property insurance (limited but available for buildings)
• ✓
  Security Arrangements: Set up property security (guards, systems)
• ✓
  Foreign Investment Declaration: File with central bank if investment exceeds thresholds
• ✓
  Property Management Setup: Arrange local management if not personally present

Regulatory Compliance

Rental properties in Madagascar must comply with various regulations:

• Tourist Accommodation License:
  • Required for all properties rented to tourists
  • Applications processed through Ministry of Tourism
  • Property must meet minimum safety and service standards
  • Annual renewal with inspection
• Building Safety Standards:
  • Compliance with basic fire safety regulations
  • Emergency exits for commercial properties
  • Standards vary significantly by region
• Environmental Compliance:
  • Waste management requirements
  • Water discharge regulations
  • Protection of sensitive habitats (particularly in coastal areas)
• Employee Regulations:
  • Local labor law compliance for staff
  • Social security registration (CNAPS)
  • Work permits for foreign managers
• Foreign Exchange Declarations:
  • Reporting of foreign currency received from rentals
  • Compliance with repatriation requirements
  • Bank documentation for significant transfers

Enforcement of regulations varies significantly by region and property type. Tourist-focused areas like Nosy Be have more consistent enforcement of standards, while rural areas may have minimal oversight. Working with a local consultant familiar with both regulations and actual enforcement patterns is advisable.

Record Keeping

Maintain comprehensive records for tax and legal purposes:

• Property Documents:
  • Original deed and title documentation
  • Land registry certificates and boundary surveys
  • Construction permits and approvals
  • Property tax receipts
  • Utility installation certificates
• Financial Records:
  • All property-related expenses with receipts
  • Rental income documentation
  • Currency transfer records
  • Tax payment receipts
  • Insurance policies and payments
• Business Documentation:
  • Company registration documents (if applicable)
  • Business licenses and permits
  • Employment contracts and payroll records
  • EDBM approvals and correspondence
  • Annual compliance filings
• Operational Records:
  • Property management agreements
  • Service provider contracts
  • Maintenance records and improvements
  • Guest/tenant registration information
  • Correspondence with authorities

Madagascar’s administrative systems still rely heavily on paper documentation. Keep both digital and physical copies of all important documents, with duplicates stored securely in your home country. Records should be maintained in French to facilitate interactions with local authorities, but English translations are useful for your personal reference.

Expert Tip: For properties in remote locations, consider establishing formal relationships with neighborhood leaders through a simple community engagement ceremony. These cultural connections, while not legally required, can significantly improve security and reduce operational challenges. In coastal areas, participating in local “dina” (community rule) meetings and contributing to community development funds creates goodwill that can prove invaluable when facing administrative challenges or security concerns.

Madagascar Tax Obligations

• Property Transfer Taxes:
  • 6% property transfer tax on purchase value
  • Registration fees of 2% of transaction value
  • Stamp duty of 0.5-1% on legal documents
  • Must be paid within 30 days of transaction completion
• Annual Property Tax (IFT):
  • Rates vary by location and property type (typically 1-2% of assessed value)
  • Due annually by October 15th
  • Assessed on land and buildings separately
  • Discounts available for early payment
• Income Tax on Rental Income:
  • Progressive rates from 10-20% for individuals
  • Flat 20% rate for companies
  • Allowable deductions include management fees, maintenance, insurance
  • Annual tax return filing by April 15th
• Capital Gains Tax:
  • 20% flat rate on gains for foreigners
  • No inflation indexing available
  • Limited deductions for improvement costs with documentation
  • Due within 30 days of transaction completion
• Value Added Tax (TVA):
  • 20% standard rate applies to commercial rental income above thresholds
  • Registration required if rental income exceeds MGA 200 million
  • Monthly or quarterly filing requirements for registered businesses
• Business Tax (IS):
  • 20% corporate income tax for Malagasy companies
  • Minimum tax of MGA 100,000 or 0.5% of turnover (whichever is higher)
  • Annual filing by May 15th

Home Country Tax Obligations

Madagascar has limited tax treaties. There is no comprehensive tax treaty with the United States or Canada, which can complicate tax situations and potentially lead to double taxation in some circumstances. Professional tax advice from experts familiar with both jurisdictions is strongly recommended.

Tax Planning Strategies

• Entity Structure: Evaluate whether personal ownership or Malagasy company provides better tax treatment
• EDBM Investment Approval: Qualify for tax incentives available to approved investments
• Expense Documentation: Maintain meticulous records of all deductible expenses
• Revenue Categorization: Structure rental and service components appropriately
• Capital Investment Tracking: Document all capital improvements to reduce future gains tax
• Currency Strategy: Plan currency conversions to minimize exchange losses
• VAT Registration: Evaluate threshold for mandatory registration
• Timing of Income Recognition: Consider fiscal year timing for income reporting

Madagascar’s tax administration can be challenging to navigate, with inconsistent interpretation of regulations. Working with a reputable local tax advisor is essential, particularly for the first few years of operation. Having a tax compliant record is particularly important if you intend to repatriate funds or eventually sell the property, as tax clearance certificates are required for these transactions.

Expert Tip: For tourism properties, it’s often advantageous to structure operations through a Malagasy company that can qualify for EDBM incentives. These can include temporary exemptions from property tax, reduced income tax rates, and VAT exemptions on certain imports and equipment purchases. To qualify, your business plan must demonstrate significant job creation (typically 10+ full-time positions) and investment value exceeding $200,000. Approval must be obtained before property acquisition to maximize benefits.

Selecting a Property Manager

Evaluate potential property managers using these criteria:

• Local Market Experience:
  • Proven track record in your specific region
  • Understanding of local economic conditions
  • Established relationships with service providers
• Language Capabilities:
  • Fluency in French (essential)
  • English capabilities for client communication
  • Malagasy language skills for local interactions
• Financial Management:
  • Transparent accounting practices
  • Regular financial reporting
  • Secure payment handling systems
• Operational Capabilities:
  • Reliable maintenance resources
  • Emergency response protocols
  • Staff management expertise
• Communication Systems:
  • Regular reporting schedule
  • Digital communication platforms
  • Response time commitments
• Regulatory Compliance:
  • Understanding of tourism regulations
  • Tax reporting capabilities
  • Labor law compliance

Management Agreement Essentials

Ensure your property management contract includes these key elements:

• Scope of Services: Detailed description of exactly what is included and excluded
• Fee Structure: Clear explanation of all management fees, commissions, and additional charges
• Contract Term and Notice Period: Duration of agreement and how to terminate
• Reporting Schedule: Frequency and format of financial and property condition reports
• Maintenance Authority: Spending limits for repairs without prior approval
• Revenue Handling: Methods, timing, and currency for revenue transfers
• Insurance Requirements: Coverage expectations and liability boundaries
• Staff Employment: Clarification of which party is the legal employer
• Dispute Resolution: Process for addressing disagreements
• Force Majeure Provisions: Essential given Madagascar’s exposure to cyclones and political events

Management contracts should be drafted or reviewed by a legal advisor familiar with Madagascar’s business environment. Include provisions for regular in-person inspections, either by yourself or a trusted representative, as remote management without occasional physical presence carries significant risks in Madagascar.

Expert Tip: In Madagascar, personal relationships significantly impact service quality. For properties in tourist areas, consider engaging a dual management structure: a local caretaker for day-to-day presence and security, complemented by a professional management company for marketing and guest handling. This combination leverages local knowledge and presence with professional systems. For residential properties, management quality varies dramatically between regions; in secondary cities, directly employing a trusted local caretaker with regular oversight from a professional property manager in Antananarivo often yields better results than fully delegating to local agencies.

Exit Options

Sale Process

When selling your Madagascar property:

1. Pre-Sale Preparation:
   • Update property documentation and resolve any title issues
   • Complete tax compliance verification
   • Prepare marketing materials, including professional photography
   • Make strategic improvements to increase value
   • Address any regulatory compliance issues
2. Marketing Strategy:
   • Determine appropriate channels (local vs. international)
   • Engage specialized agencies for tourism properties
   • Prepare property history and investment documentation
   • Create bilingual (French/English) marketing materials
   • Set realistic pricing based on comparable sales
3. Negotiation and Documentation:
   • Prepare disclosure documents for interested buyers
   • Establish clear payment terms considering currency restrictions
   • Engage a notary for preliminary agreement drafting
   • Structure escrow arrangements if available
   • Prepare for extended negotiation timelines
4. Transaction Completion:
   • Secure tax clearance certificates
   • Complete required notarial process
   • Arrange secure payment receipt
   • Transfer utility accounts and registrations
   • Formalize operational handover if applicable
5. Post-Sale Requirements:
   • Capital gains tax filing and payment
   • Currency repatriation documentation
   • Business deregistration if applicable
   • Home country reporting of foreign sale
   • Record retention for tax purposes

The selling process in Madagascar typically takes 6-18 months, with tourism properties often requiring international marketing campaigns to reach the appropriate buyer pool. Having complete documentation and a clear history of property maintenance and improvements significantly improves marketability.

Market Exit Timing Considerations

Several factors should influence your exit timing decision:

• Tourism Cycle: Madagascar’s tourism industry shows cyclical growth patterns, with periods of rapid expansion followed by consolidation; selling during expansion phases is advantageous
• Currency Exchange Rates: Monitor MGA/USD or MGA/EUR trends; exit when Ariary is relatively strong can significantly enhance returns when converting back to your home currency
• Political Stability: Madagascar’s political cycle can significantly impact investor confidence; stable periods typically yield better valuations
• Infrastructure Developments: Timing sales to coincide with completion of major infrastructure improvements (airports, roads, utilities) can maximize value
• Regional Growth Phases: Different regions experience development cycles at different times; monitor local market indicators
• Seasonal Factors: Tourism high season (July-September) typically sees maximum buyer interest for leisure properties
• Tax Consideration: Timing sales relative to tax years in both Madagascar and home country can optimize tax position
• Regulatory Changes: Monitor tourism, foreign investment, and property regulations for favorable or unfavorable changes

Madagascar’s property market is less liquid than developed markets, requiring more advance planning for exits. The pool of qualified buyers is limited, particularly for higher-value properties, making relationship development with potential acquirers an important long-term strategy.

Expert Tip: For tourism properties, developing relationships with incoming tour operators and hospitality groups years before your intended exit can create a pre-qualified buyer pool when you decide to sell. Properties with demonstrable rental income and established operational systems typically command 20-40% premiums over similar physical assets without business operations. Consider engaging a hospitality consultant to optimize operations 12-18 months before listing to maximize operational performance metrics that drive valuation multiples.