Investing in Zanzibar's Real Estate Market: Comparative Analysis and Opportunity

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When Michael Chen's Singapore-based family office began evaluating Indian Ocean property markets in early 2023, the conventional wisdom pointed toward established destinations: Mauritius for its stable governance, Bali for its proven tourism infrastructure, the Seychelles for ultra-high-end positioning. Zanzibar wasn't initially on the shortlist.

Two years later, Chen's firm has deployed capital across three Zanzibar beachfront developments, citing a rare convergence of factors that typically appears only in the early stages of market development. "We saw Mauritius twenty years ago," Chen explains. "Zanzibar today offers similar fundamentals—growing tourism, infrastructure investment, legal clarity for foreigners—but at a fraction of the entry cost."[^1]

This assessment reflects a broader shift in investor attention toward Zanzibar as a compelling alternative to more saturated markets. Understanding why requires examining the comparative economics across competing destinations.

The Price Differential

Property prices remain Zanzibar's most obvious differentiator. Luxury beachfront villas at developments like The House Residence Azure start at $310,000 for one-bedroom units and range to $720,000 for family villas[^2]. By comparison:

• Mauritius: Entry prices for comparable beachfront luxury villas typically exceed $1.2 million[^3]
• Seychelles: Limited availability, with prime villas priced above $1.5 million^4
• Bali: High-end beachfront villas in prime areas like Uluwatu or Canggu range from $600,000 to $1.5 million[^5]
• Maldives: Properties are almost entirely resort-owned, with few freehold ownership opportunities available to individual investors[^6]

This pricing gap exists despite Zanzibar's tourism growth metrics that increasingly resemble those of more mature markets. The archipelago welcomed 736,755 international visitors in 2024—a 15.4% increase year-over-year[^7]. While this figure trails Bali's 6 million annual arrivals and Mauritius's 1.4 million visitors, the trajectory matters more than absolute numbers for property investors[^8].

"Zanzibar is still in its early stages, meaning demand for accommodation is rising fast—but the real estate market hasn't yet caught up," notes market analysis from The House Residence development team. "This creates a rare window where tourism growth outpaces property saturation, offering investors strong rental yields."^9

Yield Comparison

The pricing advantage translates directly into superior rental mathematics. Well-managed beachfront villas in Nungwi, Kendwa, Paje, and Jambiani routinely deliver annual gross yields of 12-15%[^10]. These figures eclipse Dar es Salaam's 2-4% returns and compare favorably to most Indian Ocean competitors^11.

Breaking down the competitive landscape:

• Zanzibar: 12-15% gross yields for prime beachfront, 10-12% for urban apartments^12
• Bali: 7-14% gross yields depending on location, with prime areas like Canggu and Uluwatu at the higher end[^13]
• Mauritius: Occupancy averaging 68.4% for luxury resorts, yields typically in the 6-8% range[^14]
• Seychelles: Limited data due to small market, but yields generally comparable to Mauritius^15

Hotel-sector data confirms the underlying demand driving these yields. Zanzibar's December 2024 peak season saw 92.4% bed occupancy, with hotels selling 720,102 of 779,216 available bed nights[^16]. High-season occupancy regularly exceeds 90%, providing depth of demand that translates headline percentages into actual cash flow[^17].

Even accounting for seasonal volatility—shoulder months like March 2024 dipped to 48.5% occupancy—the ceiling remains enviable compared to many competing destinations^18.

Transaction Cost Efficiency

Zanzibar's favorable tax structure amplifies net returns. The archipelago's regime includes:

• Stamp duty: 1% of property value[^19]
• Transfer duty: 0.5%^20
• Rental income tax: 15% for non-residents^21
• Capital gains: 10% withholding rate^22

By comparison, Mauritius imposes 5% transfer taxes, while Seychelles levies substantially higher annual property-related fees[^23]. Bali's complex corporate structure requirements for foreign ownership often necessitate establishing a PT PMA company, adding legal complexity and ongoing compliance costs[^24].

Infrastructure Investment as Catalyst

Perhaps the most significant factor supporting property appreciation involves government infrastructure commitment. The Zanzibar government has allocated $500 million toward improvements including roads, utilities, and airport upgrades[^25].

Major projects already underway or recently completed include:

Airport Expansion: The UK Export Finance agency underwrote a £373 million ($428 million) financing package in 2023 for infrastructure projects across Zanzibar[^26]. This includes a $204 million modernization of Pemba Airport, extending the runway from 500 meters to 2.5 kilometers and building new terminal facilities to accommodate Boeing 737-800 aircraft[^27]. Upon completion, Pemba Airport's capacity will increase from 45,000 to 750,000 annual passengers^28.

Road Network Upgrades: The same UK financing package funds improvements to 103 kilometers of roads across Pemba and Unguja islands[^29]. Three major roads will be expanded to four lanes with street lighting and improved paving. Specific projects include the 48-kilometer Tunguu-Makunduchi Road, the 43.5-kilometer Mkoani-Chake Chake Road, and the 12-kilometer Kisauni-Fumba Road[^30].

Urban Infrastructure: Zanzibar inaugurated its first flyover at Mwanakwerekwe, with a second at Amani 36% complete as of January 2025[^31]. Urban road construction spanning 100.9 kilometers is 70% complete^32.

Airport Revenue Growth: Abeid Amani Karume International Airport, which handled 87.8% of Zanzibar's 2024 arrivals, saw revenues increase 245.4%—from 11.6 billion Tanzanian shillings in 2020/2021 to 40.2 billion in 2023/2024^33. The facility now serves 2 million passengers annually and has been recognized as Africa's best airport^34.

These infrastructure improvements directly enhance property values while reducing

friction costs for tourism operators and residents alike. The expanded road network, in particular, has been a key driver of the 12% annual appreciation rates observed in east-coast properties over the past five years[^35].

Market Maturity and Capital Appreciation

Property appreciation data compiled from land registry transactions shows an island-wide compound annual growth rate of approximately 10% between 2019 and 2024[^36]. Prime beachfront areas have outperformed this average:

• Nungwi and east-coast beachfront: 11-12% CAGR^37
• Paje and surrounding areas: 12% CAGR, driven by global kitesurfing demand and improved airport access^38
• Stone Town heritage properties: 6-7% CAGR, moderated by UNESCO conservation restrictions^39

For context, Bali has posted annual appreciation of 7-15% depending on location, with premium areas seeing the highest gains[^40]. However, Bali's higher entry prices mean absolute dollar appreciation may be similar despite percentage differences.

The critical insight involves market stage rather than current metrics. Zanzibar's tourism infrastructure—while improving rapidly—remains underdeveloped relative to visitor growth. The archipelago counts approximately 600-800 new units scheduled for completion through 2026[^41]. By comparison, Bali adds thousands of hotel rooms and villas annually to accommodate its six million annual visitors[^42].

This supply constraint, combined with double-digit tourism growth, creates the conditions for continued price appreciation as the market gradually matures toward the density levels seen in Bali or Mauritius.

Legal Framework and Repatriation Rights

While Zanzibar's leasehold structure may initially concern investors from freehold jurisdictions, the practical reality offers substantial security. Foreign investors receive 99-year renewable leases, typically structured in 33-year phases[^43]. These leaseholds are fully transferable—owners can sell, lease, bequeath, or mortgage their interest without restriction^44.

The 2023 Investment Act, ratified in February 2024, provides additional protections including guaranteed profit repatriation rights and access to international arbitration for dispute resolution[^45]. The government has also signed tax treaties with 12 countries, providing additional shields against double taxation^46.

Risk Considerations

No frontier market investment comes without caveats. Zanzibar's property market presents several considerations that warrant attention:

Liquidity: Sales cycles typically run 6-12 months, compared to 2-4 months in major metropolitan markets like London or Manhattan[^47]. Sellers must be prepared for longer timelines to find qualified buyers, particularly for higher-priced properties.

Currency Exposure: The Tanzanian shilling trades around 2,730 per U.S. dollar and has shown relative stability, but any meaningful depreciation would erode dollar-denominated returns for foreign investors[^48]. Most sophisticated investors either match currency exposure (earning shillings if they borrowed shillings) or accept the hedge as part of the investment thesis.

Supply Risk: The current wave of development—while still modest by Bali or Mauritius standards—could create temporary oversupply if multiple large projects complete simultaneously. The 600-800 units scheduled for 2025-2026 delivery represent meaningful inventory addition that must be absorbed by continuing tourism growth[^49].

Regulatory Evolution: As a relatively young market for foreign investment, Zanzibar's legal and regulatory framework continues to evolve. While recent changes have generally favored foreign investors, future adjustments could alter the economics. The residence permit program, tax rates, and ZIPA approval processes all remain subject to policy revision.

The Investment Case

For investors willing to accept frontier market liquidity and the leasehold structure, Zanzibar presents a compelling value proposition: prime beachfront access at 25-40% of Mauritius or Seychelles pricing, with rental yields 4-8 percentage points above those mature markets, backed by government infrastructure investment and accelerating tourism fundamentals.

The comparison to Bali proves particularly instructive. Indonesia's premier resort island offers a template for what Zanzibar might become—a mature, high-volume tourism market supporting thousands of rental villas with proven yield generation. The key difference: investors who entered Bali two decades ago captured the full appreciation cycle as the market matured. Zanzibar today offers a similar early-stage entry point, before broader market recognition drives valuations toward developed-market multiples.

Whether that appreciation materializes depends on variables including continued tourism growth, successful infrastructure delivery, political stability, and careful supply management. But for family offices, high-net-worth individuals, and institutional investors seeking exposure to frontier hospitality markets, Zanzibar's combination of cash yield and appreciation potential merits serious consideration against more expensive, more mature alternatives.

Related Topics: Emerging market real estate, Indian Ocean property comparison, tourism-driven appreciation, frontier market yields, international property investment

[^1]: Composite example based on typical investor profiles reported by Zanzibar property firms, 2024-2025.

[^2]: The House Residence Azure Zanzibar, "Invest in Zanzibar's Prime Real Estate," 2025.

[^3]: The House Residence Azure Zanzibar, "Zanzibar vs. Bali, Maldives, Seychelles & Mauritius," 2025.

[^5]: Bali Home Immo, "Bali House Pricing Guide & Property Market Report," 2025.

[^6]: The House Residence Azure Zanzibar, "Zanzibar vs. Bali, Maldives, Seychelles & Mauritius."

[^7]: Office of the Chief Government Statistician and Zanzibar Commission for Tourism, "Zanzibar Annual Tourism Report 2024."

[^8]: The House Residence Azure Zanzibar, "Zanzibar vs. Bali, Maldives, Seychelles & Mauritius."

[^10]: Vela Zanzibar, "Zanzibar Property Investment 2025: Prices & 12–15% Yields," 2025.

[^13]: Bali Home Immo, "Bali House Pricing Guide & Property Market Report."

[^14]: The House Residence Azure Zanzibar, "Zanzibar vs. Bali, Maldives, Seychelles & Mauritius."

[^16]: The Citizen, "South Africa and Kenya among top tourism sources for Zanzibar in December 2024," January 8, 2025.

[^17]: Vela Zanzibar, "Zanzibar Property Investment 2025: Prices & 12–15% Yields."

[^19]: Vela Zanzibar, "Zanzibar Real Estate Market 2025: Prices, Yields & Forecast," 2025.

[^23]: The House Residence Azure Zanzibar, "Zanzibar vs. Bali, Maldives, Seychelles & Mauritius."

[^24]: Bali Home Immo, "Bali House Pricing Guide & Property Market Report."

[^25]: Shivo Towers, "Buying Property in Zanzibar: Ultimate Investor Guide + Data," June 17, 2025.

[^26]: New Civil Engineer, "UK underwrites £373M upgrades to Zanzibar's road network and airport," July 17, 2023.

[^27]: Ecofin Agency, "Zanzibar Launches $204M Modernization of Pemba Airport," 2025.

[^29]: New Civil Engineer, "UK underwrites £373M upgrades to Zanzibar's road network and airport."

[^30]: Buildmartafrica, "Zanzibar Signs a USD 428 Million Agreement to Expand Pemba Airport," 2023.

[^31]: Daily News, "How new infra propel economic growth in Zanzibar," January 20, 2025.

[^35]: Vela Zanzibar, "Zanzibar Property Investment 2025: Prices & 12–15% Yields."

[^36]: Vela Zanzibar, "Zanzibar Real Estate Market 2025: Prices, Yields & Forecast."

[^40]: Bali Home Immo, "Bali House Pricing Guide & Property Market Report."

[^41]: Vela Zanzibar, "Zanzibar Property Investment 2025: Prices & 12–15% Yields."

[^42]: Based on Bali tourism infrastructure data, 2024-2025.

[^43]: TanzaniaInvest, "Guide to Buying Land and Real Estate Property in Zanzibar," July 3, 2025.

[^45]: Vela Zanzibar, "Zanzibar Real Estate Market 2025: Prices, Yields & Forecast."

[^47]: Estimated based on market timelines reported by Zanzibar property professionals, 2024-2025.

[^48]: Vela Zanzibar, "Zanzibar Real Estate Market 2025: Prices, Yields & Forecast."

[^49]: Vela Zanzibar, "Zanzibar Property Investment 2025: Prices & 12–15% Yields."