Building Affordable Housing in Morocco

Here is an article from the Financial Times about plans to increase affordable housing in al-Maghreb.
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Morocco offers home help to its poor

By Heba Saleh

Published: April 7 2010 17:42 | Last updated: April 7 2010 17:42



Standing outside her ramshackle home in one of Casablanca’s slums, Aziza El Shannani bemoans her living conditions.

“If it rains, the water comes in, and if there is wind, the roof moves,” she says.

Some 2,500 people live in the huddle of small dwellings made from breeze blocks and topped with metal sheets weighed down with stones. The narrow alleys between the houses are less than a metre across. There is no running water in the homes, with residents instead having to use a public tap.

Many such as Ms Shannani say they would like to leave but they have to wait for a government scheme to progress. Morocco has a shortfall of 1.2m low-cost homes, and every year this figure increases by 125,000.

It is a region-wide problem that the Moroccan government hopes to tackle with a package of incentives designed to revive the construction of low-cost housing, which was announced in its most recent budget.

This includes tax breaks for buyers and developers alike, with 10-year exemptions from capital gains tax for companies building affordable housing.

One company taking advantage of the new measures is Addoha, one of the North African nation’s largest real estate developers, which accounts for almost half of the low-cost housing being constructed in Morocco.

The company plans to build up to 25,000 apartments for people on low-incomes in the country this year, and 120,000 homes over five years.

“The tax exemptions are for 10 years so it gives us clear visibility,” says Abderazzak Oualieallah, assistant director-general of Addoha. “Our profit margin is 30 per cent but it was difficult when the tax breaks were abolished in 2008.”

The company has a land bank of 6,000 hectares, half of which is earmarked for affordable homes. Land for housing aimed at the poor is provided by the state at a discounted price.

Mr Oualieallah says he expects the easier terms for developers to encourage more companies to enter the sector and that the problem of unmet demand could end within 10 years.

Despite the fact that the company has yet to announce the locations of the developments, more than 150,000 people have put their names down on a waiting list.

“Renting is not good because landlords are always trying to throw you out,” says Khadija Greir, as she leaves the the Addoha headquarters in Casablanca after registering for an apartment for herself and her unemployed 34-year-old son.

Ms Greir says that King Mohammed, Morocco’s ruler, “is now doing us this good deed by giving each buyer a gift” of Dh40,000 ($4,750).

The “gift” is a rebate on value added tax to which low-income buyers are entitled, as part of the housing package announced in the budget. Registration fees have also been abolished.

The number of units a developer has to build to qualify for the incentives is 500 over two years. The units should be sold at the fixed price of Dh290,000.

The provision of cheap housing is part of the “Cities without Slums” programme initiated in 2004. More than 30 slums have been cleared, but many remain. The government aims to move 280,000 households out of the shanty towns.

The government has in recent years turned its attention to clearing slums after 14 suicide bombers from a shanty town outside Casablanca killed 45 people, including themselves, in 2003. Some of the larger slum communities had become breeding grounds for extremism, spread by unauthorised mosques preaching admiration for Osama bin Laden and al-Qaeda.

The construction of low-income housing, however, had flagged after earlier tax breaks for developers were withdrawn in 2008, and even the cheapest housing is beyond the means of many slum dwellers.

The government now plans to spend $7.5bn during the next decade on low-cost housing and its slum clearance programmes.

It has also been encouraging mortgage providers to lend to lower-income families. In 2004 the government set up Fogarim, a guarantee fund, which is used to underwrite 70 per cent of the sum loaned. It is funded by a levy of about $12 on every tonne of cement sold in the country.

“This makes banks more comfortable about lending even to those who do not have a regular pay cheque,” says Youssef Benkirane, head of brokerage at BMCE Capital.

As a barrier to speculation, owners of the low-cost homes are not allowed to sell for four years.

For those who cannot afford the monthly mortgage payments of $120, which are the norm for the low-cost units such as those sold by Addoha, there is an alternative scheme that offers subsidised homes costing about $19,000.

Mr Benkirane says that the scheme has worked well during the past five years, and adds that the rate of non-performing loans has been less than 1 per cent – “because people do not want to lose their flats”.

Copyright The Financial Times Limited 2010.