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.

Affordable Housing in Morocco

Here is an article from the UAE based paper, The National about looking at Moroccan affordable housing programs as a model for what could be done in that Gulf country.
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Morocco affordable housing a guide for the UAE

* Last Updated: June 01. 2009 5:16PM UAE / June 1. 2009 1:16PM GMT

Rochdi Ben Driss Zouichi for The National

All property players in the country agree on one thing: there is a need for more affordable housing. In Abu Dhabi in particular, the issue has been neglected until recently, with most of the 140,000 residential units scheduled for delivery by 2013 being high-end accommodation, according to Colliers International.

But following the slowdown in the property market, developers, including Al Qudra, Aldar and Sorouh, have announced strategy changes to address the needs of the low-priced segment, too.

Other markets in the Middle East have managed to turn the housing needs of low and middle-income earners into a lucrative niche. And Abu Dhabi could do worse than to look at Morocco, where developers who focus on affordable housing still make good money and their order books are full, in spite of the global crisis.

Anas Sefrioui, the chairman and founder of Addoha, Morocco’s largest developer, is confident.
His company, the first to be listed on the Casablanca stock exchange since 2006, is now on the top of the list. Around 77 per cent of its activity is based on low and mid-income housing. And yet, Addoha’s revenue last year increased 57 per cent to 4.7 billion Moroccan dirhams (Dh2.16bn), compared with 3bn dirhams in 2007.
The results for the first half of this year are expected to double compared with the same period last year. Mr Sefrioui says other developers are experiencing the same buoyancy.

“There is a specific Moroccan context,” he says. “People want to buy their own house. Renting is not part of the culture. When somebody is renting people generally think this is related to some sort of a problem. Buyers are mainly end-users.”

According to the Moroccan ministry of housing and urban planning, the undersupply of homes exceeds one million and each year 123,000 new families enter the market. Around 60 per cent of the population is under the age of 30.
Five years ago, the government launched a programme aimed at reducing the number of shanty towns and sub-standard dwellings and to ease the housing shortage by 25 per cent in 2012.

Access to land is a major catalyst. Last January, developers willing to build affordable housing were offered a total of 3,853 hectares of land at a reduced price to build 200,000 units.

The conditions: they have to sell the flats for only 140,000 Moroccan dirhams on one third of the allocated land and for 200,000 dirhams on another third.
On the last third of the land, developers are allowed to build other types of properties and make margins. But the key factor that boosted the market is an enticing financial policy that involves all industry players.

“Banks today not only continue lending to people with no regular incomes but they do so at a reasonable rate – 5.5 per cent fixed rates for up to 25 years,” says Hassan Ben Bachir, the adviser to Mr Sefrioui at Addoha.

The secret is a system of guaranteed funds established by the government four years ago, backed mainly by taxes on cement companies.
Fogarim, a security fund, enabled more than 48,000 families with low and irregular incomes to take out low-interest loans and buy homes.

The amount of guaranteed mortgages so far is 7bn dirhams.
According to figures from the ministry of housing, Fogarim’s main beneficiaries are traders (41 per cent), followed by street vendors (23 per cent), craft workers (16), taxi drivers (4.2), maids (3.7) and labourers (3.3). The scheme was soon followed by other funds linked to specific professions.

To qualify for the Fogarim programme and tax breaks, developers have to build at least 2,500 affordable housing units over five years, which are sold at less than 200,000 dirhams.

“In the beginning, cement companies were complaining because they had to pay 100 dirhams tax per tonne – which brings around Dh2bn a year into the fund,” says Mr Ben Bachir. “But now everybody is happy. Banks are lending because of the lower risk. People are buying because they get the finance, developers are building more affordable housing because of the advantages they get and the demand, and cement companies sell much higher volumes. The system does not even cost the government a lot of money.”

According to the housing ministry, up to 29 per cent of banks’ total loans go to the property industry.
The banks are bullish. The default rate is very low, according to the mortgage department of BMCE bank. “And the low-income segment is also the main part of our clients. We cover the total value of a property that costs up to 800,000 dirhams, as this is guaranteed by the fund.”

The low level of integration in the global financial system is another factor. “We have not developed many sophisticated products like securitisation, which caused the bankruptcy of some banks. We don’t have that much of a virtual economy,” says Nour Eddine Charkani, the director of Wafa Immobilier, the property loans section of Attijariwafa Bank.

“In Morocco, banks are not allowed to lend in excess of 50 per cent of a family or an individual’s revenue. The credit risk rate is less than 1 per cent and Moroccan banks have increased their total income by nearly 5 per cent during the first four months compared with the same period last year.”

According to Youssef Ibn Mansour, the chairman of the National Federation of Property Developers in Morocco, the market boomed because of low-income housing. “Until the mid-nineties, only the government was taking care of it. But when private companies were invited to enter the market this created a dynamic that attracted huge capital. We went from 30,000 to 40,000 units built a year to 125,000 units last year. Of this, 25,000 units are built for mid-incomes. The high-end segment only represent 5 per cent to 6 per cent of what is being built in Morocco.”

Addoha, along with the state company Al Omrane, makes up about 40 per cent of the low-income market, according to Mr Ibn Mansour, followed by a dozen smaller groups including Chaâbi and Jet Sakane.

Two UAE property companies also got involved. Al Qudra, which recently announced its focus on affordable housing in Al Ain, joined Addoha to build 359 villas in Tamesna, a town in Morocco, half of which should be delivered this year and the rest next year.
With the Abu Dhabi Fund for Development, Addoha last month launched a project to construct 17,000 units in the Moroccan town of Kenitra, including low and mid-income flats, along with villas and a golf course.

“Most Emirati developers are focused on tourism or high-end residential developments though,” says Mr Ibn Mansour.
The question of profitability of affordable housing is regularly raised, especially with the recent 140,000-dirham units programme.

“It is profitable if you have good volumes,” says Mr Sefrioui. “Addoha builds 22,000 units every year, of which 2,000 only are high-end projects.”
Mr Ibn Mansour recognises that the 140,000-dirham units are products with no margin. “Developers in that case are allowed to build expensive units on one third of their granted land but most of them today go for the 300,000-dirham units and accept paying additional taxes.”

The other question is the quality of the housing. “These are mainly blocks of flats worse than Paris outskirts. It can look really depressing,” says William Simoncelli, the director of Agence immobilière Carre Immobilier Maroc, a brokerage company based in Casablanca.

The programme though has been extended to other income segments. After years of focusing on housing for Morocco’s low-income population, the government is faced with a new problem: home ownership is out of reach for much of the middle class.
Land prices have skyrocketed and driven many middle-income families to buy social housing.

“There are not many areas where you can put your money,” says Mr Simoncelli. “The stock exchange is not that attractive. So Moroccans love to invest in property. They don’t really have much choice.”

According to Mr Ibn Mansour, prices in high-end units are €1,500 (Dh7,796) per square metre, mid-range is €800 to €1,000, while low-income residences cost €500 to €600. The most expensive areas are in Casablanca, the economic capital, reaching up to €3,200 per sq metre.

However, prices have begun to come down because of the global economic crisis. Tangier has been the most affected, says Mr Simoncelli. “A year ago we were talking about €2,200 to €2,300 per square metre. Now it is rather close to €1,600.”
Marrakech was also very much affected because of the high number of projects for this medium-sized city. Many large creek projects with villas have been launched within a 4km to 15km range from the centre. The high prices fell down like a soufflé, he says.

Having proved successful, Fogarim has been expanded to include private-sector workers with regular salaries. Existing funds were merged in April to form Damane Assakane, which guarantees mortgages up to 800,000 dirhams.