All property players in UAE 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% of its activity is based on low and mid-income housing. And yet, Addoha’s revenue last year increased 57% to MAD 4.7 billion, compared with MAD 3 billion in 2007.According to the Moroccan ministry of housing and urban planning, the undersupply of homes exceeds 1 million and each year 123,000 new families enter the market. Around 60% 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% 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 1/3 of the allocated land and for 200,000 dirhams on 1/3. On the last 1/3 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% fixed rates for up to 25 years. The secret is a system of guaranteed funds established by the government 4 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 MAD 7 billion.
According to figures from the ministry of housing, Fogarim’s main beneficiaries are traders (41%), followed by street vendors (23%), 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 5 years, which are sold at less than MAD 200,000. “In the beginning, cement companies were complaining because they had to pay MAD 100 tax per tonne – which brings around MAD 2 billion 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.”
In Morocco, banks are not allowed to lend in excess of 50% of a family or an individual’s revenue. The credit risk rate is less than 1% and Moroccan banks have increased their total income by nearly 5% during the first 4 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% to 6% of what is being built in Morocco.
Addoha, along with the state company Al Omrane, makes up about 40% of the low-income market, 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.
“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 MAD 140,000 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 MAD 300,000 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. 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 MAD 800,000.
via The National
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