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Morocco: Housing Solutions

After a building slowdown caused by the global recession and the removal of a tax break for low-income housing developers in 2008, the Moroccan government has reinstated affordable housing incentives in its 2010 budget. Now in the final stages of parliamentary review, the 2010 Finance Bill will give social housing developers exemptions from a capital gains tax and a cement tax. Social housing is defined by the government as homes sold for less than Dh200,000 (€18,000) - however, university dormitory developers will also be granted tax incentives.

"The advantages given to developers will allow a return of investment to the construction industry, with all that it entails in terms of opening up new construction sites, job creation and sales of building materials," Youssef Ben Mansour, chairman of the National Federation of Housing Developers, said in a press statement at the end of 2009. Low-income homebuyers will also benefit from a value-added tax rebate of Dh40,000 (€3585), up from Dh30,000 (€2689), and an exemption from registration fees.

As an estimated 70% of market demand is for social housing, Morocco has a strong imperative to speed up the construction of affordable homes. "Social housing will be in crisis in 2010 if nothing is done by the state to rescue the sector," the housing and town plan minister, Toufik Jhira, said in a meeting for the Finance Bill in July 2009.

Morocco's total affordable housing shortage is estimated at 1.2m homes, which is expected to increase by 125,000 annually. Just 35,000 social housing units were built in 2009, down from 129,000 in 2008. The decrease is partially attributable to the global recession, but also related to the repeal of tax breaks in 2008 for developers of social housing units. In its place, all property developers received a 50% break last year, causing many to leave the low-income construction market in search of higher profit margins.

Local developer Addoha reported a 25% profit margin last year, down from 65% in 2008. To take advantage of the budget's new incentives, the company is planning to look for financing on capital markets. "We have announced a goal of 120,000 homes between 2010 and 2015, and that's why we plan this capital increase," the company's chairman, Anas Sefrioui, told international press in April 2010.

The range of incentives contained in the new budget join other efforts by the Moroccan government to bridge its housing gap. In February 2009, the state signed off Dh52bn (€4.6bn) for social housing projects, and made 3853 ha of public land available to build 200,000 housing units.

One of the government's key programmes in providing affordable shelter is Fonds de Garantie en Faveur de Populations à Revenus Irréguliers et Modestes, granting people with low or irregular incomes loans covering up to 70% of the price of their home. Commercial banks have been reluctant to extend housing loans to the low-income population, exacerbating the housing crisis as the majority cannot afford to purchase homes on their own.

Another successful programme has been Villes Sans Bidonvilles (Cities Without Slums), aimed at dismantling the shantytowns that have sprung up around large cities in recent years as a result of urban migration. In September 2009, the government reported that the programme has placed 138,000 people in formal households since its establishment in 2004.

To say nothing of the negative social impact, the shortage of affordable housing stock is holding Morocco back from meeting its full economic potential. Though the Kingdom's economy maintained steady growth throughout the downturn (5.4% in 2009), solving the housing crisis would undoubtedly propel that figure even further.

© Oxford Business Group 2010