Although the Gulf has seen the majority of construction activity in the MENA area of late, Morocco too is beginning to emerge as a favorite for a variety of European and Gulf investors.
The Investment Commission, chaired by Prime Minister Driss Jettou, announced on June 13 the setting-up of three major cement factories at a total cost of Dh8.9 billion ($1.1 billion). These significant investments in the cement industry are designed to meet the increasing demand in the construction and real estate sector.
Although the cement industry still is dominated by foreign capital, two out of the three factories will be Moroccan-owned. The first one is initiated by the Ynna group and will be built in the Settat region. The second one, to be established by the Addoha group, will have two units, one in the region of Beni Mellal and the other one also in Settat.
The Ynna group is investing Dh3.3 billion ($400 million), creating 500 jobs. The Addoha group’s factory, also know as Ciments de l’Atlas, will require an investment of Dh3.6 billion ($430 million), with the creation of 1,000 jobs in its two units.
Spanish firm Lubasa, over the past 50 years specializing in construction, real estate development and environmental management, will set up the third cement factory. To complete this project in the region of Sidi Kacem, Lubasa will invest Dh1.9 billion ($228 million) and create 170 direct jobs and 300 indirect jobs.
The investment commission has also studied many other projects. In total, some Dh25 billion ($3 billion) and the creation of 5500 jobs are at stake.
Most developments are high end
Among others, the commission will soon assess the Loukos construction project, a city planned by Emirati firm Al Qudra and Moroccan firm Addoha. The investment for this new city amounts to Dh1.2 billion ($144 million) and will create 2024 jobs. The investment program includes the construction of apartments, houses, public facilities and shopping malls.
According to a study conducted by the Centre Marocain de Conjuncture (CMC) published in March 2007, the construction and real estate sectors make up 7% of national production for an added value of 5% of GDP. The latest statistics on employment reveal that the construction and public works sector employs around 700,000 people directly, representing 6.7% of the working population. The real estate sector generated Dh2.9 billion in foreign direct investment (FDI) in up to the end of September 2006, which represents 15% of all FDI flow.
“The real estate market is booming, as illustrated by domestic sales of cement at the end of September, which rose by 10% compared to the same period in 2005. The construction and public works sector also created 61,000 jobs by the end of September and the number of mortgages contracted by banks by the end of November rose by more than 25%,” said Leila Haddaoui, project director at CDG Development, a development and construction firm for large-scale urban projects.
In that sense, FDI development prospects in the real estate sector look very promising as illustrated by the real estate boom in high-end products: luxurious condominiums, office headquarters, five-star hotels, tourist resorts and port facilities.
Although there are many who bemoan the lack of maturity in Morocco’s real estate sector, notably the lack of reference prices, the lack of insurance tools and the threat of a speculative bubble, the construction sector continues to thrive.
The housing shortage, combined with the development of tourism projects and the emergence of a new type of professional real estate service industry all point to a promising future for Morocco.
However, while the market is in danger of becoming oversupplied with property for upper and middle income groups, the country is still suffering from an acute shortage of low-cost housing. Morocco’s cities are growing, as increasing numbers of migrants move in from rural areas. In 2000, 53% of Morocco’s population lived in urban areas, a figure that is predicted to rise to 65% by 2012.
While demand for residential property in Morocco is high, the market faces three principal challenges: affordability, limited financing options, and unclear laws regarding landownership and titling issues.
As foreign interest in Morocco continues to grow, the government needs to be careful to ensure that the all-too-common problem of “make it all luxury” is not repeated in a country that needs to house a rapidly growing population. With a housing shortfall estimated at anywhere form 500,000 to 1.5 million, social housing could well be more of a priority.
