Private developers are moving to establish a permanent foothold in Algeria’s largely untapped real estate market, with a number of sizeable projects due to break ground in the coming year.
Following nearly a decade of strict financial restrictions and political instability, the recent glut of petro-dollars has helped fuel a massive increase in the construction and real estate sectors, drawing in foreign investors and nurturing domestic developers.
Gulf investors have flocked to Algeria to develop its 1,200 kilometer coastline. Some of the Gulf’s more prominent property investors — including Emaar, Gulf Finance House and Al Qudra — have unveiled billion-dollar plans for commercial, residential, tourist and mixed-use projects in and around Algiers.
Among the more prominent developments is the new megaproject by Emirates International Investment Company (EIIC), the $4.8 billion Dounya Parc, a nearly 7 million square meter greenbelt around Algiers. The company also has unveiled plans for the $322 million beachfront Ain Chorb tourism village, which the group is developing with the Kuwaiti Investment Group. Projects of this size represent a massive step forward for the Algerian market, although the lack of precedent means that such developments often face a lengthy land acquisition process requiring coordination with both ministries and local authorities. However Camille Nassar, CEO of EIIC Algeria, said the country’s enormous commercial potential was a crucial incentive.
Europe and China look to the Maghreb
Gulf investors are not alone in looking to enter the Algerian market. Swiss-based Société des Centres Commerciaux d’Algérie (SCCA) is overseeing the construction of Algeria’s largest commercial center, the $73 million Bab Ezzouar complex, which will include some 31,000 square meters of retail space. The China State Construction Engineering Corporation (CSCEC) has also expressed interest in expanding its Algerian operations by developing real estate.
Domestic investors have also joined in the headline grabbing events. Dahli Group’s $3.4 billion Alger Medina development in downtown Algiers issued a bond that was marketed directly to the public — an audacious move and the first of its kind for the country’s fledgling capital markets. The bond raised 30 percent of the cost of the project, which will provide some 1 million square meters of office space.
Following the completion of its ambitious low-cost housing program, the Ministry of Housing and Urban Planning will dedicate an additional $19.4 billion to building one million more homes. As one of the primary pillars of President Abdelaziz Bouteflika’s election campaign, the new residential space will be marketed through a network of more than 450 private and state-owned real estate agencies offering subsidized schemes.
With one of the highest per-unit occupancy rates in the world, according to the United Nations Development Program, Algeria has also tried to mitigate urban migration by launching a program to improve existing housing structures around the country. Nacer Djama, president of the Caisse National du Logement, said there is enormous opportunity for companies specializing in the construction of social housing in the coming years. With only 15,000 to 20,000 mortgages given out last year, Djama said the banking sector needs to catch up with demand for housing finance.
While Algeria’s real estate market offers a tantalizing target for companies that are increasingly squeezed by the global economic downturn, developers — and foreign companies in particular — still face a number of obstacles. The prime minister recently issued a decree on foreign investment, mandating that any project that benefits from government incentives must have a local majority shareholder.
Still, Algeria is a promising place for the committed long-term investor. The trials and tribulations of the market as it adjusts to these multibillion dollar projects will also help prepare the authorities to deal with the needs of the country’s increasingly dynamic real estate sector.
Sam Inglis is Executive’s Mediterranean correspondent, based in Istanbul