Interview: Zhor Kabbaj
What challenges do real estate promoters face?
ZHOR KABBAJ: The main difficulty is not simply access to land; it is access to authorised land. There have been major advances in recent years in facilitating access to authorisation processes, through the creation of a single government office and the implementation of digital systems at municipal centres. Major obstacles have been eliminated, and now perhaps the biggest challenge in accessing land is price. Land often belongs to several owners who cannot agree to sell, or to investors who put off selling and wait for an increase in prices.
Furthermore, recent changes in property legislation have resulted in increased estate taxes. This equates to higher taxes at the point of sale of land, so that owners think twice before selling. The new price scale on the valuation of land – sometimes even higher than the actual land value – scares the seller, who fears a price revision based on the new tariff.
One last problem to mention is access to financing. Banks have given a lot of credit in the past, and it is unsurprising that they are more prudent now. Speculation is a big part of a promoter’s role, and banks tend to lend to those who do consistent projects, and only after close analysis of previous projects.
How do you assess the recent levels of supply and demand for property in Casablanca?
KABBAJ: If we talk about 2014 and 2015, demand for high-end housing has been declining. In terms of the residential offer in the Casablanca region, it is abundant, whether in central Casablanca, or in suburban areas like Bouskoura or Dar Bouazza.
For mid-range housing, demand is stable, and not increasing. The offer exists, but its prices are not currently adapted to the real demands of the market. In general, prices tend to exceed the purchasing power of the middle-income segment. However, promoters seem to have realised this. In order to find an appropriate price, it is necessary to design apartments differently, adapting them better to clients’ needs and income. Prices have stopped increasing, and in some cases are even decreasing informally through discounts that were not applied before.
Promoters in the Moroccan market benefit from significant margins, and though some are very indebted, their land base remains large and important.
What are the main challenges for property rental?
KABBAJ: The main challenge is the quality of service, and its continuity over the long term. Standards should be raised by offering a good service 24 hours a day, seven days a week; maintaining infrastructure; and installing video surveillance and fire security, among other facilities. We also need to think about adding greater flexibility to contracts and giving administrative help to expatriates in Morocco, offering engineers and interior designers as well as luxury concierges.
The second challenge we need to mention is risk management for clients, given the slowness and the complexity of procedures involved in respecting the rights of landlords. Finally, there is the strategic challenge of responding to different rental segments, with their different sizes, locations and mixes of products.
What is the potential in commercial real estate?
KABBAJ: There is sufficient availability with regards to industrial and logistics real estate in the Casablanca area, whether it is for sale or for rental. The offer is stronger for logistics real estate than it is for industrial real estate. There has been a significant boom in logistics projects in recent years, and these largely respond to relatively slow demand. There is still room for growth for malls, especially if we compare the offer in Casablanca and Rabat to a comparable city like Istanbul. Nevertheless, there needs to be a better-adapted offer, with smaller malls specialised by sector. Also, a positive move would be to avoid mixing sales and rentals in the same mall. Lastly, with regard to office space in Casablanca, the economic capital, there is a clear oversupply at all price levels, whether it is in sale or rental.
Read More from OBG
