Interview: Mohammed Fassi-Fehri
Why have real estate developers shown only limited interest in investing in the mid-range segment?
MOHAMMAED FASSI-FEHRI: This situation resulted from the many opportunities that were available in the social housing segment, encouraged by fiscal and other incentives. Social housing needs were immense and incentives guaranteed interest; however, opportunities are now being exhausted. Developers must now look elsewhere, but many are awaiting incentive packages.
So far, incentives have been weak and need to be made more substantial. A more attractive value-added tax rate could help, and there is also a need for more mobility on the property market. For instance, if you live in Fez and you want to sell your apartment and move to Rabat, you will have to pay taxes in Fez and registration costs in Rabat, adding 30-40% to the sales price.
How has the entrance of foreign construction firms affected the Moroccan market?
FASSI-FEHRI: Morocco is a country that is very open. There are few other countries where it is as easy for real estate companies to establish themselves. This is good for competition in the market, but it does not encourage developing local capacity. A distinction should be made by applying a national preference.
What is more, many countries subsidise international corporations in the market, thus creating unfair competition. This was previously the case with European companies and now with firms from Turkey and other countries. We need to find a good balance between openness and creating value at the national level.
To what extent is land acquisition posing a challenge for real estate developers?
FASSI-FEHRI: Developers often complain about issues acquiring land when in fact this speculation problem has been created by the developers themselves. They often buy land at the fringes of a city and then pressure authorities into providing authorisation to build. Although land is cheap, developing these properties is inefficient due to the lack of infrastructure. More needs to be done to prevent speculative activity.
One way is to reconsider local taxes that aim to encourage more building activity as well as avoid speculation, but which also penalise long-term projects. In the current system, long-term projects such as the Zenata city project, which will be built over 30 years, face a final tax bill that would be exorbitant. However, a distinction should be made between long-term projects and developers who buy land and let it lie fallow indefinitely.
Thus the land market needs to be regulated in a more thoughtful fashion. So, for instance, no project outside cities should be authorised if there is still sufficient land available in the city itself. Development plans should be reviewed in order to avoid speculation on the outskirts of a city. Finally, urban development plans should be updated on a more regular basis to ensure they continue to accurately reflect trends in the real estate sector.
How can environmental sustainability be further encouraged in the construction sector?
FASSI-FEHRI: In residential construction, environmentally friendly apartments are not much more expensive than regular ones. Refitting an existing building to make it meet environmental standards is much more costly.
Because of this, new regulations should make environmentally friendly construction mandatory, for example by requiring installation of solar heating systems. By planning ahead, we can identify cost-saving opportunities.
Many real estate projects are now delivered, but our cities have too few green zones, too little space to breathe. In a new city like Zenata, this is being tackled by ensuring everything is within walking distance and by planning for many green areas.
We also need more diversity. Today, many smaller cities and towns all look alike because the same building materials are being used everywhere. Using local materials also helps to protect local building methods.
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