Algeria: Boosting housing stock
In a positive sign that Algeria’s moves to reduce its housing deficit are finally bearing fruit, several social housing projects have been completed in the first half of 2012. The state has worked desperately to overcome the shortage over the past 10 years, and allocated roughly €40bn under the current five-year national investment programme for related construction projects.
The government has adopted an ambitious housing programme and aims to construct 2m social housing units between 2009 and 2017. This comes on top of 1m homes which were built in the 2005-09 period. To account for delays on several projects under the previous five-year plan, and to accommodate the steady growth of housing demand, the government set the goal of building 1.2m homes under the 2010-14 programme.
“Particular measures have been taken to allocate accessible land for housing development in collaboration with the provinces. Indeed, this has been done through strategic urban development planning and working with local and foreign firms. The programme will see the delivery of 240,000 units per year,” Noureddine Moussa, the minister of housing and urban development, told OBG.
While progress for certain projects has at times been slow, the announcement of several recently completed projects bodes well for the sector in 2012. In mid-June, 570 new social housing units (logements publics locatifs, LPL) were allocated to residents in the area of Aoulef, located 250 km east of the capital city of the Adrar region. Construction took two years and a total investment of €30.64m.
In the area surrounding the city of Constantine, 520 subsidised housing units (logements promotionnels aidés, LPA) were allocated to area residents in late May. Local housing authorities indicated that a total of 8000 such units are slated to be delivered in Constantine by the end of 2012.
Also in May, 310 rural homes were delivered in the rural community of Mechraa Houari Boumediene, located 88 km south of Bechar, which should go a long way to meeting the registered demand for 500 homes in the area.
There is also considerable room for private sector investment in real estate management under the national housing programme. Of the 7500 LPA units to be built in Oran between 2010 and 2014, approximately 3000 are reserved for private developers. The remaining units will be allocated to public agencies that specialise in the field, such as the Oran Property Agency (Agence Foncière d’Oran) and the Office of Real Estate Promotion and Management (Office de Promotion et de Gestion Immobilière).
The timeline for many of these projects will benefit companies that are able to compress delivery schedules while maintaining competitive prices. In May 29 private real estate developers were selected amongst hundreds of bidders for the construction of 3000 LPA units, according to local press reports. In the selection process, local authorities insisted upon companies that are able to meet project deadlines, as delays have been a persistent, system-wide problem. In Oran, some 8500 housing units meant to be completed between 2004and 2006 are still under construction.
LPL units made up roughly 91% of the national real estate market in 2011 and represent the bulk of current unmet demand. Mid-range properties made up approximately 8% of the market, and high-end housing only 1%. The 2010-14 spending programme aims to incentivise and finance the construction of several different levels of social housing nationwide, including 500,000 LPL units for rent and 500,000 LPA homes.
In addition, 300,000 units are to be built under the slum eradication project (Résorption de l’Habitat Précaire) and another 700,000 units under the rural development programme, which finances the construction of homes in rural areas in an effort to alleviate congestion in urban centres.
LPL housing is reserved for low-level salaried workers who earn less than €245 per month. Rents on these properties vary between 2% and 12% of minimum wage. LPA housing, meanwhile, aims to encourage home ownership among the middle class by offering government-subsidised interest rates and loans. LPA homes are open to Algerians earning between one and 12 times the minimum wage.
“Incentive measures have been taken simultaneously on the demand side to make it solvent and on the supply side to make it more reactive through several schemes and actions, including: the institutionalisation of procedures, tax benefits, the reduction of housing costs and clearly defining housing rights,” Moussa said.
The challenges facing the Algerian housing sector are considerable. The majority of the population is concentrated in the northern Tell region, where large cities and much of the nation’s economic activity is located. By 2008, 63% of the population lived in the Tell region, which represents only 4% of the territory.
As a result, a high rate of urbanisation and limited space for expansion have led to rising real estate prices, and some land owners have manipulated prices to their advantage. These conditions have in turn led to overcrowding in many urban areas, as well as the spread of shantytowns and unregulated urban expansion on the outskirts of many cities that do not meet basic living standards.
However the regulatory environment is improving, as the state has taken on several initiatives aimed at organising the sector. The National Development Master Plan 2025 (Schéma National d’Aménagement du Territoire) was adopted in 2010 to plan the establishment of new urban centres in order to ease congestion.
The state also undertook an urban planning scheme for Algiers in 2010, which will manage all future expansion. Insufficient land availability has been an obstacle to the real estate sector as a whole. To remedy this, the government is making state-owned land available under a number of 33-year concession agreements that can be renewed twice, the majority of which will be reserved for public housing.
While challenges remain for the sector, strong financial commitment from the government and sustained growth in residential demand − with a particular focus on social and mid-range housing projects − should continue to spur real estate growth in the mid to long term.