Social housing programmes and private investors driving Tunisia construction and real estate market

Carried by the government’s focus on expanding the middle class – together with rising rates of urbanisation – Tunisia’s real estate sector has grown accustomed to years of gradual expansion. While it is recognised as one of the most interesting markets in the region due to its stability and development potential, recent years have nonetheless brought some challenges, including regulatory blockage and rising scarcity of land to expand housing options. In hand with this, rising construction costs and the difficulty gauging demand patterns due to uncertainty have somewhat increased risks for real estate developers. Despite these challenges, the sector continues to demonstrate growth potential.

Sector Size

With 11.5m inhabitants Tunisia has a considerably smaller population than neighbouring Algeria or Morocco, but its real estate has historically seen expansion, as foreign and domestic investors saw the sector as a secure investment with predictable returns. Nowadays, roughly 80% of Tunisians own their own home, according to figures by the National Association of Real Estate Developers (Chambre Syndicale Nationale des Promoteurs Immobiliers de Tunisie, CSNPI). The 2014 census found that nearly 18% of owned homes in the country were high-end properties bought as either a second home or as an investment.

Key figures that show the real estate sector’s contribution to the economy are difficult to come by, but according to figures from the Centre for Affordable Housing Finance in Africa (CAHFA), the housing segment alone contributed $2.8bn to GDP in 2014. As of January 2018 there were 3125 officially registered real estate developers, and annual production of new housing has notably eased from approximately 14,000 units in 2013 to 10,000 in 2017, according to the CSNPI. A lack of available land and rising construction costs have become increasingly difficult obstacles faced by operators.

Although the macroeconomic environment surrounding the sector has become more unpredictable after the 2011 revolution, several real estate segments remain sources of opportunity. Adding to this potential, a series of large-scale transport infrastructure projects are likely to help expand housing development areas in the capital city of Tunis and other urban centres across the country.

Government Participation

Following independence, the government took the reins of the sector. Although most of the main policy-making falls under the Ministry of Equipment, Housing and Territory Management (Ministère de l’Équipement, de l’Habitat et de l’Aménagement du Territoire, MEHAT), the establishment of several state-run agencies to promote housing acquisition and urban development has had a visible impact on housing.

The Société Nationale Immobilière de Tunisie began operating in 1957 and has played a central role in housing construction over several decades. Later, in 1973, the government established the Housing Land Agency to manage the availability of land plots and encouraging adequate urbanisation. To expand government programmes supporting low-income housing, the state created the Société de Promotion des Logements Sociaux in 1977. Another mechanism to improve housing conditions for low-income individuals is the National Fund for the Improvement of Housing, which began operating in 2007, finances home improvements for citizens with income levels below the minimum wage.

Rising discontent over the pace of political and economic reform following the 2011 revolution has put pressure on the government to increase social expenditure. This is likely to be particularly beneficial for the housing sector and other urban development efforts. While the government’s budget increased by 10.7% in 2017, the MEHAT has seen its budget increase over two-fold to reach more than $660m, according to figures from the CAHFA. For the sector to effectively benefit from the added financial capacity, however, some regulatory and financing obstacles will need to be overcome. The number of housing units in Tunisia expanded by 789,103 between 2004 and 2014 to reach 3,289,903, according to government censuses in those years.

Sector financing by private banks remains focused on the middle- to high-income segment of the market, leaving lower-income earners mostly dependent on publicly run housing programmes. Average rates for home mortgages varied from 7.23% to 7.52% in 2016, according to the CAHFA. However, interest rates for subsidised government housing loans can be as low as 2.5% for individuals in the lowest-income brackets eligible for financing.

Housing Programmes

Support for home acquisition has traditionally focused on facilitating financing, through direct government loans are available to cover part of the cost of a property purchase or the initial payment of a commercial loan. Launched in February 2017, the First Home Programme ( Programme Premiere Logement, PPL) aims to support individuals or households earning 4.5-10 times the minimum wage in acquiring their first home. In 2018 the monthly minimum wage is TD357.14 (€137.13) for employees working 48 hours per week and TD305.59 (€117.34) for 40-hour weeks.

The programme has been given initial funding of TD200m (€76.8m) and finances down payments worth up to 20% of the total cost of a home. Support is limited to a series of government-approved housing developments, and the total cost of a qualifying home cannot exceed TD200,000 (€76,800). The initiative allows the government loan to be repaid over 12 years with a five-year grace period and aims to facilitate access to bank loans.

Some sector observers contend that the PPL could use some tweaking for its reach to broaden, especially when it comes to supporting middle class property buyers. The CSNPI has been lobbying sector authorities to increase the maximum home prices allowed under the initiative to TD300,000 (€115,191) and to increase the upper bound of earners eligible for the programme from 10 times the minimum salary to 15. “This is the only way to accommodate the rise in home prices we’ve had over the years,” Fahmi Chaabane, president of CSNPI, told OBG.

An earlier initiative, established in 1977, channels support to lower-income Tunisians. The Fund for the Promotion of Housing for the Salaried (Fonds Pour La Promotion des Logements aux Salariés FROPOLOS) initiative is managed by Tunisia’s state-owned Housing Bank and allocates loans to homebuyers earning less than 4.5 times the national minimum wage, across three income categories.

For households or individuals earning between one and two times the minimum wage, the state finances 90% of a unit costing a maximum of $25,500. Eligible homes can be no larger than 50 sq metres, and loans have a repayment period of 25 years. For households making between double and triple the minimum wage, homes bought under the programme can be up to 75 sq metres and cost $32,500, with the state loaning 90% of the full price of the unit over a 25-year period. The third category supports households earning between three and 4.5 times the minimum wage. In this category, recipients can acquire a home with a size of 80-100 sq metres for a price of up to $43,400.

Interest rates for the loans vary according to income, with lowest-income applicants subject to a 2.5% annual interest rate, middle-income earners set at a 4% rate and higher-income individuals receiving credit at a rate of 5.75%.


Housing programmes are having trouble keeping up with rising home prices, which, according to the CAHFA, have inflated at an average of 8% per year between 1990 and 2011. Although post-revolutionary instability has made domestic and foreign investors more cautious in some sectors of the economy, real estate has continued to receive attention.

This, in conjunction with higher construction costs, has put real estate prices on an upward trajectory for several years. “In 2017 average prices for new housing began to stagnate after a steep rise over the previous four to five years,” Tarek Thabet, regional director for Remax Tunisia, told OBG. “The fundamentals on which the price of new housing is based have been going up, so the overall level that prices have reached is not exaggerated at all.” The arrival of Libyan nationals to avoid ongoing conflict and instability in their country has added to price pressures for both rents and sales.

The capital Tunis has felt the trend most markedly. Prime areas such as Berges du Lac or the northern suburb of La Marsa have seen more acute price rises because of their value as solid real estate investment options. According to Knight Frank’s “Africa Report 2017/18”, which compares real-estate markets across the continent, renting a four-bedroom executive house in an up-market area in Tunis can cost $4000 per month. Average acquisition prices in Tunis can vary between $400 in the southern outskirts of the city and $1000 per sq metre in sought-after neighbourhoods like La Marsa or Carthage, according to figures by Remax Tunisia. “If commuting options open up, people could live 30-45 minutes away from the city centre and get good value for money,” Thabet told OBG.

Homebuyers, however, are set to face further price increases, after the 2018 budget added a 19% value-added tax (VAT) to any acquisition of a property. Despite the need to improve the country’s budgetary situation, the measure might make it harder for first-time homebuyers to enter the market. The CSNPI has stated that the tax alone might push property prices up an extra 12% over the course of 2018 and had suggested a softer tax of 7%. Homes purchased through the FROPOLOS programme, however, are exempt from VAT.

Land Availability

As demand for new housing expands the size of cities and towns, especially along coastal areas, available plots have become increasingly scarce. For several decades a large volume of housing expansion was undertaken on state-owned lands through the Housing Land Agency; however, even the state has become short on land. The problem has been compounded by private developers buying up land in advance as a means to secure it for future developments. Scarcity is increasingly felt in the more sought-after locations, especially in the capital city. “In Berges du Lac, a plot of land used to cost TD1100 (€383.97) per sq metre in 2011. Today, it costs roughly TD7500 (€2880) per sq metre,” Chaabane told OBG. Another issue affecting the sector is the conflict with agriculture-denominated land, which can lead to restrictions in the expansion of housing, especially in the case of developments on the outskirts of bigger cities.

Scaling Developments

A number of largescale residential and multi-purpose real estate projects have been in the pipeline for several years. After various interruptions, construction began on the Tunis Financial Harbour project in 2016. The development, 25 km north of the capital’s centre, is budgeted at $3bn and is being constructed by Tunis Bay Development and Bahrain-based investment bank Gulf Financial House. Covering more than 523 ha of land, it will include villas, a golf course, offices and a university campus. According to the developers, the project is expected to create 16,000 jobs.

Another Gulf developer, Sama Dubai, launched a $25bn, mixed-use project in 2008 that involved the construction of a marina. While the project was interrupted in 2011, local media reported in 2016 that work on the site was set to resume.

One long-awaited project is the $5bn Sports City, launched by Emirati developer Bukhatir Group in 2009. Although preliminary work had already started shortly after its announcement, the development – earmarked for a 256-ha area between central Tunis and the northern suburb of La Marsa – has faced a series of obstacles. Work on the project was set to resume after new investors bought a share of it; however, disagreements between Bukhatir Group and Société de Promotion du Lac de Tunis, a Saudi-Tunisian joint venture, arose after Bukhatir aimed to change the nature of the project by increasing housing units and reducing the area set to be occupied by sports facilities. An agreement on the future of the project and its finalised structure still had yet to be reached by early 2018.

Another large-scale, mixed-purpose development has been announced for the outskirts of the capital. Tunisia’s Loukil Group is set to partner with Industrial and Commercial Bank of China to build a 200,000-sq-metre commercial centre in Raoued. The project, budgeted at $120m, will include a 100,000-sq-metre shopping area, a number of restaurants, a hotel and a business centre. Announced in July 2017, construction on the development reportedly began in late 2017.


Real estate in Tunisia is likely to remain an interesting option for domestic and international investors alike over the medium term. In addition to the potential for residential developments, other segments remain relatively underdeveloped. According to Knight Frank, prime yields for residential real estate in Tunisia averaged 7.5% in 2017. However, other segments of the market were considered more profitable, with industrial real estate showcasing prime yields of 14%, office real estate 10.5% and retail 9.5%. These provide a promising context for the sector’s future development, but assessing future demand under a mantle of regional instability will remain challenging. Rising construction costs and added taxes on home purchases are likely to affect sector profitability over the shorter term, but the overall demand potential remains significant.

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The Report: Tunisia 2018

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