Besides focusing on major construction projects aimed at modernising transport links and social infrastructure, a considerable part of Algeria’s recent spending drive has also been directed at enlarging the pool of affordable homes for the growing population.
Consecutive years of high oil prices have solidified the country’s fiscal position. This has not only allowed plans for heavy infrastructure investments to go ahead, but also facilitated the allocation of a large chunk of the government’s public spending plan to increasing housing options. Of the €222bn set aside for infrastructure revamping between 2009 and 2014, €39bn is being used for the construction of new homes.
Under the previous housing plan, which ran from 2005 to 2009, the government achieved its goal of building 1m homes. Targets are more ambitious for the current scheme, with the state aiming to add 2.45m new homes by 2017. The authorities are aware of the need to build 225,000 homes per year to close the current gap, but the sector has only been able to produce 75,000-80,000 annually, according to the Ministry of Housing and Urban Development.
ALL HANDS ON DECK: Much of the responsibility for building these new units had been in the hands of local contractors, but the sheer size of the task has prompted the government to call on an increasing number of foreign construction companies to help complete the job. “Social housing needs a lot of construction materials and labour. The prices are set, so not all contractors are qualified or willing to work on these kinds of projects,” said Dareb Debsi, the general manager of Egyptian construction firm Arab Contractors, which is building a total of 5000 homes in Algiers, Béchar and Mostaganem. In July 2013 a consortium including Italy’s Costruzioni & Servizi and Portuguese contractors Prebuild, as well two Algerian partners, began the construction of 6000 homes in Algiers, a contract worth €133m.
WIDENING THE FIELD: As part of efforts to diversify the construction sector, the authorities issued an international tender in 2012. Around 200 firms responded and 60 contractors were selected. Projects have been allocated to consortiums of foreign firms, generally 2000-5000 homes to each. Companies from Spain, Portugal, Turkey, Jordan, Italy, India, Romania and Egypt have been selected, while Chinese contractors, which have been taking part in social housing projects in Algeria for years, made up around one-third of the selected construction firms.
It is a win-win situation for both the government and the foreign operators. For a country where a lack of housing has been a stubborn issue, the heightened role of international firms – which has strengthened technology and expertise transfer to local subcontractors – has helped facilitate completion on a number of projects. At the same time, Algeria’s housing boom can be a shot in the arm for international companies that have seen their domestic markets stalled by the economic crisis and a lack of investment, especially in southern European countries.
BANK ON IT: Although mortgages have been traditionally limited, and Algerian contractors sometimes face difficulties in getting banks to finance real estate projects, the tide may be turning. In May 2012 the state-owned bank Credit Populaire d’Algerie signed a deal with the Entreprise Nationale de Promotion Immobilière to finance the building of 150,000 homes. The bank also signed a second agreement with the National Agency for Housing Improvement and Development for the construction of an additional 100,000 homes. These deals may be a good omen for a housing market where banks have traditionally been absent, given the state’s direct role in funding projects.
Algeria’s push to increase the stock of affordable homes will likely remain a priority for years to come. Bringing in foreign partners will boost production capacity, but for the government’s strategy to succeed other elements will need to come into play. Cutting red tape, as well as raising domestic cement and steel production capacity, will help reduce project delays.
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