Real estate developers in dire straits
People left behind, business failures, serial bankruptcies, over-indebtedness, an accumulation of agios, job losses, lack of visibility… Residential building professionals are in disarray. The entire ecosystem (industries, businesses, design and control offices, building and construction professionals, developers, companies of all trades , etc.) is collapsing. In this same context of gloom, the low-income housing system has been suspended since 2020, without any alternative being put in place since the program was stopped more than 2 years ago.
In addition, there is no offer or adapted system that meets the specific needs of the middle class… Worse still, this deadlock has resulted in a wait-and-see attitude of buyers who postpone purchases indefinitely, hoping in vain for new incentives. The result is that the real estate sector is experiencing a drastic drop in transactions. This is the direct consequence of the combination of several factors: the difficult situation marked by inflation, the collapse of the purchasing power, and the increasingly expensive real estate loans, to which one must add the soaring prices of inputs and building materials (steel, concrete reinforcing bars, aluminum, glass, wood, tiles, sanitary facilities, etc.) or again the scarcity and high cost of land with a price per square meter that reaches record highs in large cities like Casablanca (up to 100,000 Dirhams (US $ 10,000) per square meter in the Racine district!)
The guests of the Club de L’Economiste, two vice-presidents of the National Federation of Property Developers (FNPI), Anice Benjelloun and Adil Bouhaja, are sounding the alarm. The two vice-presidents drew up a worrying picture of the situation and analyzed the complex situation of one of the strategic ecosystems of the national economy, which contributes, it should be remembered, up to 15% of the national GDP.
Main observation: The indicators are alarming! “We have recorded a 50% drop in applications for building permits. This resulted in a 50% drop in housing starts. At the same time, requests for bank loans for real estate development fell by 50%, all against a backdrop of substantial declines in transactions”, said Adil Bouhaja, vice-president of the FNPI. In addition to these red indicators, “there is a real problem linked to the decline in purchasing power which began with Covid-19 and which has been worsened since 2022 with the crisis of the war in Ukraine and the generalized skyrocketing prices, and the rise in the cost of living…”, explained Anice Benjelloun, especially since banks have tightened the conditions for granting loans. “Banks are increasingly careful when financing and granting loans to buyers”, added Benjelloun. Moreover, given inflation and the rise in the interest rate, the risk of non-repayment is high, and as a result, banks revise downwards the amounts of the loans requested, even for solvent customers who fulfill the conditions. “The increase in bank interest rates has led to the selective granting of loans to buyers”, notes the Federation of Property Developers. Obviously, this deadlocked situation had snowball effects, such as, for example, the drop in cement deliveries by 10.65%, standing at 12.48 million tons at the end of December 2022, while the real capacity is standing at around 22 million tons.
Amin RBOUB
