MOROCCO HOUSING MARKET: 

INDUSTRY STATUS, GOVERNMENT INVOLVEMENT, AND 

INVESTMENT OPPORTUNITY 

Overseas Private Investment Corporation 

January 4, 2006

 

 

 

The OPIC team that produced this report was headed by Stephen Everhart, Managing Director-Chief 

Economist, lead research analysts were John McKenna III of Duke University and Patrick Carleton-Senior 

International Economist-OPIC. Other members of the OPIC team include: Debra Erb-Director of Housing 

Programs, and Tony Ieronimo-Director of Economic and Market Analysis. 

OPIC appreciates the invaluable support and advice of Steven A. Bernstein, Senior Advisor-United States 

Department of the Treasury. 
 2

MOROCCO HOUSING MARKET

INDUSTRY STATUS, GOVERNMENT INVOLVEMENT, AND INVESTMENT OPPORTUNITY

EXECUTIVE SUMMARY

For sustainable development in the Middle East and North Africa (MENA) region, a deficiency of proper 

shelter and basic living services must be remedied as populations grow. As of 2001, 62% of Moroccans living 

in urban areas owned their homes; however, only 20% of rural houses have running water and only 2% have 

proper sewage facilities.1 Improving housing policies influences macroeconomic performance through the 

positive spillover effects on labor markets, supporting savings behavior, and strengthening the quality of 

economic growth. Although showing great potential, the housing industry in Morocco is being artificially 

supported by government subsidies and public sector domination, damaging the Moroccan economy. Strong 

demand coupled with inefficient resource allocation has made many housing units completely unaffordable to 

lower-income families. However, hope is on the horizon. Since 2002 the government has prioritized housing 

and infrastructure development through a multitude of municipal construction projects involving regional 

investors and international development agencies. Improved financial transparency, strong property rights, and 

high demand make the Moroccan housing industry ripe for low-risk foreign investment. 

MACROECONOMIC IMPACT OF HOUSING IMPROVEMENT

Constructing a strong and viable housing industry inextricably leads to capital advancement in low-income 

nations. Sustainable growth grounds itself in the tangible assets of the poor, primarily housing. Improving 

housing finance supports economic development through several channels: increasing saving, investment and 

employment; creating a solid capital base; and including low-income individuals and families in the sovereign 

legal structure.2 In many developing economies the lack of a fully functioning mortgage market constrains the 

development of the housing sector. Without financing options, low- and middle-income households cannot 

afford to purchase homes. Since a house is often the primary investment and savings vehicle for those groups, 

a lack of housing finance also constrains overall saving rates. Low saving and investment rates restrict 

economic growth and limit economic development. 

International experience suggests that living standards increase when there is widespread availability of home 

mortgages because mortgages have a positive impact on the quality of housing, infrastructure, and urbanization. 

Mortgage availability for low- and middle-income groups encourages investment in both residential property 

and other real estate (such as retail shops and other small businesses). Additionally, structured mortgage 

markets assert legal and financial accountability to individuals and families who might remain in the extra-legal 

sector. This, in turn, encourages medium- to long-term growth and new jobs for low- and middle-income 

workers. 

 

1 McCarter (June 2005). 

2 De Soto (1997) presents a detailed analysis of the developmental benefits inherent in freeing a developing country’s stock of “dead 

capital” through a well functioning housing finance sector. 
 3

Housing finance also encourages the growth of the financial services sector, which studies have also shown to 

be a key factor in economic development.3 If consumers begin to save for down payments and loan 

repayments, these actions increase both the assets available to the financial services sector, and the demand for 

more financial services. Additionally, financial markets and intermediaries act as a lubricant in well functioning 

economies. They perform the crucial task of mitigating information and transactions costs and provide a 

needed bridge and filter between economic agents of information that otherwise would not be shared. This 

enables firms to allocate their resources more effectively and increase their productivity, resulting in greater 

overall economic growth. King and Levine (1993), Beck et al (2000) and others have shown a direct causal 

relationship: financial deepening leads to greater economic growth. Going even further, Beck et al (2004) 

showed that the economic growth generated by financial deepening is disproportionately geared toward the 

poorer sectors of society, decreasing inequality. 

Finally, empirical studies have shown that there is also a positive relationship between land distribution 

equality, poverty reduction, and economic growth.4 More accessible housing finance could lead to more 

ownership by low and middle-income households. Low and middle-income households are the most limited in 

financing options, both because of their inability to afford down payments and also their inability to access 

capital markets for long-term loans.5 At the same time, housing is often their biggest expense, accounting for 

50 to 70% of their budgets. If housing finance can be made more affordable, that will free up resources that the 

poor can then use for other opportunities, such as starting small businesses. 

The main challenge facing the housing sector in Morocco and other Middle Eastern and North African 

countries is the lack of affordable housing, not a lack of available housing stock. The lack of efficient financing 

options is a large component, and the single most correctable component, of these high housing costs. Since 

housing policies affect the entire economy - influencing saving, consumption, financial depth, employment and 

government budgets6 - improving the availability of housing finance would go a long way towards furthering 

overall economic development and reducing poverty. 

GENERAL MARKET SITUATION

The Moroccan housing market faces three main obstacles: (i) affordability; (ii) land and ownership titling 

encumbrances; and (iii) poor finance infrastructure. On the surface these problems are being addressed by 

government initiatives designed to correct market discrepancies and decrease the proportion of the population 

living in informal settlements. However, the roots of the issues, unemployment, urban growth rates, and 

financial insufficiencies, are not being appropriately addressed. The result is a market with much potential for 

improvement in the short run but that will remain inadequate in the long run if not improved. 

An April 2005 survey of MENA housing sectors concluded that many of the region’s countries suffered from 

affordability problems rather than insufficient housing stock. While some segments of the population, mainly 

the lower income groups, suffer from inadequate supply, many of the countries are facing over-supply for the 

upper and middle income groups. The same report found that Morocco’s housing price-to-income ratio7 (9.2) 

is the highest in MENA and nearly double Tunisia’s (5.0); see Table 1 below. 

 

3 Beck et al (2000), provides a representative study. 

4 Galal and Razzaz (2001) provide detailed information on the empirical literature. For example, Alesina and Rodrik (1994) have shown 

that reducing inequality in land ownership across income levels by one standard deviation increases economic growth by more than one 

percentage point. 

5 Erbas and Nothaft (2002). 

6 World Bank (2003). 

7 The “housing price to income” ratio is defined as the ratio of “median house market price” to “median income.” 
 4

Table 1: Housing Indicators Comparison, MENA and select countries.1

 

Per 

Capita 

GDP 

House 

price to 

income 

ratio 

Floor 

Area per 

Person 

Housing 

Credit 

Portfolio 

Informal 

Housing 

(%) 

Mortgage 

Loans to GDP 

(%) 

Urban 

Pop. (%) 

Population 

age 20-29 

(%) 

 [A] [B] [C] [D] [F] [G] [H] [I] 

Iran 6,128 9 21 - 25-30 2.8 65 19 

Lebanon 4,391 9 10-12 9 20-25 4 90 23 

Algeria 5,319 8.1 8.5 6.5 20 1.2 58 19 

Egypt 3,750 4.9 12 7.4 30-60 3 43 18 

Morocco 3,787 9.2 6 13 23 7 56 18 

Jordan 4,080 6.5 10 19 10 11 79 21 

Tunisia 6,769 5.2 6.5 10.44 Negligible 5.9 66 12 

Yemen 812 10-17 4 - 35 - 25 56 

 

Definitions: [B] Median House market price to median income; [C] median usable living space per person measured in square 

meters; [D] ratio of total mortgage loans to all outstanding loans in both commercial and government financial institutions; [E] 

percentage of total number of dwelling units in the urban area that is owned, managed, and controlled by the public sector; [F]

percentage of dwelling not incompliance with current planning, land use, and building regulations. Informal housing stock includes, 

but is not necessarily limited to, squatter housing stock, which means housing is built on an illegally occupied land; [G] ratio of total 

mortgage loans to Gross Domestic Product.

MENA markets tend to exhibit inelastic supply curves, even in the long run. As a result, increases in demand 

are not met by proportionate increases in quantity supplied; rather, demand increases translate largely into 

rising prices. This problem is particularly acute at the low end of the housing spectrum, where population 

growth is the highest. Since the high demand among low-income populations is not being met with adequate 

supply, informal settlements8 replace structured housing as the status quo. 

The current predicament is summarized in the World Bank’s February 2005 loan documentation for the 

Government of Morocco: 

“. . .sub-standard housing has sprawled in the form of squatter settlements and informal neighborhoods, mostly 

concentrated in the agglomeration of the Casablanca-Rabat-Kenitra continuum (where 55% of all slum 

households are living) and in the Tangiers-Retouan area, but are present throughout Morocco’s main cities and 

towns. Meanwhile, the historic housing stock of the ancient medinas, unattended and impoverished, has rapidly 

decayed. The number of slum households has increased from 160,000 in 1992 to over 260,000 in 2001, and 

the substandard housing represents 18% of the stock, with an average yearly growth of 4%. The latest housing 

stock census calculated at 430,000 the number of households living in informal neighborhoods, and at 90,000 

the number of households living in housing stock threatening collapse.” 9

The wide presence of unauthorized housing is an indicative byproduct of overly stringent land development 

regulations and vague property titling systems. Cumbersome titling procedures and unclear rights inexorably 

lead to inadequate property markets and over speculation.10 Significant public sector ownership fuels the 

 

8 Informal (unauthorized) housing is defined as the housing stock that is not in compliance with current regulations. This includes 

illegally occupied land (by squatters) as well as housing built outside the planned areas (even if land ownership is legal, and/or housing 

units constructed outside the construction regulations.) Slums on the other hand refer to deteriorated living conditions in terms of 

both social and physical dimensions. 

9 World Bank ( 2005). 

10 Baharoglu (2005), page 17. 
 5

disparity by preventing the “land supply from being demand-responsive, creating land densities that are not consistent with its 

cost, and conveying non-transparent subsidies, often unintentionally, to middle- and upper-income households rather than the 

poor.”11 Public housing ownership and rent-control are becoming increasingly problematic. Rent controlled 

units initially benefit existing tenants. However, these controls decrease the incentive for further investment in 

the housing sector leading to neglected maintenance, diminished unit improvement, and wholesale shifts in 

investment funds away from new construction. In Morocco, rent control has disenchanted investors, leaving 

the market to individual landlords with self-constructed units who rent without contracts or are reluctant to 

even allow renters at all. A 2001 survey concluded that there were nearly 500,000 units vacant. 

Baharoglu, Peltier and Buckley frame the market disparity from the supply side, explaining that disruptive 

“housing policies in Morocco are equivalent to a tax shifting the supply curve up.”12 As illustrated in Figure 1, 

the Moroccan government’s housing program is inadvertently driving prices higher and quantities lower than 

they should be, creating a dead-weight loss and unit shortages. It is important to note that all housing markets 

have relatively price-inelastic markets in the short run. Because construction of new units takes time, it is 

impossible to bring much new housing capacity online over a short time horizon. As such, price changes do 

not readily translate to an increase in quantity supplied in the short run. However, in the long run an efficient, 

unencumbered housing market will have a much more price-elastic supply curve. Higher than normal rents will 

attract long term investment in housing capacity, pushing out the short run supply curve, lowering prices 

(rents) and increasing equilibrium quantity. However, housing policies in Morocco currently deter the 

mobilization of growth capital into the housing sector, retarding this long run movement to a stable and 

efficient equilibrium. If Morocco follows the path to market liberalization discussed below, the long run 

housing stock should become more elastic allowing increased demand to be met by increased supply rather 

than exorbitant price increases. 

Tunisia-like 

supply curve 

Morocco-like 

supply curve 

Tunisia-like 

supply curve 

5.0 

Q1 Q2 Q1

9.2

5.0

2.3 (Demand) 

L

Quantity (Q) (Q)

Price to Income Ratio (P) (P) 

Figure 1: The Supply Side Effect of Moroccan Government Housing Policies

GOVERNMENT PRIORITIZATION

Government programs designed to eradicate substandard housing have had wide success in the MENA region. 

Tunisia’s 20 year long slum removal initiative has helped support a functioning housing market in which price 

and quantity accurately reflect supply and demand. Following suit, Morocco is actively pursuing slum removal 

through government programs by increasing the low-income housing stock. While the government has shown 

great conviction in its attempts to provide for its impoverished citizens, its broad subsidies have not succeeded 

in narrowing themselves to the targeted lower income segment and have cost the Moroccan taxpayers greatly, 

narrowed the mortgage market, and crowded out private development. 

 

11 Baharoglu (2005), page 12. 

12 Hilberset et al (2001). 
 6

Since 2002, the Moroccan Government has given considerable attention to developing its infrastructure and 

housing sector. The $800 million King Hassan II Second Economic and Social Development Fund finances 49 

projects across the housing, tourism, and highway development sectors. 13 Its focus is on slum upgrading and 

enticing private sector developers into the real estate market. In 2003, the Moroccan government announced 

further measures to eradicate its cities’ shantytowns after the terrorist attacks in Casablanca. Directed toward 

1.5 million Moroccans living in poverty, the government concentrated efforts to replace the slums with social 

housing, hoping to upgrade areas that provide fertile ground for the influence of Islamic fundamentalists. 

Moroccan Prime Minister Driss Jettou announced that the government would be building a total of 100,000 

homes each year and for low-income families and will be selling them for less than MAD 120,000 (USD 

12,700). A report in early 2004 recorded that publicly held companies created 110,000 new homes in 2003 

alone as a result of the government initiative.14 Also in 2003, the Interior Ministry announced an $18.3 million 

government-financed housing project in southern Morocco that would provide 3,500 new homes, 1,500 of 

which would be completed by July 2005.15 In June 2005 the government began a $360 million project for 

improving living conditions in Rabat. Concentrated on urban development, road development, public lighting, 

and green space re-adjustment, the initiative will relocate 4,000 families in nearby Sidi Yahia Zaer and commit 

to a ten-year restructuring program for the city of Sidi Taibi at an estimated cost of $95 million.16 

Resolve shown by the government is drawing attention from the international community. Since the focus on 

housing began in 2002, Morocco has received a total of $367 million from the World Bank to improve civil 

services, infrastructure, housing, and banking practices, $150 million of which was allocated specifically for 

housing development.17 Economic assistance from USAID will be $26 million for 2005,18 IFC exposure is 

approximately $450 million,19 and OPIC exposure is $49 million. 

Nevertheless, government involvement does not come without a price. 

In Morocco, government subsidies in the financial services and land development sectors are the most widely 

utilized form of housing stimulus. It is estimated that the aggregate cost of Morocco’s subsidies program is 

more than US$700 million per year, or over 5% of GDP.20 These subsidies, including tax exemptions, interest 

rate deductions, and co-lending practices, are targeted to tap the private savings of lower-income households. 

For example, a Moroccan civil servant with a fixed salary is likely to get a bank loan with a guarantee covering 

over DH20,000, with the state contributing 70% and the bank 30%. 21 However, many of the economic 

incentives are logistically impractical, as high-income households remain the primary beneficiaries. 

Land subsidies have also proven to be inefficient and regressive. Government programs established to increase 

production in low-income areas are going straight to state-owned land developers, creating unfair competition 

among private developers and discouraging the growth of new business. Intervention in social housing 

development, mainly though state-owned-enterprises (SOE’s) is crowding out private sector investment in 

housing finance, construction, and land development. Moreover, the inefficiency of subsidy distribution 

inhibits proper allocation of resources and capital. 

 

13 US Foreign Commercial Service (2003).

14 Intellinews (January 7, 2004). 

15 Intellinews (August 12, 2003). 

16 Intellinews (June 22, 2005). 

17 U.S. Report on the Middle East – Morocco (2005). 

18 U.S. AID – Morocco (2005). 

19 International Finance Corporation (2005). 

20 Baharoglu et al (2005). 

21 Barka (2004). 
 7

HOUSING FINANCE

Morocco began to develop long-term housing microfinance22 in the mid 1980s. Until 1992, a state–owned 

institution provided mortgage financing exclusively. In 1997, that institution still provided 57% of mortgages. 

Its loans may be extended up to 15 years at an average interest rate of 11%. The central bank (Bank AlMaghrib) is currently the second largest provider of mortgages, with 18% of the total. Mortgages provided 

through bank loans, funded by deposits, tend to have shorter terms and higher interest rates. Additionally, the 

private sector has a 16% share of the market and two societies for real estate credit account for the rest of 

mortgages. 23 Currently there are five stand-alone real estate loan companies, Al amana, Zakoura, FONDEP, 

AMSSF-MC, and FBPMC, employing a total of 12 full loan officers. Combined, their total loan portfolio 

comprises 926 purchase loans, 400 improvement loans, 1,000 utility loans and 97 rural construction loans. The 

two newest companies, AMSSF-MC and FBPMC, began operating in May 2005 and had pilot microfinance 

programs in place as well as applications pending at the time of charter. All of the institutions have the 

capacity to loan up to 30,000 DH for home purchases, which equates to approximately $5,000 with terms 

stretching from 6 to 60 months. Over 90% of all home purchase loans are financed with interest rates ranging 

from 12 to 27%.24 

Despite the somewhat diverse range of loan providers, mortgages are still concentrated among middle to highend income brackets as low income groups do not have systematic access to financial services due to low credit 

status, informal nature of income flow, and lack of collateral. Overall, outstanding housing loans are estimated 

at 13% of total credits but banks finance only 20% of housing construction, leaving 80% to self-funding.25 

Today the ratio of mortgage loans to GDP is only 7%26 and the annual growth rate is estimated at less than 1%, 

with the private informal sector remaining the predominant source of funding.27

Instituting housing reform judiciously will have positive long-term effects beyond the housing market. First, 

finance instruments can stimulate savings by helping to draw informal savings into the formal system. Second, 

contract savings can begin to address the disparity between low income / informal households and banks by 

giving credit status to families, increasing personal worth and asset value28. Third, private sector finance 

reforms will help move the market from subsidy reliance to a system of collateral-backed loans. 

SECTORS WITH INVESTMENT OPPORTUNITIES

While the push towards privatization continues, most of the construction and building projects are being 

financed by state-owned enterprises. Two initiatives, the free trade zone at the Port of Tangier and the 

requirement for open-market tender calls, will promote foreign involvement in development projects, including 

housing. Some examples of areas that are open to investment are: 

• Housing Construction - Morocco is much in need of technology that provides competitive 

advantages and U.S. firms will find opportunities to provide building methods that guarantee high 

safety and short delivery. 29 

3⁄4 In mid 2005 the World Bank committed $150 million to support private involvement in 

housing development. 

 

22 Practical Guide for Housing Microfinance (2005). 23 Erbas and Nothaft (2002). 

24 McCarter (2005). 

25 World Bank Group (2005). 

26 Baharoglu et al (2005). 27 Erbas and Nothaft (2002). 

28 Baharoglu et al (2005).

29 US Foreign Commercial Service (2003). 
 8

3⁄4 The late King Hassan II launched the 200,000 Dwellings Program which grants tax incentives 

to developers that commit to a minimum of 3,500 low-cost housing units. Since its 

inauguration in 1994, local competition has increased and foreign firms are now entering this 

market, making property more accessible to low- and mid-range income households. 

3⁄4 In 2002, the Nour Zaer project was launched to relocate 2,200 homes in the Rabat area. Most 

recently, in July 2004 King Mohammed IV allocated US$550 million to a housing project 

located in the Sale and Tamara region. It is expected that this project will produce more that 

850,000 homes until its completion in 2008.30 

3⁄4 In December 2001, the U.S. firm World Atlas Services signed a $1 million contract with the 

Moroccan holding group Jet Group for equipment that provides so-called monolithic units. 

This American technology, the first of its kind in Morocco, will introduce the new concept of 

producing one house per day. The building industry consists of few large contractors and 

myriads of small companies and sub-contractors. 

• Land Development - In spite of the high demand for affordable housing, Morocco's issues of 

insufficient private banking participation, land scarcity, and bureaucracy in legal registration are not 

improving rapidly. Currently, the government is attempting to privatize much of its urban and rural 

land holdings. In early 2005 the Moroccan government launched its first international call to tender 

inviting bids for 56,000 hectares of state-owned land. US firms can take a leading role in this tender 

call for both agricultural and development allocated land. Capital Trust USA inaugurated a land 

development project in the Central District of Beirut in early 2005.31 

• Real Estate & Mortgage – As Morocco begins to liberalize its financial services sector, shying away 

from government subsidization, opportunities for US and international financial institutions to partake 

in the structural advancement of mortgage securities markets and real estate development are 

abundant. Recently the Government of Morocco passed a law supporting a secondary mortgage 

market, a unique and potentially influential tool for equitable housing distribution. Additionally, the 

World Bank committed $100 million in 2003 to revise public accounting and management practices to 

facilitate budgetary efficiency and civil reform. As a case example, US investors and in-country firms 

have established successful mortgage facilities in Egypt, Egyptian American Bank and First Private 

Mortgage Co., over the past 18 months.32 Specific housing microfinance products that US and 

International Financial Institutions can develop are: 33

3⁄4 Minor Home Improvements – Minimum of DH 3,000 to DH 20,000 with terms ranging 

from six to twenty-four months backed by promissory notes, guarantors, or blocked accounts. 

The demand for this product will be very high among low-income groups and is a recognized 

yet newer product than that offered by the existing microfinance institutions. 

3⁄4 Major Home Improvements – Clients with 1-year credit history can access loans from 

DH15,000 to DH30,000 for terms ranging from six to thirty-six months. The rates for these 

loans will be slightly lower due to extended terms but can have provisions to increase if misuse 

occurs. These loans will be backed with promissory notes, guarantors, or blocked accounts. 

Demand for this product will probably be less than that for minor loans due to the 

creditworthiness requirements of the recipient. Additionally, these loans will require a form of 

collateral to protect the financier from default. 

3⁄4 Employer-Based Loan – At the higher end of the market there is much competition for 

loans to salaried workers, but certain lower-level groups are not eligible. Utilizing the salary as 

collateral for the financier, employers can deduct portions of the salary to ensure loan 

 

30 IntelliNews (June 22, 2005).

31 Mediterranean Investment Project Observatory (2005). 32 Mediterranean Investment Project Observatory (2005). 33 McCarter (2005).
 9

repayment. Only individuals employed at large companies will be eligible for these loans 

(DH3,000 to DH20,000 with six to twenty four month terms and interest rates comparable to 

minor home improvement loans). 

3⁄4 Land Acquisition – If land plots can serve as collateral for loans of less that DH30,000, this 

product could be used to assist the poor in purchasing property and building homes. Land 

loans will require a 30% down payment with terms of one to five years and rates comparable 

to major home improvement loans. 

3⁄4 Home Purchase – Basic new homes cost between DC150,000 and DH200,000 and thus 

cannot be financed via DH30,000 micro loans. Institutions must develop clear and detailed 

procedures on collateral, terms, foreclosures, and long-term payment schedules in order to 

ensure market acceptance. 

CONCLUSION

A strong and flexible housing industry is a vital component to capital advancement in low and medium income 

economies. Its development forms a cornerstone pool of finance necessary for a stable and vibrant financial 

system, creates a stepping off point to the “ownership class” for lower income families, and helps societies to 

foster an environment of long-term political stability. The Moroccan housing market is currently burdened by 

a lack of availability of affordable housing, land and ownership titling encumbrances, and poor financial 

infrastructure. The Moroccan government has recently made great strides towards reducing the housing gap at 

the lower income end of the affordability spectrum. However, overall government involvement in the housing 

sector has traditionally introduced rigidities and crowded out private investment. Recent movements toward 

greater transparency and financial liberalization indicate a future where there are many opportunities for 

increased private sector involvement in all levels of the Moroccan housing sector. The continued nurturing 

and expansion of this private participation will generate broad communal and economic benefits, both for the 

overall society and for the individual private participants. 

 
 10

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