“Housing support” and 2030 projects open the taps of bank financing for real estate developers

The direct support program for housing and infrastructure projects in preparation for the 2030 World Cup opened the taps of bank financing for real estate developers and construction and works companies, after a long period of recession that the buildings experienced, affected by the slowdown in demand and the rise in prices of raw materials, in relation to supply disruptions in the international market as well as waves of inflation and the repercussions of the Corona pandemic that It led to the bankruptcy of a large number of companies in the two aforementioned sectors.

Monetary statistics, recently issued by the Bank of Morocco, revealed that the value of loans granted to real estate developers increased by 4.3 percent at the end of last March, compared to the same period in 2023, jumping to 53.8 billion dirhams, an increase of 2.2 billion dirhams. While the value of loans granted to the construction and works sector recorded an increase of 16 percent during the first quarters of this year, to stabilize at 96.6 billion dirhams, in parallel with the growth in the volume of cement sales, which is considered a barometer for measuring construction activity, with an increase of 3.5 percent compared to last year.

The housing support program stimulated demand in the real estate market. This increased the number of real estate projects and reduced the banks’ credit risk margin for this category of customers, which is evident from the statistics on the development of loans granted to finance housing, as they jumped by an increase of 1.4 percent at the end of last March, reaching their value to 244.2 billion dirhams. While construction and works sector companies benefited from a clear vision about the future, after announcing public investments worth 64 billion dirhams during 2024, an increase of 56 percent compared to last year.

Public investments

Banks, construction and public works companies were able to adjust their commercial plans for the current year, especially the first party that always seeks to anticipate future credit risks. This is by announcing an increase in public investment allocations, a large part of which will be dominated by infrastructure projects in preparation for hosting the 2030 World Cup. This concerns an investment envelope worth 64 billion dirhams, distributed between 15 billion dirhams directed to water sector projects, 14 billion dirhams for roads and motorways, as well as 10.6 billion dirhams for ports, and 24.6 billion dirhams for public equipment.

Salim Shihabi, a financial and banking consultant, considered the increase in the general investment budget a driver that will accelerate the pace of financing of the construction and works sector by banks, stressing that the increase in demand for financing in this sector will contribute to strengthening the economy and stimulating construction activity.

In the same context, Shihabi explained, in a statement to Hespress, that the aforementioned request will open new opportunities for banks to provide financing for major infrastructure and construction projects. This enhances its commercial dynamism and its role in supporting economic development in the Kingdom.

On the other hand, the financial and banking advisor stressed the possibility of banks facing increasing challenges in managing risks related to financing infrastructure projects and construction, especially with their long-term nature and the legal and regulatory risks associated with them, considering that the increase in the general investment budget is an opportunity for banks to enhance their activity and achieve financial gains, stressing However, the risk margin remains under control thanks to the new financing and guarantee strategy, which allows for a thoughtful distribution of risks between the partners in the financing process, in a way that preserves the commercial interests and liquidity of the banks, in the event of any failure during the collection operations.

Real estate projects

The new direct housing support program came in order to stimulate demand in the real estate market, after it entered a long recession, during which the previous support model demonstrated its limitations. However, it carries the same constraints from the last period, especially with regard to the scarcity of the real estate base in order to produce subsidized housing whose price is less than or equal to 300 thousand dirhams, and the same applies to bank financing for real estate developers whom banks classified as high-risk customers during the last period, especially Since the outbreak of the Corona pandemic, which has negatively affected workshop activity and caused a chronic imbalance in the level of demand.

As for Mustafa Harakat, a developer and real estate investor, in addition to the slowdown in demand in the market, developers faced liquidity problems in order to finance their real estate balances, explaining that most real estate groups suffered difficult financial conditions during the last period, some of which were forced to resort to “cash flow” operations. cash flow in order to reduce its debt and stimulate liquidity in its coffers, especially after recording an increase in construction costs in relation to the high cost of building materials, specifically iron and cement.

On the other hand, the aforementioned real estate investor and developer admitted that the risks of floods remained present in the negotiations between banks and developers during the last period, especially since financing real estate projects requires the allocation of large and long-term financial resources in the absence of a secondary market for outstanding loans that allows credit institutions to quickly recover their financing in the future. Cases of necessity.

Harakat stressed, in a statement to Hespress newspaper, that the direct housing support program would reduce banks’ credit risks and would allow a greater flow of loans into the real estate market, whether for housing or directed to real estate developers.