Morocco’s construction costs jump as real estate developers face mounting pressure

Morocco’s real estate development sector is facing a sharp increase in input and production costs, driven by pressure from energy prices, wages and administrative procedures, industry professionals told Hespress.

The rising costs come as households’ limited purchasing power constrains developers’ ability to pass higher expenses on to buyers through increased selling prices, according to a senior source within the National Federation of Real Estate Developers.

Construction material prices climb

Prices of construction materials, including sand, steel, cement, concrete, glass, marble and bricks, have risen by between 25% and 30%, according to the industry source, who closely follows developments in Morocco’s property sector.

The source attributed the increases partly to higher energy costs, noting that diesel prices had exceeded MAD 16 per liter and approached MAD 17. The situation also reflects the economic impact of persistent geopolitical tensions, the source said.

Higher fuel costs have affected transportation and the operation of construction machinery. Industry data cited by the source show that subcontracting costs for social housing projects have risen from MAD 2,400-2,500 per square meter to between MAD 3,000 and MAD 3,200.

Developers are also struggling to recruit and retain workers as employees seek higher wages amid the rising cost of living, according to industry professionals.

Administrative delays are adding to the pressure. Obtaining permits and completing administrative procedures can take between one year and 18 months, delaying project launches and exposing developers to further fluctuations in prices, the source said.

Production costs have also made it increasingly difficult to offer apartments for MAD 300,000, the source added, citing the combined burden of land acquisition, construction materials, bank interest and administrative expenses, as well as the involvement of multiple stakeholders.

Developers have limited scope to raise selling prices to offset these increases, however, because of weak household purchasing power.

The source also cautioned against interpreting rising cement consumption as evidence of a recovery in the housing market, arguing that the increase is primarily linked to major infrastructure projects and nonresidential construction.

Industry calls for government measures

To encourage investment in rental housing, the source called for simpler administrative procedures and faster court rulings in eviction disputes, arguing that greater legal certainty would help reassure investors.

The source also proposed tax incentives for owners of rental properties, including exemptions for rental income below MAD 1,500 or MAD 2,000.

Providing affordable housing priced between MAD 300,000 and MAD 350,000 under current economic conditions would require government intervention through tax exemptions for real estate developers, the source said.

The industry representative concluded by expressing developers’ willingness to work with the newly formed government and submit proposals, provided that authorities open a channel for dialogue.

The source stressed that developers’ objectives extend beyond profit-making to include social stability and access to decent housing.

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