Global Arab Network | Real Estate Market Building Strong Foundations in Algeria

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Real Estate Market Building Strong Foundations in Algeria

Thursday, 03 February 2011 14:15

As in most countries, Algeria’s real estate market has been hit by the effects of the global economic slowdown over the last two years, with a number of planned developments put on hold and some major investors opting to withdraw entirely. However, these temporary reversals do not tell the whole story, which remains broadly positive in many ways. Several large-scale real estate projects have recently been completed or are going ahead, and the sector continues to have strong potential, driven by ambitious plans for social housing and moves by the government to improve industry regulation, Global Arab Network reports according to OBG.

Despite the downturn, the Algerian real estate market has recently witnessed some landmark developments. Most notably, August 2010 saw the opening of the €70m Bab Ezzouar shopping, leisure and office space development in the suburb of the same name to the east of Algiers, the first development of its type in Algeria and one that has potential to serve as a model for future projects. The development was led by the Swiss group Valartis and covers 45,000 sq metres, not including office space, and includes a cinema, a hypermarket and two hotels owned by France’s Accor hospitality group. Other major projects have slowed but not necessarily stalled. Arcofina holding group and its Dahli arm, developers of the landmark €2.5bn Alger Medina tourism, leisure and office space real estate development in the capital, say that while financing difficulties have led to delays, work on the project will continue. Although the group did not manage to raise the amount of capital it hoped to fund the project through a bond sale in 2009, it says it will use a mixture of the financing it did raise, its own funds and income from elements of the project that are already completed to finish it, albeit more slowly than originally planned.

Accor is not the only foreign investor to see potential in the tourism sector. The country’s first Marriot hotel is due to open in Tlemcen in March this year. The brand plans to open two more properties in Algiers in 2012. These expansion plans are being driven in part by the government’s aim of promoting long-term growth in the sector – it has set an ambitious target of attracting 25m visitors a year by 2025.

Social housing will also continue to drive activity. The government’s plan to build 1m housing units between 2010 and 2014 is under way, and foreign investors have taken note. The Turkish government, for example, has said it hopes Turkish firms will build half of these. Housing shortages have sparked demonstrations and unrest in some areas, providing a strong political incentive for further construction. The programme has given rise to opportunities in other sectors, such as banking. The Algerian arm of French bank Société Générale, which has been lending to Algerian property buyers since 2005, has recently begun to provide government-subsidised housing loans. The bank had already committed as of late 2010 to provide €19.6m of credit to house buyers, with plans for further loans in the pipeline.

Despite these positive developments, the sector is undoubtedly beset by problems. These include a shortage of available land – leading to rising property prices – and slow building permit and property registration processes. Delays and cost overruns in projects can result from issues such as conflicting titles of land and, according to local press reports, the existence of some unscrupulous housing developers.

However, the government has been working to address many of these issues. For example, in December 2010 it presented a new draft property development law (projet de loi sur la promotion immobilière). The law will create a register of licensed real estate developers with the aim of eliminating unqualified outfits from the market, and will require developers to pay fines for late delivery of projects. It also provides for fines for developers who accept payments and deposits from buyers before a proper contract is signed, and requires that all off-plan purchases be registered with the Property Development Mutual Guarantee Fund (Fonds de garantie et de caution mutuelle de la promotion immobilière, FGCMPI), which insures customers’ deposits. While the Algerian Entrepreneurs General Association has called for some modifications to the law to shield developers from liability for problems and delays beyond their control, the law is likely to improve confidence among Algerian consumers in the property sector, benefiting the industry as a whole.

The government is also working to address shortages in the availability of land. In early January the minister of industry, small and medium-sized enterprises and investment promotion, Mohammed Benmeradi, said only 30% of land designated for industrial use was being used for industrial purposes, and that the ministry planned to put 9000-10,000 ha of improperly used land back on the market. He added that state land adjacent to the route of the East-West Highway would be made available for industrial use.

Global Arab Network

This article is published in partnership with Oxford Business Group

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