Investment Strategies

Short Term Investment Strategy Key Opportunity Morocco is one of the most appealing investment markets in the world today due to several factors. The dedication and backing of King Mohammed VI and the Moroccan government to improving the tourism infrastructure plays a very important role, however is not the only deciding factor. Morocco benefits from fantastic weather for the great majority of the year, while being very close to most European Capitals. The climate is much more attractive than many European capital cities, the prices are still very low compared to countries located very close to Morocco (for example Spain). However, as the projects included in Plan Azur and as Vision 2010 unfolds, prices will increase steadily and surely, therefore the early investor in Morocco will see very rewarding return on investments.

Infrastructure Together with the outspoken pro-tourist approach by both King Mohammed VI and the government, a great deal of investment has been placed into the local infrastructures, including;

New Motorways to be built or upgraded
New Regional Airports to be either built or upgrade
New marinas and ports and high-speed trains to be implemented
Investigate and possibly implement the construction of a tunnel linking Spain and Morocco under the Strait of Gibraltar.

The tunnel
The Swiss Lombardi engineering firm has won the contract to design a railway tunnel between Europe and Africa running under the Strait of Gibraltar.

The company, one of 14 competing for the job, has until late 2007 to draw up the plans for one of the most complex projects of its kind ever, on the cards for over a quarter of a century. A Spanish-Moroccan committee has been considering various options since 1980, not surprising since the difficulties faced by potential builders are a huge challenge. It was only in 2004 that the two countries' governments decided to go ahead.

A bridge was ruled out because of the depth of the strait. It would be impossible to build supporting pillars in 300 metres of water. A floating bridge was also not an option because of the number of ships passing through the Gibraltar bottleneck. An underwater tunnel made out of prefabricated elements was considered unfeasible as well as the sea bottom is unstable and currents too strong.

If the project goes ahead, it will be a close cousin of the Eurotunnel that runs under the Channel between France and Britain. Running at depths of up to 600 metres, it will connect Tarifa in Spain to Tangiers in Morocco.

Timescale
Investors should know that the average term of investment should be between 12 and 18 months (from reservation to resale) as the average construction time for Plan Azur projects is between 12 to 36 months. Generally, investors are required to pay between 20% and 40% on private contract, with one or two payments during construction the remainder being paid upon completion. A property can be held in reservation for as little as 3.000 €

Timescale
Of the six Plan Azur projects, the timescale varies greatly;

Saïda
Launching of work: March 2004;
Opening of the first hotel: April 2007
The last part of the development is scheduled to be finished in 2010.

Khemis sahel
Launching of work: beginning of 2006
Opening of the first hotel: end of 2008
The last part of the development is scheduled to be finished in 2015.

Mazagan (El Haouzia)
Launching of work: the end of 2006
The opening of the first hotel: the end of 2008
The last part of the development is scheduled to be finished in 2011.

Mogador
Launching of the work: October 2005.
The opening of the 1st hotel: 2007.
The last part of the development is scheduled to be finished in 2012.

Taghazout
Launching of work: 2007;
Opening of the first hotel: 2009.
The last part of the development is scheduled to be finished in 2017.

Plage Blanche (White Beach)
Tenders were invited to select a developer on December, 15, 2006. The tender should be decided in 2007.

While the returns on short term investment can be very appealing, the returns expected over the next five to ten years in Morocco point to much higher returns. The optimum choice for investors is the lowest possible initial payment with a high end payment and the more common available projects require a 20% to 30% payment on initial contract followed by 10%-20% during construction and a final 60% on completion and hand over of the title deeds.

Key Risks
One important thing when investing large quantities of money is of course consider all kind of risks. The main point when dealing with properties is knowing how attractive can it be for potential buyers, because if your property is considered as magnificent or outstanding, risks will be practically inexistent. It all depends on the location, the proximity to the beach, the surrounding facilities, etc.

To determine the correct purchase, the investor should take into consideration all and any factors which will influence the demand for property within the timeframe that their strategy dictates, to be able to assess the risk associated with the development they are considering. Key factors to consider is the increase or decrease of permanent and temporary residents in the area as well as the increasing or decreasing amount of tourists visiting the region. Local infrastructure, facilities available on site and increase of employment opportunities in the region will also dictate how easily the property will be resold or rented in the interim. As always with real estate investments, holding on until the perfect time to sell is an absolute necessity.

If the property you are about to buy is located in a tourist resort, try to find out what facilities it will have and the distance to the ones it lacks. Most of the Plan Azur projects are designed with this in mind and offer everything from traditional Souks to luxury five star hotels and restaurants and one of the largest marinas in the miditteranean.

Medium to Long Term Investment Strategy - Key Opportunity
While pre-release and select off-plan prices continue to remain competitive, Moroccan capital appreciation will continue its healthy growth for many years to come. Marrakesh is already seen as the “in” place to be seen by many celebrities. As the Plan Azur and Vision 2010 continue to unfold and develop, the accompanying demand for primary and secondary residences and tourist rental properties will value the properties investors have chosen. There are currently 6 major resorts included in the Plan Azur, one of which is on the Meditteranean and the other 5 on the Atlantic.

The government has made a major commitment to investing heavily into infrastructure in the area around the Plan azur resorts and on improving routes to and from the resorts and nearby cities, airports and marinas. They have also invested heavily into improving the local living conditions to entice both permanent and transitory residents to the areas.

From 2001 to 2006, the number of arrivals at Moroccan borders increased by a stunning 50% from just over 4 million annual visitors in 2001 to over 6.5 million visitors in 2006, with visitors from Spain and the UK showing increases of 133% and 96% respectively over the same period. Since February 2004, Morocco has been engaged in a structured and clear policy concerning the liberalization of its sky. Such a policy has quickly borne fruit:

Entry of new airlines;
Creation of the first Moroccan low-cost airlines intended for tourism: Atlas Blue followed by Jet 4 You;
Setting up of partnerships with integrated TO of the major issuing markets designed for Morocco (France, Spain, Germany, United Kingdom, Belgium, Italy) with a view to densifying some priority lines and to putting in place new ones and mainly point to point, linking the European cities with Moroccan destinations (Fez, Marrakech, Agadir, etc)

This policy has been accompanied by the adoption of incentive measures such as:

The setting up of a new pricing policy in the field of airport taxes, stimulating the increase in the air frequencies scheduled for "Morocco" destination and the creation of new air links with Morocco;
The stimulation of the drop in prices as regards "Handling" and the concession of the second licence in favour of a private operator at the airports of Casablanca (CMN), Marrakech (RAK) and Agadir (AGA), since the end of 2004.

Nowadays, this open sky policy is confirmed by the next coming into force of the open sky agreement between Morocco and the European Union (Signed in December 2006). This agreement provides Morocco with new prospects, and more particularly thanks to the entry, into the Moroccan sky, of some European low cost companies such as Ryanair or Easy Jet whose low price and the great marketing capacity, via Internet, (95% of sales) will permit Morocco to target new tourist segments.

The impact of this liberalization has been almost immediate on the air traffic which recorded satisfactory results in 2004 and 2006:

+8.5 million international passengers in 2006 against 5.5million passengers in 2003.
International air traffic:+19% in 2006,+21% in 2005,+16% in 2004, against +3% in 2003;
355 "point to point" international frequencies/week in 2006.
+160 frequencies/week over 2003-2006 period, against +12% frequencies/week over 1999-2002 period.

Safety
Morocco's economy is very dependent upon tourism and with the increasing interest of King Mohammed VI and the government in promoting tourism, reforms have been put in place to make the visitors experience in Morocco as carefree as possible. All guides must be registered and trained. Tourist Police Offices are in every major city. The crime rate is very low, usually limited to petty thievery, most often on trains and buses. However do remember that Moroccans are experts in talking you out of your money during bargaining with a smile and a glass of mint tea; they are renowned for their hospitality. Remember that there is quite a different culture in Morocco – shoulders and ankles should be covered when visiting locations densely populated by moroccans such as the local souk.

Legal advice
As with any overseas property investment, once you have decided on the property you wish to purchase, you will require legal representation to ensure that your best interests are protected at all times. The first and foremost concern should be to carry out a full due diligence inspection of your chosen property. While IPW does our own due diligence checks on any project which we promote, including checks on the legitimacy of the project, solvency of the developer, etc, every overseas property investor should perform their own due diligence on the development of their choice, either through their legal representatives or by any other research tools they see fit.

By appointing independent legal representation, the client can be sure that all necessary paperwork is in place before signing purchase contracts. Most reputable developers have Bank Guarantees in place to protect investors’ interests.

Once the due diligence checks have returned favourably, a private contract will be prepared between the developer and the investor which will specify all of the terms and conditions including delivery date. Upon signing this contract, the investor makes a non refundable payment (an agreed percentage of the sales price minus the original reservation deposit).

The property sale process is finalised before a public Notary with the investor and a representative of the developer signing the Title Deeds. Once this document is signed, the investor receives the keys to the property and takes possession.

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