Building the future

Algeria's accommodation and construction policies have shown important limits over the years. Since independence, the efforts made have had but a weak impact on national accommodation statistics : after forty years of independence, the country has an estimated deficit of more than two million houses. Several factors have contributed to this situation, among which feature the strong demographic growth that the country has experienced and the ever-present role of a state wanting to do everything by itself in the management of the country's accommodation resources.
This over-enthusiastic state intervention has had considerable effects on the crisis, with long delays in the construction of new housing, financial setbacks and all too frequent distribution irregularities when it comes to social housing. The concentration of the population in coastal regions (with two-thirds of the population concentrated in just four per cent of the territory), the inefficient management of housing and illegal construction projects are additional problems to be solved.

The most important government measure put in place to correct past wrongs concerns the availability of housing. The idea is to diversify the available options, concentrating on the adaptation of revenues and the possibility of owning the property. Different housing policies have therefore been adopted : social leasing, for which The Real Estate Promotion and Management Office (OPGI) is responsible; social participation, aimed at constructors; let-to-sell, which has been handed to the Agence de l'Amélioration et de Développement du logement (housing development agency); rural development, which is designed to help repopulate rural regions ; and, finally, promotion. These projects require large investments and provide plenty of opportunities for partnership.

Faster and better

Current Ministry of Housing policy (www.mhu.gov.dz) is guided by the need to reconstitute the market character of the sector. The stated wish is to introduce a spirit of competitiveness and commercial activity into a real estate market which is already more open to private initiative, whether that initiative be foreign or Algerian. The only role the state wishes to keep is that of regulator.

"We have never shunned private sector or foreign partnerships. Indeed, we acknowledge the need for assistance and the help of foreign partners who have more experience in the construction sector: partners who can offer us much more in the construction and conceptual choice domains. We are fully aware of the deficit that we have in town planning circles. We encourage the formula for partnerships. I am convinced that this will allow us to grow further and faster. " says M. Hamimid, minister for housing and town planning.

This will to establish partnerships and access new technologies is a desire held by all of the country's businessmen, something which is certainly the case with ECA, one of the largest construction companies in the Algiers region. Its General Manager, Mr. Hasbellaoui, explains his interest in seeking a private partner: "Our most important market is the state housing construction market. That's why we wish to take on board a large part of the 65,000 houses that are being planned for the near future, a project for which we are seeking private partners. This should help us complete the project better and quicker."

The alternative to the social-participatif

The projects that were launched in 2002 include almost 130,000 houses, with 62,000 that fit into the category of social housing, financed by the state to the tune of 47.6 billion dinar.

The Real Estate Promotion and Management Office (OPGI), a network that manages promotion and supervises the building of houses for the state, is also seeking private foreign investment. "Our primary goal is to build social housing financed by the state," explains Mr .Zahana, general manager of the OPGI office in Blida. The general manager of the Oran OPGI office, Nadir Imadali, confirms this: "Currently, the housing demand in Algeria is so strong that we need some very important investments. We have a deficit of around one million houses and I think that any investor willing to share expertise and financial resources is welcome. Their investments would be assured as we have no unsold property liabilities."

Mr. Imadali explains that: "The OPGI is a state instrument to help put in place its social housing policy. But it is also an industrial, commercial entity because it can undertake purely profit making enterprises alongside its public service mission (…) whenever we find interesting opportunities, like the discovery of an interesting plot of land, we contact investors to build promotional housing, aimed at better off families. That way, we try and increase our commercial exposure and obtain some profits." Mr. Zahana goes even further: "We at the OPGI offices know very well that the future will be built on commercial real estate promotion." Real estate promotion constitutes another very important sector in contributing to the reduction of state financing and participation.

Let-to-sell: the latest trend

The importance of the new let-to-sell formula, aimed at the middle classes, must not go unnoticed. 35,000 houses will be added this year to the 20,000 constructed last year. This state enthusiasm will continue for another three years because of the popularity of the project among Algerians. The project will not impose any additional expenditure on the state budget as it will be financed by reimbursable loans from the public treasury.

Apart from the fact that this operation is assured with capital recycling, which will guarantee its financing in the medium- and long term, the powers-that-be have started discussions with potential foreign partners (notably the Chinese and estate management companies from the Middle East).

They are also planning to extend financing to Algerian and foreign loan companies. The situation generated by this formula will allow the state to progressively disengage itself from housing finance, at the same time as keeping its finger in the social housing pie to aid the poorest families.

Since its launch, let-to-sell is unquestionably the formula which has had the most success in the opinion of the Algerian public. Launched in eight wilayas (districts) in the 2001 programme, the project has surpassed all hopes and has thus been extended to twenty-five further wilayas this year. For the 20,000 houses planned for 2001, the AADL, in charge of the let-to-sell programme, has re-estimated its growth plans and is currently constructing 55,000 more units spread across Algeria. Algiers is to benefit from most of them, with eleven zones pinpointed for improvement by AADL. Annaba, Tipaza, Constantine, Oran and Blida have not been forgotten either.

One of the elements of let-to-sell's success in Algeria is its methods of payment, which are linked to the financial possibilities of the Algerian middle classes. For the F3 and F4 types of house, for example, which are valued at 1.4m AD and 1.7m AD respectively, the buyer only needs to provide a down payment of ten per cent. The remainder is paid very gently over the next twenty or twenty five years in monthly payments. The buyer is, of course, also allowed to reduce this repayment period if he (or she) wishes. The let-to-sell contract, however, specifies that the occupant may not sell the property in the first ten years and, thereafter, and should the occupant wish to sell, that the agency will be the sole buyer.

Financial Diversification

Aside from the AADL and the EPLF (Entreprise de Promotion du Logement Familial or family housing promotion unit), which intervene directly in the construction, different public bodies have been created in order to promote and sustain the development of the housing sector financially. Amongst these is the Caisse Nationale du Logement (CNL). This institution was created to manage state contributions dedicated to social housing. According to its general manager, Nacer Djama: "Total state interventions can be valued at one billion dollars every year, 75% of which pass through the CNL." Mr. Djama adds that : "this is also a sector where foreign investment is growing and encounters a low risk. There is an large demand and, as strange as it may seem, limited competition. (…) The housing sector occupies a great position within the 525m DA plan to re-launch the economy. There are therefore some excellent business opportunities in our area." Another important body in the Algerian housing sector is the FGCMPI (Fonds de Garantie et de Caution Mutuelle de la Promotion Immobilière or real estate mutual guarantee fund), whose role is to secure the loans awarded to buyers based on off-plan and show-house sales. The SGCI (Société de Garantie du Crédit Immobilier or real estate loan guarantee society) is a loan insurance company which is developing an real estate investment fund. Finally, we have the SRH (Société de Refinancement Hypothécaire or mortgage refinancing society) whose goal is to refinance banks to help them award loans for the acquisition of housing.

Sidi Abdellah : potential for success

In order to ease urban pressures, the Algerian authorities are planning the construction of three new cities: one in the wilaya of Constantine, with an estimated population of over 300,000, one at Boughzoul and a new city near Algiers named Sidi-Abdellah. This last project will give priority to new technologies, with the creation of a cyber-park part-funded by the Ministry of Post and Telecommunications and the scientific community.

"We are eagerly awaiting financing from large private investors", explains Liess Hamidi, general manager of ANSA, the company in charge of the Sidi-Abdellah project. Some investors are already present, like the Khalifa Group or the American hospital, which has committed itself to building a research centre for cardio-vascular diseases. Mr. Hamidi highlights this: "Investors will have the EU just across the water and will be able to benefit from very favourable economic conditions. Goods and labour are both cheaper than in Europe and we have very skilled workers here. We have young, dynamic, well trained graduates who are paid less than there American and European counterparts. The location is also exceptional, with impressive views over the Mediterranean and the Mitidja Atlas." The general manager of ANSA adds : "the new town of Sidi Abdellah represents a key project for the Algerian economy of tomorrow and for scientific research. We must invest in this project so as to be able to reap the rewards in a few years time. In five years time, Sidi Abdellah will have an international presence. First come, first served."

Revitalising urban infrastructures

Alongside all of these programs, projects inherent to existing urban infrastructures are being developed. Algeria has an exceptional architectural heritage, composed of medieval cities and designs inherited from the French colonial period but it is an architectural heritage in a very advanced state of decay. "There is an awful lot to do in this area," explains Mr. Hamimid, minister of Housing: "One of our principal concerns is to preserve the historical quarters, which represent a historical heritage that we cannot let disappear (…) We must also renovate and revitalise our towns and cities, re-qualifying and improving them so visitors and inhabitants can see their true characters." The rehabilitation of entire housing estates is already under way in the oldest districts of the capital and the regional metropolises (Oran, Constantine, Annaba). In addition, the restoration of historical centres in the south is programmed within the framework of the national fund for the development of southern regions.

In the capital, an urban reorganisation project on a grand scale has been undertaken in the "Hamma" neighbourhood, which should be the future businesses district of Algiers. This project should see the construction of 17,000 homes for around 120,000 inhabitants, along with the establishment of business premises, service centres and an interaction point for heavy machinery. Another long term project is also winding its way through the urban planning maze : the restoration of the Casbah, one of the most treasured historical zones of Algiers.