Morocco's drive to emulate Dubai by turning itself into a playground for rich Europeans is hurting lending at home as cash-strapped banks are hit by investments in holiday resorts that soured in the global financial crisis.
Loans to homebuyers and companies grew at the slowest pace in a decade last year through November, according to central bank data. In September, the North African kingdom's central bank allowed banks to reduce reserves to increase money in circulation.
Morocco, like Dubai, was in the midst of a major tourism expansion when the global financial crisis caused investment to tumble, saddling developers, banks and investors with soured property debt.
Lending for development surged in the two years before the market stalled in 2009, peaking at US$2.1 billion (Dh7.71bn) in 2007, said Gabriel Matar, the head of Middle East and North Africa hotels at Jones Lang LaSalle. He said much of the debt would mature this year, leading to property sales.
"Moroccan banks are working out their overexposure to commercial real estate, mainly tourism-related, which will limit the amount of their new engagements in 2013," said Mr Matar. "The Moroccan market isn't mature enough to recover all these projects, which are too big to be completed by just Moroccan players."
Mortgage growth peaked at 57 per cent in the first 11 months of 2007 and lending to developers jumped almost sixfold in that period, according to data compiled by the central bank. Like in Dubai, projects stalled as the housing slump in the United States morphed into a global banking crisis.
Mortgage lending slowed partly because cash-poor developers are struggling to get financing to build, said Zineb Masrour, a Casablanca-based senior capital manager at the property consultancy CBRE.
"Banks are obviously overexposed to the real-estate market and the priority is to complete the projects they're already involved in and slow financing to sensitive projects such as tourism or high-grade residential. These projects were mainly targeting foreigners, who were strongly investing a few years ago but they're not here any more."
Work on six mega-resorts, part of a €9bn (Dh44.11bn) development drive, ground to a halt, prompting foreign investors to exit. Among the largest was Taghazout, which was to include a hotel and villas under the Raffles brand, a polo club and a beach club in its first phase, said Mr Matar.
The Taghazout project is now being restarted, along with the bigger Azur Plan with a new goal to double tourists by 2020, said the government.
"The customers have changed, especially in Marrakech," said Younes Sebti, the finance director at the Moroccan developer Alliances Developpement Immobilier, which is involved with Taghazout, speaking in a December interview. "There are fewer foreigners buying with the euro crisis, but this is cyclical. The fundamentals are still the same and we remain confident."
Total private-sector lending grew by 2.8 per cent in the 11 months through November, the slowest pace since 2002 when the growth rate was 1 per cent, according to central bank data.
Loans for housing rose 6.8 per cent in the 11 months through November, the smallest increase since 2002, according to data compiled by the central bank.
Mortgages overall gained 6 per cent, also the slowest pace in a decade. Last September, Morocco cut its reserve ratio by 2 percentage points to 4 per cent, citing a "liquidity shortage".
The banking sector has adopted "a rather selective approach in the treatment of requests for funding" in property, said Samir Hadjioui, the deputy general manager at Credit Immobilier et Hotelier, the Moroccan government-run mortgage bank.
Over the course of the first nine months of last year, mortgage rates ranged from 5.5 per cent to 6.75 per cent, while those offered to developers had rates of 6.21 per cent to 7.75 per cent, he said.
Companies are now facing pressure to pay off or restructure their debts, either construction loans or financing for land purchases, as they come due, said Mr Matar.
"In 2013, through indirect pressure by banks, we will see some projects or land being offered for sale, since we will be hitting the normal duration of a loan where it would be negotiated," he added.
Property transactions dropped 12 per cent in the third quarter from a year earlier, according to government data. Residential sales fell 9.7 per cent by volume and prices dropped 0.4 per cent, led by a 6.3 per cent decline in villa prices.
The central bank estimated that residential transactions slumped by 10 per cent, land deals by 17.3 per cent and commercial transactions by 9.7 per cent.
Morocco's Vision 2010 tourism strategy sought to more than double the number of visitor beds to 230,000 in the decade to 2010.
About half of that amount was built by 2008, when the credit crisis starved the market of buyers and investors. The construction of six resorts, known as Azur Plan, was started in 2001 with the support of King Mohammed VI.
Tourist visits climbed to 9.3 million in 2011, close to the kingdom's target of 10 million, according to the tourism ministry's website. About 83 per cent of the visitors were from Europe.
The government "highlighted six resorts to be completed, and less than half" were built, said Mr Matar. "They are now in a situation where they have to relaunch the vision and make it 2020, or 2025 even, to meet the goal"
* Bloomberg News