Morocco - Second Housing Finance Project

Document of t The World Bank FOR OFFICIAL USE ONLY A. 2/ Report No. 7431-MOR KINGDOM or MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT July 31,1989 Infrastructure Operations Division Country Department II Europe,Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  KINGDOM OF MOROCCO CURRENCY EQUIVALENTS (as of June 30, 1989) Currency Unit - Dirham (DH) US$ = DH 8.60 DH1 = US$ 0.116 GLOSSARY OF ABBREVIATIONS General ANLHI Agence Nationale pour la Lutte Contre l'Habitat Insalubre BM Central Bank (Bank Al-Maghrib) BNDE Banque Nationale pour le Developpement Economique CDG Caisse de Depot et de Gestion CEN Caisse d'Epargne Nationale CG. Compagnie Generale Immobiliere CIFM Compagnie Immobiliere et Fonciere Marocaine CIH Credit Immobilier et H6telier CMM Caisse Marocaine des Marches CNCA Caisse Nationale de Credit Agricole ERAC Etablissement R6gional d'Am6nagement et de Construction FNAET Fonds National d'Am6nagement et Equipement des Terrains FOS Fonds des Oeuvres Sociales GFCF Gross Fixed Capital Formation ITPA Industrial and Trade Policy Adjustment MOF Minist&re des Finances MOH Ministere de l'Habitat MOI Ministere de l'Interieur SNEC Soci6t6 Nationale d'Equipement et de Construction SOPHAL Soci6t6 pour la Promotion de 1'Habitat Locatif VAT Value Added Tax VIT Maximum real estate value (valeur immobiliere totale) CIH Lending Products ANP Mortgage loans for the purchase of existing housing units CNP Mortgage loans for self-help construction HBM Low- and moderate-cost housing (Habitat a Bon Marche) OCF Construction loans for commercial facilities OCH Hotel construction loans OPF Housing construction loans (for sale) OPL Housing construction loans (for rental) OPVT Land development loans OTT Construction loans for tourism facilities  FOR OFFICIAL USE ONLY KINGDOM OF MOROCCO SECOND HOUSING FINANCE PROJECT TABLE OF CONTENTS Page No. LOAN AND PROJECT SUMMARY ...................................... (i) I. INTRODUCTION ................................................. 1 II. THE HOUSING SECTOR ............ . ...... ...................... 2 A. Urban Growth Patterns . ........... . . 2 B. Housing Demand ........ . .... . . 3 C. Housing Supply ........................................... 4 D. Housing Finance . . . 6 E. Current Government Housing Policies . . . 9 F. Bank Experience in the Sector . . . 10 G. Project Rationale . . . 11 III. THE PROJECT . ................................................. 11 A. Project Objectives . . . 11 B. Project Description . . . 12 C. Line of Credit to CIH .................................... 12 D. Institutional Assistance to CIH . . . 15 E. Sector Institutional Development: Assistance to the...... Ministry of Interior and to the Ministry of Housing .... 17 F. Lending Arrangements . . . 19 G. Coverage of Foreign Exchange .. . 19 H. Procurement and Disbursement ............................. 20 I. Supervision .............................................. 21 IV. THE MAIN LOAN BENEFICIARY .................................... 21 A. Organization ............................................. 21 B. Management and Operations ................................ 21 C. Operational and Financial Performance .................... 23 D. Status of Loan Portfolio ................................. 26 E. Prospects for Future Growth and Financial Performance .... 26 F. Accounts Receivable to Government Transfers and Hotel Arrears ............................................ 28 This report ia based on the findings of an appraisal mission to Morocco in June-July 1988 composed of Messrs. Gianni Brizzi (Senior Urban Economist), Youssef Choucair (Urban Planner), Claude Hovnanian (Urban Engineer), Charles Sterling (Operations Analyst), Christopher Barltrop (Consultant Financial Analyst) and Laurent Colombant (Consultant Researcher). This document has a restricted distribution and may be used by recipients only in the performence of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Page No. V. PROJECT BENEFITS, RISKS AND ENVIRONMENTAL IMPACT ............. 29 A. Project Benefits . . . ...................... . 29 B. Project Risks .... . ...................... 30 C. Project Environmental Impact ........... .......... 00.. 30 VI. AGREEMENTS REACHED AND RECOMMENDATIONS ......... ...... ..... 31 ANNEXES Annex 1: CIH: Estimated Disbursement Schedule ........... 33 Annex 2: CIH: Summary Cost Table ................... . 34 Annex 3: CIH: Organizational Chart .. . 35 Annex 4: CIH: Audited Income Statements (1984-1988) .. 36 Annex 5: CIH: Audited Balance Sheets (1984-1988).. ..... ' 37 Annex 6: CIH: Projected Financial Performance Indicators.. 38 Annex 7: CIH: Definition of Performance Indicators ........ 39 Annex 8: CIH: Projected Growth Rate of Lending Operations. 40 Annex 9: CIH: Projected Commitments............... 41 CIH: Projected Disbursements. .... ..... . 42 Annex 10: CIH: Projected Project Pipeline (Public Projects) 43 Annex 11: CIH: Projected Income Statements (1989-1994) ..... 44 Annex 12: CIH: Projected Sources and Applications of Funds (1989-1994) ... .......... ..45 Annex 13: CIH: Projected Balance Sheets (1989-1994) ...... 46 TABLES Table 1: Past and Projected Population Growth .........ooo. 2 Table 2: Evolution of Urban Housing Production (1984-1988). 4 Table 3: Contribution of Housing Sector to GFCF (1984-1988) 5 Table 4: Outstanding Balance on Loans to Housing Sector (1984-1988) ..... ...................... _oo. 7 Table 5: CIH: Lending Target and Affordability ....... oooo. 14 Table 6: Implementation Costs and Timetable for Survey and Studies .. . ... ......... 16 Table 7: Implementation Cost and Timetable for MOI and MOH Institutional Development Programs ........... 18 Table 8: Beneficiaries and Terms and Conditions of CIH's On-Lending... .................... oo-o ........ 19 Table 9: CIH: Approved Loans, Commitments and Disbursements (1986-1988)o.. ................ 23 Table 10: CIH: Financial Performance Indicators, Audited Data (1984-1988)............ ............ ooo . ... 25 Table 11: CIH: Loans in Arrears of Principal Interest over Six Months (1984-1988) . .. ooo 26 Table 12: CIH: Projected Sources and Application of Funds.. (1989-1994) ... . ... ... . 27 (05 16d)  KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT Loan and Project Summary BORROWERS: Kingdom of Morocco, and Credit Immobilier et Hotelier (CIH) GUARANTOR: Kingdom of Morocco (for the loan to CIH) BENEFICIARIES: Ministry of Interior (MOI), Ministry of Housing (MOH), and CIH AMOUNT: US$3 million to the Kingdom of Morocco and US$77.5 million to CIH TERMS: Both loans will be repayable in 20 years including five years of grace at the standard variable interest rate. PROJECT OBJECTIVES: The shortage of urban housing is an acute problem in Morocco, particularly for low-income households. Construction and mortgage financing covers only 15% of total housing investment compared with 20-25% in most other developing nations. Credit mainly benefits the construction of housing for middle- and higher-income groups. Housing for low-income groups is constrained not only by scarce financial resources, but also by the lack of appropriately priced land, taxing land-use, infrastructure and building regulations, and rigid administrative procedures. Against that background, the project will help widen the scope and improve the functioning of housing finance as well as rationalize land and housing supply, with particular emphasis on low- and moderate-cost housing. PROJECT DESCRIPTION: To achieve its objectives the project will provide CIH with: (a) a line of credit (US$77 million) to support its lending for low- and moderate-cost housing; and (b) technical assistance funds (US$0.5 million) for studies to improve its knowledge and understanding of the housing supply system, to develop new savings and credit products, and to adapt its management information and internal audit systems to its new depository and lending activities. In addition, the project will finance institution-building activities (US$3 million) designed to upgrade the Government's capability to facilitate land and housing development.  (ii) BENEFITS AND RISKS: Social benefits will include enhancing access to home ownership and improving the housing conditions of low-income groups. The economic and institutional benefits will include rationalizing the structure of the housing finance sector, further strengthening CIH's operations, and improving the efficiency of land and housing delivery processes. The project will also have a positive environmental impact by limiting the development of informal housing on unserviced land through increased provision of low- and moderate-cost housing. The main risks under the project are that: (a) CIH's lending operations and profitability may be limited by the tight financial market in Morocco and the rising cost of long-term resources; (b) CIH may be unable to channel credit towards the lowest income groups because of inadequate low- and moderate-cost housing supply; and (c) the results of the institution-building activities to be carried out by the Government may be slow to materialize. The project design, however, mitigates these risks through appropriate conditionalities as well as through flexibility in the eligibility criteria for the use of the loan proceeds.  KINGDOM OF MOROCCO SECOND HOUSING FINANCE PROJECT 1. INTRODUCTION 1.01 High population growth rates and relentless rural-to-urban migration have given rise to an entrenched urban housing shortage in Morocco. This shortage is particularly acute for low-income households because the supply system is unable to produce affordable low- and moderate-cost housing and financial institutions do not participate in its financing. Overcrowding, shared housing, and shanty towns are visible consequences and adversely affect social stability and economic development. 1.02 The project would improve mobilization of resources and availability of credit for low- and moderate-cost housing. It would also help remove present administrative, regulatory, and organizational constraints to land development and housing construction. These objectives wouid be achieved through a loan to help the Cr6dit Immobilier et Hotelier (CIH) step up its lending for low- and moderate-cost housing and another loan to the Kingdom of Morocco to strengthen the capacity of the Ministry of Interior (MOI) and the Ministry of Housing (MOH) to facilitate low-cost land development and housing construction. Beyond the above objectives, the project would contribute to the liberalization of the financial sector, according to present government policy. This would be achieved by improving CIH's operations and profitability, and thus enabling it to compete effectively with commercial banks in both mobilizing reso-urces and extending credit. 1.03 The Bank loan to CIH would be in the amount of US$77.5 million; US$77 million would be onlent for low- and moderate-cost housing development and US$o.5 million used for studies. The loan to the Kingdom of Morocco would be in the amount of US$3 million 1.04 CIH is well known to the Bank. It has already received four loans for hotel and tourism development, amouating to US$148.8 million, and a housing finance loan of US$60 million. At the end of April 1989, the latter was fully committed and disbursements exceeded US$50 million. In 1987, CIH also received a line of credit in the amount of US$50 million for hotel financing from IFC. This loan is fully disbursed and is being replenished by new IFC funding, negotiated in June 1989. MOI and MOH have a long-standing dialogue with the Bank on urban and housing development. The latter Ministry has been the implementing agency for two lending operations (Rabat Urban Development Project, Loan 1508-MOR; Second Urban Development Project, Loan 1944-MOR) supporting urban renewal and sites and services development. 1.05 This report describes the background, objectives, and content of the project; updates information on CIH's organization, operations and finances; and assesses the expected contribution of MOI and MOH to successful project implementation.  - 2 - II. THE HOUSING SECTOR A. Urban Growth Patterms 2.01 Morocco's urban population has increased rapidly over the past three decades, expanding from 29% of the total population in 1960 to 45% in 1986, at an annual growth rate of 4.5%. During the last ten years, this rapid urbanization has taken place in the context of a stressed economic situation. The country has been beset by severe budgetary and balance ox payments deficits, which the Government is trying to control through financial adjustment and economic stabilization programs. These unfavorable conditions, compounded by real income stagnation, have significantly limited the capacity of the public and private sectors to respond to the service, infrastructure, and housing needs of an increasing number of urban dwellers. Although rural outmigration has decreased in intensity, it will continue well into the next decade and contribute to the growth of urban centers, which are projected to account for about 50% of the country's nearly 32 million inhabitants by the year 2000. Table 1: Past and Projected Population Growth (in millions) a/ a/ a/ b/ b/ b/ 1960 % 1971 % 1982 % 1990 % 1995 % 2000 % Urban 3.4 29 5.4 35 8.8 43 22.6 46 13.7 48 16.0 50 Rural 8.2 71 9.9 65 11.7 57 13.6 54 14.4 52 15.8 50 Total 11.6 100 15.3 100 20.5 100 26.2 100 28.1 100 31.8 100 Sources: a/ Census data. b/ Projections by the Centre d'Etudes et de Recherches Demographiques (CERED). 2.02 Morocco's urban settlement pattern is relatively well balanced. The primacy of Greater Casablanca with a (1986) population of 2.5 million (about a quarter of the total urban population) is compensated for by the dynamic growth of Rabat-Sa1 with a (1986) population of about one million and a substantial network of small- and medium-sized cities, 15 of which have (1986) populations exceeding 100,000. The rapid pace of urbanization will heavily tax the absorptive capacity of all urban centers and exacerbate such problems as deteriorating utility networks, inadequate municipal services, and a growing housing shortage. The total housing stock is estimated (1986) at about 3.7 million units, 1.8 million of which are in urban areas. This includes the informal sector, which comprises informal, i.e., unlauthorized housing (habitat clandestin) and slums (bidonvilles), and accounts for about 20% of the total stock.  - 3 - B. Hous!ng Demand z.03 In the context of the preparation of the 1988-1992 Five-Year Economic Plan, MOH has estimated that the elimination of the present urban housing shortage and the replacement of obsolete structures will require the production of approximately 100,000 units p.a. over the next ten years. The production required to meet new demand is estimated at about 90,000 units p.a. Though these figures are c iarly overestimated, they underscore the magnitude of the urban housing p..oblem, particularly when compared with the production during the last five years (1984-1988) which averaged 72,000 units p.a. (including informal housing). Although housing stock conditions have improved in recent years, one-third of existing dwellings are substandard or lack basic sanitary facilities. In addition, the housing stock is severely overcrowded. The average number of persons per room in urban dwellings is estimated at 2.1, with approximately 60% of all urban households living in one- and two-room units.-I The proportion of households presently sharing a dwelling exceeds 10%. 2.04 Housing demand mainly stems from households that are temporarily lodged in rental properties, cohabiting, or just moving into urban areas. To a minor extent, it is also determined by upward mobility and the desire to improve housing conditions. Few new households have the financial means to accede to homeownership. Available data on household income, expenditure structure, and homeownership status show that: (a) the poorest 20% of urban households had only 3.7% of total available income; (b) housing expenditures represent about 22.7% of the urban household's total expenditures and that their elasticity to income is the second lowest after expenditures on food; and (c) approximately 40% of households are lodged in re.tal property. 2.05 Most rental units are in two-story attached houses in which owners informally rent the upper floors for additional income. The Habous, 2 insurance companies, social security agencies, as well as numerous public enterprises and ministerial departments, are the other main owners of rental housing. Rents on individually-owned units generally reflect market conditions, since owners often evade rent-control legislation through informal rental agreements. On the other hand, rents on public housing as well as units held by major private investors barely cover maintenance costs. Standing in the way of cost recovery are questionable legislative constraints (para. 2.23), weak management, and policies favoring specific categories of workers and social groups. 2.06 Income level, consumption patterns, and homeownership status also determine the various types of housing demand. Low- and moderate-income households prefer attached houses. These are usually built by force account I/ 1982 sensus data 2/ The "Habous is a religious institution set up to administer the operation and maintenance of mosques and other religious and social facilities, such as schools.  - 4 - with traditional construction techniques on small lots varying from 80 m2 to 120 m2. Middle- and upper-income groups choose to live in centrally located apartments or in suburban single-family homes. The choine of a house by all income groups is generally cons4dered a permanent, once-in-a-lifetime decision. This leads either to overinvestment or to evolutionary construction processes in which a house is expanded and remodeled over time according to the changing needs and financial resources of the household. C. Housing Supply 2.07 Housing demand is met by a supply system mainly comprising private contractors and construction enterprises. Small- and medium-size land and housing developers participate in this process and have recently expanded their activities. Many contractors and enterprises are artisans and traditionally cater to a low- and moderate-income clientele constructing evolutionary attached houses. On the other hand, until recently, developers have catered to a high-income clientele. However, the demand for high-priced units has declined along with the stagnation of real income. Developers are, therefore, turning increasingly to a moderate-income clientele; a few have even begun to specialize in building homes for low-income households. A considerable share of new houses is produced informally by the owners themselves, who often enlist the help of relatives, friends, and piece-workers. These dwellings generally add to the existing unauthori2ed housing stock (para. 2.02). 2.08 In the early 1970s, to cope with the housing demand by low-income households and with critical urban housing shortages, the Government encouraged MOH to move into housing production. In 1974, it established seven Regional Development and Construction Agencies (ERACs). MOH's and the ERACs' activities were intended to complement those of other Government-controlled companies such as the Compagnie Gen6rale Immobiliere (CGI), the Societe pour la Promotion de l'Habitat Locatif (SOPHAL), and the Compagnie Immobiliere et Fonciere du Maroc (CIFM). Housing production by the private and public sectors is summarized in the Table below: Table 2: Evolution of Urban Housing Production (1984-1988) 1984 1985 1986 1987 1988 * Units % Units 2 Units 2 Units X Units X _(OOs) (0OOs) (OOs) (0QOs) (0OOs) Private Sector Formal Production 41.4 62 41.5 65 43.6 63 52.3 66 49.3 62 Informal Production 16.5 25 15.8 25 17.1 25 19.7 25 19.8 25 Subtotal 57.9 87 57.3 90 60.7 88 72.0 91 69.1 87 Public Sector Ministry of Housing 4.1 6 2.1 3 1.6 2 1.2 1 1.0 1 ERACs 1.6 3 1.4 2 3.8 6 3.3 4 3.2 4 Government Companies 2.9 4 2.9 5 2.9 4 2.9 4 6.5 8 Subtotal 8.6 13 6.4 10 8.3 12 7.4 9 10.7 13 TOTAL 66.5 100 63.7 100 69.0 100 79.4 100 79.8 100 Sources: Ministry of Housing and individual government companies. * Provisional data.  2.09 Conccrned by implementation delays and cost overruns, MOH has disengaged itself from direct land development and housing construction. In 1984, it established a special agency, Agence Nationale pour la Lutte contre l'Habitat Insalubre (ANLHI), to carry out all infrastructure upgrading and housing construction projects related to the elimination of slum areas. More recently, at the beginning of 1988, it transferred the responsibility for completing the land development projects from the Fond National d'Am6nagement et d'Equipement des Terrains (FNAET) to the Socikt6 Nationale d'Equipement et Construction (SNEC), a new public enterprise. Following major managerial, operational, and financial restructuring in 1978, most ERACs evolved into financially viable and dynamically managed enterprises operating on a broad market front, ranging from social to high-standard housing. Over the past five years, the ERACs' annual production averaged 2,700 housing units, or 3.8% of the country's total. CGI, which is supported by the Caisse des Dep8ts et Gestion (CDG), continues to maintain its market share with an annual average production of 2,000 units, mainly aimed at middle-income households. SOPHAL and CIFM have experienced operational problems resulting from uticertain developm-r;t policies and continue to need restructuring measures. 2.10 The combined housing production in the private and public sectors (para. 2.08) is estimated at about DH 7 to DH 8 billion (US$815-930 million) annually. It represents 4.3% of GDP. Moreover, this production induces an additional annual investment of DH 1.7-2 billion in related urban infrastructure and DH 1-1.2 billion for furnishing and equipping new dwellings. The contribution of the houising sector to Gross Fixed Capital Formation (GFCF) was estimated at 20% in 1988. This excludes the informal housing sector, for which data are nonexistent. Table 3: Contribution of Housing Sector to GFCF (1984-1988) (DH Billion) (Current Figures) 1984 1985 1986 1987 1988 Capital Equipment 10.7 12.3 14.2 13.4 14.9 Agricultural Assets 0.9 1.1 1.3 1.4 1.3 Public Works 6.4 7.8 8.4 7.3 8.8 Construction 7.9 8.7 9.1 9.5 12.0 of which residential 4.8 5.2 5.8 6.3 7.9 Total GFCF 25.9 29.9 33.0 31.6 37.0 Res. constr. as % of GFCF 18.5% 17.4% 20.0% 20.0% 20.0% Source: Ministry of Planning, Department of Statistics 2.11 The housing construction industry is relatively efficient and responsive to the needs of its clientele. The first consideration is proved by housing production costs which compare favorably with those of other  - 6 - countries in the region; the second by a full range of housiug typologies and construction standards. 2.12 The development of housing affordable to low- and moderate- income households remains the main sectoral issue. In spite of its declared objective, public sector housing production has mainly benefitted medium-income households. Public production of low- and moderate-cost housing has been mainly associated with the upgrading and restructuring of slum areas, thus it has been developed as a cure for an existing problem rather than as a means to meet a specific housing demand segment. The production of low- and moderate-cost housing by the private sector has been constrained by: (a) scarcity of appropriately priced land; (b) excessive land-use, infrastructure, and building requirements; and (c) the low rate of participation by financial institutions in the financing of low- and moderate-cost housing projects, which forces developers either to put up equity contributions varying from 30% to 50% of the total investment cost or to resort to expensive bridge financing. These above constraints have contributed to the urban housing shortage. They have also led to the development of unauthorized housing on unserviced or inadequately infrastructured land. Generally, unauthorized housing units are adequate in size and soundly built. Had there been sufficient affordable land available, they probably would have been part of the formal construction circuit. D. Housing Finnmce 2.13 Morocco has a well developed financial system including a Central Bank (BM), 15 commercial banks, two government-controlled saving banks (Caisse d'Epargne Nationale - CEN, and Cheques Postaux), and five specialized institutions (Caisse de Depots et Gestion - CDG, Caisse Marocaine des March6s - CMM, Caisse Nationale de Credit Agricole - CNCA, Banqixe Nationale de D6veloppement - BNDE, and Cr6dit Immobilier et Hotelier - CIH). Long- and medium-term credit is available principally through CNCA, BNDE and CIH, which specialize respectively in agricultural, industrial, and housing and tourism development. 2.14 Banking activities are firmly controlled by BM, which fixes ceilings on credit by commercial banks and determines maximum interest rates on loans and minimum rates on deposits. BM also monitors the reserve and minimum equity requirements of commercial banks, as well as their maximum exposure to individual clients. Moreover, it establishes, in association with the Ministry of Finance (MOF), the share of sight deposits that they have to convert in Treasury instruments (35% in 1987) as well as preferential credits and bonds of specialized financial institutions (12% in 1987). 2.15 Current interest rates on loans vary between 12% and 15%, compared with an annual inflation rate of about 3% in 1987 and 2.5% in 1988. Interest rates on local currency resources vary from nothing to 12%, depending on their nature and maturity (e.g., sight deposits and long-term securities). No financial institution is allowed to engage directly in foreign borrowings, which are strictly monitored by the central monetary and financial authorities. In effect, foreign exchange transactions are a monopoly of the BM to which all foreign currency must be surrendered. Under this arrangement, the Government (i.e., the Treasury) has so far assumed or shared the foreign exchange risk on foreign borrowings by the specialized financial institutions (Daras. 2.16, 3.22 and 3.23).  - 7 - 2.16 In 1985, the Government initiated a progressive adjustment of the financial sector to reduce distortions in the level and structure of interest rates, develop a broader money market, and strengthen institutional systems, while fostering liberalization and promoting greater bank competition in the sector. This process, which was supported by the Bank's Second Industrial and Trade Policy Adjustment (ITPA II) Loan, has resulted in the establishment of positive interest rates, a substantial reduction in interest rate subsidies, improved mobilization of savings by the specialized financial institutions that now can accept deposits as well as extended commercial credit, and the shifting of part of the foreign exchange risk from the Treasury to the financial institutions and their customers. Previously, the Treasury had assumed the entire foreign exchangc risk. At present, the major distortion remaining in the financial sector is related to the credit ceilings imposed by the Government to preempt commercial banks' resources (over 40% in 1987) to finance the budget deficit. 2.17 The financial institutions operating in the housing finance sector are CIH, BCP, and the commercial banks. CNCA, the agricultural bank, lends for rural housing. However, such lending activity is marginal. The outstanding balance of the loan portfolio of each main financial institution is presented in the table below: Table 4: Outstanding Balance on Loans to Housing Sector (1984-1988) (DH Billion) (current figures) 1984 1985 1986 1987 1988 Amount % Amount % Amount % Amount % Amount % CIH 2.3 62 2.8 62 3.4 64 4.3 66 4.7 66 BCP ) 1.3 24 1.4 22 1.4 20 ) 1.4 38 1.7 38 Other Banks ) 0.7 12 0.7 12 1.0 14 TOTAL 3.7 100 4.5 100 5.4 100 6.4 100 7.1 100 Sources: Central Bank and Financial Institutions 2.18 The above figures include both construction and mortgage loans. Housing loans represent approximately 12% of the total credit to the economy. CIH plays the dominant role, financing over 60% of the total housing investment. Commercial banks mainly provide construction loans, which carry short maturities, usually of two to three years. The only commercial bank (relatively) active in mortgage lending is the Banque Centrale Populaire (BCP). It has been funding, on CIH's behalf, a low- and modei-ate-cost housing program referred to as Habitation Bon Marche (HBM). Over the past three years, BCP lending for this program averaged DH 70 million p.a. In 1973, BCP and commercial banks introduced housing savings schemes. These activities have come to a virtual standstill; neither the interest rate on deposits nor the  -8 size and conditions of the associated loans have attracted sufficient clientele. 2.19 Since March 1982, to step up resource mobilization for housing finance, commercial banks have been required to earmark a portion of their short-term deposits (6% as of 1988) for either direct lending or for purchase of medium-term securities issued by CIH. Because of their tradition of risk specialization, commercial banks have been reluctant to lend directly. Furthermore, they cannot compete on tAie same terms as CIH, whose borrowers are exempt from the Value-Added Tax (VAT) on interest and benefit from interest-rate subsidies on mortgages for low- and moderate-cost housing (para. 2.21). This situation is bound to change as a result of Government financial liberalization policies. The Government is also aware that reforming the present system requires measures to improve banking regulations, selective credit policies, and interest-rate systems (para. 2.30). 2.20 Financial intermediation is relatively well developed in Morocco. However, the domestic financial market is tight and heavily constrained by credit demand from the Treasury. This situation limits the funds available for housing finance. In recent years, mortgage lending has accounted for only 15%, on average, of the total yearly capital investment in the housing sector. Most of these funds have benefited medium- and high-income groups. Government policies to redirect funds to low-income groups have been largely frustrated by insufficient low- and moderate-cost housing supply. This is partially due to the fact that a large share of the latter takes place in the form of unauthorized housing construction (para. 2.12), which is ineligible for credit. 2.21 CIH lending rates for construction and mortgage loans are pegged at 13.5% and 12% respectively, well above present and projected inflation rates (2.5% in 1988 and 5% thereafter). The Government, however, subsidizes mortgages financed by CIH by assuming part of the interest cost and exempting CIH borrowers from the VAT. The final interest rates for mortgages charged to borrowers range between 7% and 12% depending on their income and on the real estate value, or Valeur Immobiliere Totale (VIT) of the purchased property.-I Interest-rate subsidies are presently available only to heads of households with monthly income less than DH 3,000 (US$350) and for the purchase of housing units with a VIT not exceeding DH 300,000 (US$35,000). The subsidy is paid by the Treasury to CIH, which charges its borrowers the final interest rate. In the past, the Treasury has been late in meeting its payments. This has harmed CIH's liquidity position and profitability. To alleviate the financial burden that interest-rate subsidies impose on the Treasury and the serious resource constraints facing the economy, the Government has progressively reduced such subsidies by realigning interest According to Moroccan practice, the VIT is defined as the estimated construction cost of the housing unit plus a conventional amount for the cost of the land (DH 20,000 or US$2,300 except for low-cost units, which is DH 10,000).  rates to the real cost of financial resources. Interest-rate subsidies have also been reduced by not raising the VIT ceilings of housing units qualifying for subsidized loans according to inflation. E. Current Government Housing Policies 2.22 To stimulate housing production and homeownership, the Government modified the real estate investment code (Code des Investissements Immobiliers) in January 1988. The new code increases the fiscal advantages granted to homebuyers by expanding tax exemptions and improving provisions for accelerated depreciation. Essentially, it maintains existing balances between investment incentives in housing sector and in other sectors such as tourism, industry, mining, and exports. The Government also promotes the implementation of special fiscal provisions introduced in 1985. These enable private and public companies to reinvest 3% of their profits in housing or other social facilities for their employees and deduct this investment from their taxable income. Although this provision is, in principle, very attractive, it is only implemented by 'Large firms due to the administrative burden of managing housing construction. The development of the cooperative system may help solve this problem (para. 2.24). 2.23 In 1980, the Government reacted to rising home rental prices by enacting stringent controls which limit increases to once every three years and permit tenants to take landlords to court in case of disagreement over rent increases. This action contributed to a marked decline in the availability of rental housing. Moderate- and medium-income households are particularly penalized since rent controls are most easily enforced on the moderate- and medium-cost housing stock and thus discourage institutional and private investment. Low-income households generally rent on the informa'l market, in which rent-control is unenforceable (para. 2.05). Aware of the negative consequences of the present rent-control system on the availability of rental property, MOH has drafted corrective legislation to be submitted soon for Government approval. 2.24 Following European models, in October 1984, the Government enacted a new law setting guidelines on the creation of cooperatives. There has already been some success in implementing this law in the Ministry of Public Works, which has established a special foundation to build social housings Fondation des Oeuvres Sociales (FOS). Since its inception, the foundation has built approximately 300 units at an average price of DH 87,000. The development prospects of cooperatives could be enhanced by improving present legislation concerning ownership rights and responsibilities for the collective parts of multi-family residential buildings, for which MOH is currently preparing amendments, and by increasing the availability of appropriately serviced and priced land. 2.25 Insufficient supply of affordable serviced land has been a persistent coastraint to housing development since the beginning of urbanization. The Government's decision to transfer responsibility for land development from MOH to public enterprises under its tuteiage (e.g., ANHLI, SNEC, the ERACs) should greatly enhance the development and delivery processes by eliminating some of the administrative procedures constraining the operations of Government  - 10 - departments. Additional steps, however, are needed to improve urban planning, strengthen and extend utility networks, further cooperation among local government authorities, landowners, and housing developers, and mobilize the financial resources needed to carry out investments ih infrastructure. MOI and MOH, which are responsible for intervening on the above issues, will take steps to implement the sector institutional development programs envisaged under this project (paras. 3.13-3.18). F. Bank Experience in the Sector 2.26 The dialogue on the housing sector between the Bank and the Government dates back to the mid-1970s and has resulted in three lending operations. The first two operations in 1978 and 1981 were managed by the MOH and focused on the upgrading of selected squatter settlements and the development of shelter concepts affordable to the lowest income groups. The third operation in 1983, which is now close to completion, focuses on strengthening CIH's ability to lend for low- and moderate-cost housing production, by funding technical assistance and construction and mortage loans. 2.27 Experience under the first two operations has generally shown that appropriate institutional arrangements concerning land tenure, infrastructure development, home improvement, and housing finance have a positive impact on improving the housing conditions of the poorest population segments and on restraining the proliferation of slum areas. Experience under the First Housing Finance Loan indicates that the availability of credit greatly enhances the development of low- and moderate-cost housing and access to homeownership. In fact, the loan contributed to the construction of approximately 16,000 dwellings with an average cost of US$11,000 (1986 prices) or less than half the median cost of the total housing units financed by CIH. From a macro-economic perspective, the loan has contributed to the increase in housing output with improved cost efficiency, minimizing the impact of expanded housing production on the availability of resources to other economic sectors. 2.28 The experience gained from the First Housing Finance Loan also teaches some important lessons for the design of future similar operations. First, the housing market is an integrated system. Improving the amount of credit available for medium-cost housing ultimately results in greater availability of existing housing for low-income households. Excessively rigid eligibility criteria for the use of Bank funds do not necessarily help the poor but rather slow down their access to affordable housing. Second, promoting the development of housing projects for low-income households requires the combined actions of local government, municipal agencies, and public and private entrepreneurs to ease procedural, regulatory, operational, and marketing constraints. Availability of credit is a necessary but insufficient condition, as demonstrated by the slow commitment pace of the First Housing Finance Loan. Finally, the real earning, as well as saving, capacity of low-income households is probably much greater than what is revealed by available statistical data and income surveys. In addition, the overall performance of low-income households in servicing their debt appears to be equal if not better than that of higher-income households. This calls for more flexible credit policies and the establishment of appropriately targeted housing savings programs, possibly extended to land acquisition.  - 11 - G. Project Rationale 2.29 The project will address critical issues related to housing development in general and low- and moderate-cost housing in particular. It comes at a critical time, when the Government is discussing ways and means to promote a more dynamic role for local authorities and public agencies in the development of serviced land and low- and moderate-cost housing. In keeping with present government liberalization policies, private entrepreneurs are ready to play a greater role in the construction of large housing development projects, including low- and moderate-cost housing, which in the past have been mainly carried out by the public sector. 2.30 Present Government policies, notably interest-rate subsidies and VAT exemptions (para. 2.21), give CIH a competitive edge on the mortgage market. Commercial banks mainly limit their activities in the housing sector to the financing of construction and ensure that CIH mortgage lending is available during the commercialization phase of the projects they support. Mortgage lending by commercial banks to reach out to a larger clientele and enhance competition could be a longer-term objective. Although the project does not address these questions directly, it is designed to lay the groundwork for a market-determined housing finance system. To this end, it focuses on improving CIH's competitiveness and ability to mobilize resources so that it could ultimately operate in a liberalized financial system. In particular, the project will engage CIH in a discussion of its plans for developing deposit and saving instruments. Broader discussion on the scope and pace of the liberalization process and its implications on the housing finance sector, including active participation of commercial banks in mortgage lending, are planned in the context of a general dialogue between the Bank and the Government on financial sector development policies. This dialogue will touch upon issues such as selective credit policies, credit controls, and the introduction of variable rate instruments. The liberalization of the financial sector is expected to lead to a future Bank lending operation involving both CIH and the commercial bank system. HI. THE PROJECT A. Project Objectives 3.01 The housing sector in Morocco is characterized by sustained urban housing demand fueled by rural migration and the decay of the existing housing stock (paras. 2.03-2.04). Its efficient development requires increased participation of the financial sector in housing financing to reach the higher level (20-25%) observed in many other developing nations (paras. 2.17-2.20). It also requires the shift of a greater share of available credit to low- and moderate-cost housing with the resultant positive effect of decreasing the unit costs and thus increasing the total output of housing production. Resource mobilization for low- and moderate-cost housing will be, however, ineffective until the Government removes the existing bottleneck in the supply of this kind of housing through the promotion of appropriately priced land and the establishment of more flexible building regulation and administrative procedures (paras. 2.12 and 2.25).  - 12 - 3.02 The general purpose of the project is to widen the scope and to improve the functioning of housing finance, with particular emphasis on credit for low- and moderate-cost housing. To this effect, the project will pursue the following mutually supportive objectives: (a) assist CIH in mobilizing resources for housing finance and in providing loans to developers and homebuyers; (b) increase the relative share of credit for the production of low- and moderate-cost housing; and (c) rationalize land development and housing production processes to facilitate low- and moderate-cost housing production. 3.03 Indirectly, the project will also contribute to the liberalization of the financial sector by enhancing CIH's ability to compete with commercial banks in mobilizing resources and extending credit. The project will thus ease the transition from the present specialized to a universal banking system. B. Project Description 3.04 To achieve the above objectives, the project will provide: (a) a line of credit in the amount of US$77 million to CIH to support its lending for low- and moderate-cost housing; (b) funds (US$0.5 million) to CIH to increase its knowledge of the housing supply system, to develop new savings and credit products, and to adapt its management information and audit systems to its new depository and lending activities; and (c) funds (US$3 million) to the Government to carry out institution-building programs designed to upgrade the capability of two key ministerial departments, the Urban Directorate of MOI and the Housing Directorate of MOH, to guide and facilitate land and housing development. C. Line of Credit to CUII 3.05 CIH's lending program and financial projections over the next five years call for cumulated commitments of about US$2.7 billion; about 66% of this will be for housing construction and mortgages, 26% for tourism development, and 10% for commercial construction and mortgages. Based in part on the existing pipeline of projectF. CIH projected lending for housing construction and mortgages is expected to amount to approximately US$238 million p.a. in 1990 and 1991. The line of credit will assist CIH during the above two-year period by refinancing a portion of its construction and mortgage loans for low- and moderate-cost housing (para 3.06). Bank financial assistance will represent approximately 9% of CIH's total disbursements, or 16% of disbursements against housing loans. This contribution is deemed essential to ensure adequate levels of financing for low- and moderate-cost housing, which tends to be neglected in favor of credit demand generated by higher-income groups and by developers producing upmarket housing, both of which have better access to credit.  - 13 - 3.06 Use of the Line of Credit. The Bank loan proceeds will be used to refinance: (a) Construction loans to private and public developers to build low- and moderate-cost housing developments. Such developments will cover the provision of site infrastructure and a mix of housing unit types, ranging from core units (unfinished units, including one- to two-rooms, whose completion is left to the initiative of the owners) to walk-up apartment buildings. These developments may include commercial and social facilities. Upon completion of the developments (usually four years), construction loans will be repaid and CIH will make mortgage loans partially financed out of the construction loan repayments available to potential buyers of the newly constructed housing units. This conversion of funds is a key incentive to developers to produce low- and moderate-cost housing units since it will facilitate their sale, particularly to the low- and moderate-income population, which has had only marginal access to formal housing finance. (b) Land development loans. Although construction loans will include financing for land development, it is expected that under the project, CIH will finance several land development projects carried out by public or private developers. (c) Individual housing construction loans. These loans will be extended to individuals who desire to build their houses through self-help or small contractors. Such credit will automatically become mortgage loans on completion of the construction. (d) Mortgage loans. These loans will apply mainly to the purchase of new housing units built with CIH construction financing (see (a) above). Some of the mortgage lending may be applied to new housing units whose construction has been financed by commercial banks. On the basis of CIH's past experience and the existing project pipeline (Annex 10), it is expected that about 80% of the loan proceeds will be disbursed fcr construction loans and their consolidation into mortgages, 15% for individual housing construction loans, and 5% for land development loans. Procedures are in place under the Project to ensure no double financing under the loan (which could result from financing both construction and mortgage loans); and no financing of land out of the loan proceeds. 3.07 Subproject Eligibility Criteria. To be eligible for Bank financing, subprojects will have to meet the following criteria: (a) Price criteria. These apply to the development of single-family houses, attached houses, and apartment units.  - 14 - The maximum VIT (para. 2.21) of the unit should not exceed DH 300,000 (US$35,000). For housing developments including more expensive units., refinancing will be limited to the qualifying share. (b) Surface criteria. This applies to the development of residential lots for single housing units. The covered surface of the lot chould not exceed 120 m on average. Residential use shoulc '.so be dominant (over 80X) and the ratio between marketable 4nd total surfaces should be higher than 601. (c) Locational criteria. All subpri,jects should be located in sites that are properly serviced by physical and social infrastructure; and (d) Financial criteria. All subprojects whose cost exceeds DR 20 million (US$2.3 million) should have a f4nancial rate of returnL' equal to at least the statutory lending rate of CIH (currently 13.51). 3.08 Beneficiary Selection Criteria. A beneficiary of individual housing construction or mortgage loans should meet the following conditions: (a) monthly income (head of household) for housing units with VIT of less than DH 150,000 (US$17,500) should not exceed DH 3,000 (US$350) per month; (b) the beneficiary should not own another dwelling; and (c) the beneficiary should use the housing unit as his own residence, though he may rent part of it. The above conditions are already applied by CIH, and their enforcement has been satisfactory. Table 5 summarizes lending targets and affordability levels by type of housing units. Table 5: CIH: Lending Targets and Affordability Minima Monthly Required Loan Percentage of Monthly Household Type of Selling Prices Down Paymnt Amount Income spent Payment Ince Percentage HausinA Unit ON uu1 i1L I5IL an mousina JUSA)S lUStI rgaehgd Self-Help 40% 74.4 186.1 13 Construction 100.000 11,700 10 10,530 35% 74.4 212.6 16 25% 74.4 297.7 26 Low-COSt 10 15,750 40% 132.2 230.4 30 Individual Housing 150,000 17,500 20 14,000 35% 117.5 335.7 31 30 12,250 25% 129.0 516.1 51 Moderate-Cost 20 16.800 40% 176.9 442.4 43 Individual Housing 180,000 21,000 30 14,700 35% 154.8 442.4 43 40 12.600 25% 132.7 530.8 52 Apartment 20 28,000 40% 294.9 737.3 60 Unit 300,000 35.000 30 24.500 35% 258.0 737.3 68 40 21.000 25S% 221.2 884.7 80 1*' Computed on the basis of the methodology jointly developed by CIH and the Bank on the occasion of the First Housing Finance Loan.  - 15 - 3.09 Refinancing Ratios. To stimulate CIH's lending activity for low- and moderate-cost housing as well as to increase the amount of resources available for this purpose, Bank refinanciiig of CIH's loans that qualify according to subproject and beneficiary criteria will vary according to the VIT of the concerned housing units. In particular, Bank refinancing will take into account the following ratios: (a) 65% of CIH loan amounts for housing units with a VIT under DH 150,000 (US$17,500): (b) 40% for units with a VIT between DH 150,000 and DH 300,000 (US$35,000); and (c) 50 % for land development subprojects. These percentages effectively eliminate from Bank refinancing the cost of land and developers markups. 3.10 Bank Review and Approval. All subprojects benefitting from construction sub-loans of more than US$1,000,000 equivalent will be reviewed and approved by the Bank to ascertain that all analyses have been properly performed. It is expected that an average of 15 projects per year will be reviewed. CIH will maintain appropriate records of all other subprojects so that they can be reviewed on a sample basis by Bank supervision missions. CIH will appraise subprojects according to a computerized model that it developed with Bank assistance under the First Housing Finance Loan. D. Institutional Assistance to CIi 3.11 In the coming years, CIH is planning to expand substantially its lending operations to respond to an expected greater level of housing construction and greater recourse to credit for its financing. To reach out to potential clientele, CIH has already extended and strengthened its branch system. To increase its resources, it has developed deposit and savings schemes, which are now being implemented. To improve its operations, it has undergone a major reorganization combined with the establishment of an integrated management information system and the implementation of comprehensive staff training programs.-' In addition, to meet market demand, CIH plans to introduce new lending products to finance land acquisition for housing construction and the purchase of existing housing units. Z/ The implementation of these reforms needs to be carefully monitored, gauged to CIH's actual ability to mobilize resources, and fine-tuned to Morocco's changing financial and economic environment. 3.12 The project will assist CIH in expanding its operations and bridging its existing gaps in research and development policies through the financing of the following activities: (a) study on the characteristics of the housing supply system. This study will review the characteristics of the housing supply system (e.g., types of developers, construction methods, contracting practices, marketing systems, types of housing products, cost structure, financing sources, payment practices) ' CIH's corporate organization, operational performance, and development prospects are described in Chapter IV. 2/ Mortgage loans are presently limited to the purchase of new dwellings.  - 16 - to help CIH better adapt its lending to housing supply needs and participate more thoroughly in the formulation of national housing policy. The study will include the implementation of a survey to be carried out with a sample of developers, contractors, and owners (for self-help construction) of new housing units. 'the survey will have a national scope and focus on major urban centers; (b) study of new lending products. This study will review the possible features and market potential of three new products: (i) loans for the purchase of serviced land plots and their self-help construction; (ii) loans for the purchase of existing housing units; and (iil) home improvement loans. Introduction of the first type of loan will greatly enoourage the development of low- and moderate-cost housing for, and by, households in the lowest income brackets. Loans for the purchase of serviced land have already been tested in Bank-supported site and services projects (paras. 2.26, 2.27) with positive results and marginal banking risks. Lending for the purchase of existing homes will ease movement within the housing stock. This is expected to improve the overall match between household characteristics and housing units. Finally, home improvement loans will have a positive socio-economic impact by helping improve the standard of living of a large segment of the urban population and stretching the life of the housing stock. The study will help CIH define the optimal terms and conditions of each type of lending, quantify its potential volume, and assess its impact on resource mobilization and use. Ultimately, the study will help CIH prepare a promotional campaign to link these new lending products with customized savings schemes; and (c) improvement of the management information and internal audit systems. These will be adapted to CIH's new depository and lending activities. This component will also finance related computer equipment. 3.13 The cost of implementing the above activities is estimated at US$0.5 million. Local or foreign consulting firms will be selected from a shortlist of, at least, six enterprises. Table 6: hnplementation Costs and Timetable for Survey and Studies Implementation Schedule Estimated Cost Invitation Contract (US$ '000) to bid Award Completion - Study on the characteristics 200 Dec 1989 June 1990 Dec 1991 of the housing supply system - Study on new lending products 100 June 1990 Dec 1990 Dec 1991 - Improvement of the M.I. and 200 June 1990 Dec 1990 Dec 1991 internal audit systems  - 17 - E. Sector Institutional Development: Assistance to MOI and MOH 3.14 Prior to 1985, MOH was responsible for both housing and urban development. Following a government-wide reorganization, MOI became responsible for urban development while MOH retained jurisdiction over housing development. This organizational framework was predicated on the Government's (decentralization) policy to link local communities and their public utilities, under the tutelage of MOI, more closely to the urban planning process. The potential for improvement resulting from the new organization, however, has yet to be fully exploited, as demonstrated by the unavailability of land for authorized housing construction. Such land shortages, which are common to most urban centers, inflate land prices and thereby hinder the development of low- and moderate-cost housing. In addition, land shortages often lead to illegal housing development in peripheral areas, which are either unsuitable for construction or too costly to connect to the urban infrastructure network. It is estimated that these informal settlements accommodate 15% to 20% of Morocco's urban population. Informal settlements generally contain sound housing units, even though they countervene cost-efficient development of urban services. Since such units are constructed without authorization, they do not qualify for mortgage financing. Consequently, owner-builders often face considerable financial hardship and are unable to complete the dwellings within a reasonable timeframe or to improve design standards. 3.15 Land shortages could be ascribed to the following interrelated causes: (a) local government reluctance to issue construction permits in the absence of homologated land-use plans; (b) weak coordination among local government, utility agencies, land owners, and developers; and (c) local government's inability to finance the primary infrastructure needed to open up new land to development. 3.16 The project will contribute to the solution of the first two problems. The third problem is being tackled under an existing Municipal Finance Loan (2272-MOR) and a similar Bank-supported operation to begin in FY90. The land shortage issue will be addressed by supporting the preparation of pilot urban development plans in the cities of Rabat, Tangier, Larrache, and Ksar El-Kebir. These plans will use new preparation techniques and approaches designed to make them more effective instruments for urban management by reducing their preparation time and cost, increasing their flexibility, and linking them to the actual implementation of urban development activities. More specifically, the plans will be updated continuously to meet the rapidly increasing demand for land and infrastructure. Each plan calls for an implementation program that will define the agents (i.e., municipality, utility companies, private and public landowners and developers) responsible for the various infrastructure works, the implementation schedule and financing plan of these works, and the organizational, juridical, and regulatory actions required to ensure their timely execution. Given the importance of the legal and institutional aspects  associated with the envisaged new techniques and approaches, a special study will specify the changes to be introduced to the present regulations, procedures, and legislation affecting the preparation of urban master plans and subdivision plans. In accordance with Morocco's present institutional setting, the Urban Department of MOI will prepare the urban development plans in close coordination with concerned municipalities, which are entrusted with the day-to-day implementation of zoning and building regulations. Consultants will assist in the preparation of the plans and study. The study teams will comprise professionals from the MOI and the concerned municipalities and utility agencies working jointly with and under the consultants' technical responsibility. 3.17 There is a paucity of information on the housing market and production mechanisms in Morocco. There is also a lack of documentation and understanding of the difficulties private individuals and developers encounter in the construction of low- and moderate-cost housing: inappropriate or excessively strict land-use requirements, infrastructure standards, building regulations, and architectural specifications. It is widely believed that these constraints add substantially to construction costs and even prevent the development of housing types specifically demanded by low-income households. 3.18 In support of the project, MOH will carry out a study to improve the knowledge and understanding of the housing production process and system in both the formal and informal sectors, and assess the impact of land-use, infrastructure, and building regulations on the development cost of housing. In addition, MOI will take appropriate action to promote changes, by the municipalities, in the existing land subdivision and building regulations. Special efforts will be deployed to inform local government officials on, and sensitize them to, the results and recommendations of the study. These will include specific measures leading to an increase in the supply of serviced land and dwelling units for low-income, urban households. 3.19 The total implementation cost of the sectoral institutional development program is estimated at US$3 million. Consulting firms will be selected from shortlists of local or foreign enterprises, in accordance with Bank guidelines for the use of consultants. Table 7: Implementation Cost and Timetable for MOI and MOH Institutional Development Proprams Implementation Schedule Estimated Cost Invitation Contract (US$ '000) to bid Award Completion - Urban Development 2,000 May 1990 Sept 1990 through Plans and General Dec 1992 Study - Study on housing market 1,000 May 1990 Sept 1990 Dec 1991 & production system & constraints to low- and moderate-cost housing development  - 19 - F. Lending Arrangements 3.20 The implementation of the project will involve two separate loans: one to CIH for US$77.5 million and one to the Kingdom of Morocco for US$3 million. Both loans will be made on standard Bank terms and conditions for Morocco: 20 years' maturity, including five years of grace, at a variable interest rate. CIH will use the loan proceeds to finance the construction and acquisition of low- and moderate-cost housing on its standard lending terms and conditions which are currently as follows: Table 8: Beneficiaries and Terms and Conditions of Ciif's On-Lending Type of loans Beneficiaries Maturity Interest Rate Land development loans developers 4 years 13.5% Housing construction loans developers 4 years 13.5X Self-help construction loans individuals Max. 25 years 12% Mortgage loans individuals Max. 25 years 127 3.21 The above lending rates were statutorily established by MOF in April 1988. These rates are substantially positive given the prevailing and projected inflation rates (2.5% in 1988, 5% in 1989 and thereafter). Whereas CIH applies the statutory rates to its general lending activity, referred to as regime g6neral, the beneficiaries of mortgages and individual construction loans for low- and moderate-cost housing, referred to as regime sp6cial, are charged a subsidized interest rate. The amount of subsidy is modulated according to the value of the housing unit. It consists of 5% for housing units with value below DH 150,000, and 2% between DH 150,000 and DH 300,000. The interest subsidy is borne by, and paid directly to, CIH by the Government. The recent government record of repaying CIH for interest-rate subsidies has been poor and the Government has accumulated significant arrears (para. 4.20). G. Coverage of Foreig Exchange Risk 3.22 Consistent with its credit and foreign exchange control policies, to date, the Treasury has assumed 100% of CIH's foreign exchange losses on foreign currency borrowings effected prior to 1985 and shared losses on subsequent borrowings. Under the sharing arrangement, established in connection with the ITPA II Loan (June 1985) and applied to all specialized financial institutions, CIH paid an interest rate on its foreign borrowings equal to their actual onlending rate (e.g., 12X) reduced by a 3% spread. The difference between the resulting rate (i.e., 9X) and the rate carried by the foreign loan (e.g., 8%), as well as a 1% commission charged on the relevant subloans were deposited by CIH in a foreign exchange risk fund in the name of the Treasury to be maintained on CIH's books and to be used to cover possible exchange losses. In the case of insufficient funds, the additional losses  - 20 - were assumed for an initial 2% of the currency devaluation by CIH and for the reminder by the Treasury. 3.23 In connection with the approval of the new Bank loans to CIH and CNCA, the Treasury has extended the ITPA II arrangement described above to the outstanding balance of all its existing foreign borrowings, including those contracted prior to 1985. With respect to the new Bank loan, the Treasury has decided that the spread be reduced from 3% to 22 but that the Treasury assume the initial 2% of Lhe currency devaluation in the case of an insufficient foreign exchange risk fund. These arrangements are spelled out in the letter no. 3/5187 of June 19, 1989, by the Minister of Finance to CIH's Chief Executive Officer. The assumption by CIH of a greater share of exchange losses on borrowings contracted prior to 1985 has only a marginal effect on its profitability given the relatively low weight of these borrowings on CIH's overall liabilities. Past and present arrangements also require that the financial institutions repay their debt in full directly to foreign lenders by purchasing the required foreign currency from BM. The Treasury later reimburses any foreign exchange losses at its charge. Since these losses have largely exceeded the margin between domestic and foreign interest rates, CIH has accumulated substantial receivables from the Treasury, which could not pay them on time because of cash shortages. Paymenu of Government arrears on foreign exchange losses is critical to CIH's financial viability (para. 4.20). H. Procurement and Disbursement 3.24 The line of credit to CIH will refinance civil works, goods, and acquisition of housing units. No contract is expected to be suitable for international competitive bidding. Public developers will be subjected to Government procurement practices for public works. Private developers tend to execute construction works either by themselves or through a variety of small contractors. In financing their projects, CIH will make sure that these conform to appropriate cost and technical standards. 3.25 CIH's, MOI's, and MOH's institutional development programs entail the implementation of studies and the procurement of computer equipment. Contracts for the studies will be awarded according to Bank guidelines for the use of consultants to qualified local and foreign consulting firms. Procurement of equipment will be included in the contracts for studies. 3.26 The line of credit to CIH (US$77 million) is expected to be committed over two years (1990-1991). However, to provide some leeway, the final date for submission of subprojects to the Bank has been set at December 31, 1992. Loans to both CIH and the Kingdom of Morocco are expected to be fully disbursed in five years with the closing dates set at December 31, 1994. The disbursement schedule of the loan to CIH (Annex 1, part A) is based on a conservative assessment of the subproject pipeline eligible for Bank refinancing and the disbursement rates observed for each lending product during the last two years. The disbursement schedule of the loan to the Kingdom of Morocco (Annex 1, part B) is based on a realistic estimate of the time required to implement the studies under MOI and MOH responsibility.  - 21 - 3.27 As mentioned in para. 3.09, disbursement of the line of credit will be made according to the following ratios: (a) 65% of CIH loans for housing subprojects involving housing units with a VIT under DH 150,000 (US$17,500); (b) 40% for subprojects 4avolving units with a VIT between DH 150,000 and DH 300,000 (US$35,000); ar-d (c) 50% for land development sub-projects. The total investment outlay supported by the line of credit, including the contribution of CIH and its borrowers, will amount to US$351 million. Bank financing (US$77 mrillion) will amount to 22% of the total investment and 100% of its expected foreign exchange component. A detailed breakdown showing the Bank contribution and participation to foreign exchange financing by lending product is provided in Annex 2. Disbursement of institutional assistance funds will cover 100% of the expenditures for all related activities. 3.28 Disbursements will be made against statement of expenditures (SOE) submitted by CIH, which will list categories of sub-borrowers and the VIT of housing units (below US$17,500, between US$17,500 and US$35,000). The Borrower will retain all documentation to support SOE and disbursement requests and will keep a record of all expenditures for review by CIH's auditors and Bank supervision missions. I. Supervision 3.29 Project supervision will require about 35 staff-weeks over the three years of project implementation. The basic staff required will include a financial analyst and an urban planner/engineer. X. THE MA[N LOAN BENEFICIARY A. Organization 4.01 Since 1920, CIH has operated as a private company subject to corporate law, although its major shareholders, CDG and BM, are public entities. Its organization comprises the following departments: Financial Resources, Accounting, Operations, Network Management, Human Resources, and Research (Annex 3). In 1982, CIH underwent decentralization in response to the Government's policy of using it as a main conduit for low- and moderate-cost housing. At present, CIH has 18 regional branch offices, referred to as agences. The staffing complement increased from 250 in 1979 to 390 in 1982, and to approximately 550 in 1987. Staff generally deal with both hotel and housing projects and loans. This situation broadens their exposure to technical aspects. The quality of CIH's management is good. CIH's Statute, updated in December 1988, and policy statement, integrated with annual provisions by its Board of Directors, are consonant with Bank lending policies. B. Management and Operations 4.02 CIH has developed a sophisticated data set on construction costs and building standards. It also has a good feel for housing market conditions throughout the country. Developers requesting financial assistance from CIH submit proposals detailing the technical, legal, financial, and commmercial  - 22 - aspects of their planned projects. Preliminary evaluation by CIH consists of an assessment of a developer's financial status, its experience in similar projects, and the various guarantees and collateral it is offering to back up requested loans. Once CIH determines that a developer is acceptable, a team of CIH appraisers reviews the proposal. Appraisal teams are staffed with engineers, architects, and financial analysts. Following such review, CIH submits its comments to developers, usually recommending changes or further analysis. After discussing its recommendations directly with the developers, CIH issues an appraisal report covering key project features and CIH's recommendations concerning the loan amount, loan maturity, and conditions to be met prior to loan approval. The report also contains a series of project documents, such as building plans, land documents, and building permits. A Technical Committee comprising the main department heads then reviews the report and recommends approval or rejection of the loan. The average time between pre-appraisal and final approval is two to three months. 4.03 CIH appraisers pay close attention to economic analysis and to advising developers on project concept and design. Institutional development and training components of previous Bank loans were designed to strengthen CIH's appraisal capacity and reinforce its advisory role. 4.04 The proceeds of CIH's construction and land development loans are made available in three installments to individuals and in four installments to developers. The fourth installment to developers, amounting to 10% of the loan, is withheld pending completion of the work. Funds are disbursed only after CIH has made a field inspection to ensure that the portion of the investment to be financed with the borrower's equity has been completed. Subsequent inspections are made to ensure that each CIH loan installment has been utilized in accordance with the loan contract and the project appraisal report. In case of non-compliance with the agreed project design, disbursements are suspended until the issue is resolved to the satisfaction of CIH. 4.05 The proceeds of mortgage loans are made to developers and individuals. The proceeds of construction loans to developers are consolidated into individual mortgage loans, which offset developers' debt to CIH. In the interest of preserving its creditworthiness, CIH has agreed to maintain its financial exposure in any single operation at 207 of its equity and reserves, unless the Government or any institution acceptable to the Bank guarantees to cover CIH's full credit risk. 4.06 Once projects have been completed and the housing units sold to the ultimate beneficiaries, CIH randomly checks on units benefitting from interest subsidies to ensure that these are being used exclusively as borrowers' principal residences and are therefore not being let. Whenever there is a breach in these rules, CIH requires the borrower to reimburse all interest subsidies received and to pay the statutory rate on the principal of the loan still outstanding. The proceeds of reimbursed interest subsidies are returned to the Government and credited against interest subsidies due to CIH. Owing to the size of its housing portfolio, CIH cannot possibly audit all beneficiaries. Nonetheless, its follow-up procedures serve as a deterrent, and few violations have been reported so far.  - 23 - 4.07 CIH also monitors its customers' debt service closely. It issues monthly statements defining the aging of loans. After payments are six months late and a loan is declared in default, it is assigned to a special unit that takes appropriate measures to recover the debt. These procedures are consistent with standard banking practices. 4.08 CIH mobilizes deposits and savings through its branch offices. A central department in Casablanca, in charge of the branches, defines their operational policies. To date CIH has started raising sight deposits only. This activity places it in competition with commercial banks on a tight market, which requires extensive and costly banking services. It also provides commercial banks with a strong argufent to oppose present Government regulations requiring their support for housing either by direct lending to the sector, or by purchase of CIH medium-term bonds (para. 2.19). It is essential that CIH extend its resource mobilization by setting up housing savings schemes. This is the area in which CIH, as a specialized housing bank, can show competitive strength. The mobilization of savings linked to the purchase of homes is also expected to add resources to the financial market rather than diluting existing bank deposits. C. Operational and Financial Performance 4.09 The evolution of CIH's lending operations over the past three calendar years is detailed below: Table 9: CIH: Approved Loans, Commitments and Disbursements, 1986-1988 (Current figures) 1986 1987 1988 Category No. of Amount No. of Amount No. of Amount units (US$ million) units (US$ million) units (US$ million Housing Loans Approved 15,450 188.0 13,678 175.2 14,990 233.5 Committed 143.1 144.8 186.8 Disbursed 129.5 133.5 161.2 Hotel and Other Loans Approved 60 96.9 57 85.9 58 122.2 Committed 58.3 52.2 96.0 Disbursed 51.6 50.1 88.0 4.10 During the past three years (1986-88), CIH approved US$483 million in loans, financing 40,500 housing units. Loans to developers for construction projects ca-ry maturities of four years. In principle, CIH can finance up to 100% of estimated construction costs, excluding land. Effective financing, however, rarely exceeds 60% of actual project costs owing to conservative estimates by CIH appraisers. Mortgage loans carry maturities of 15 years or less and cover 75% of the purchase price of the housing unit. However, when the VIT of a unit does not exceed DH 150,000 (US$17,500), loan maturity can be extended to 25 years and financing may cover as much as 90% of the purchase  - 24 - price. There is a maximum grace period of six months on such loans. Land development loans cover up to 100% of estimated costs of civil works. These are repaid according to the progress of sales over a maximum period of four years. 4.11 Hotel loans finance the construction, equipment, and expansion of hotels ranging from one-star to luxury hotels. These carry maturities of up to 20 years for buildings, including a three-year grace period, and up to ten years for equipment, with a one-year grace period. CIH currently charges 13.5% for hotel loans. 4.12 In 1979, CIH began a policy of systematic divestiture of its equity investments to improve the overall quality of its investment portfolio. Since then, it has taken new equity participations only in response to the restructuring needs of some critical projects, particularly in the tourism sector. In the future, CIH expects to limit its equity participations in an effort to free up resources for its lending operations, which should improve its overall profitability. 4.13 Summary audited income statements and balance sheets for FY 1984-88 are shown in Annexes 4 and 5. Financial indicators are presented in the Table 10. 4.14 Analysis of the above data shows that CIH had good financial performance during the last five years. In 1988, total revenues amounted to DH 1,061 million (US$123 million), a 247 increase over 1987. Net profit before taxes amounted to DH 54 million (US$17.2 million). However, the analysis of critical performance indicators shows some signs of deterioration. The spread between the cost of borrowings and earnings from loans narrowed to 2.2% in 1988 from 2.7% in 1984. The current ratio decreased to 1.4 in 1988 from 2.0 in 1984. The debt/equity and debt-service coverage ratios moved to 13.3:1 and 1.13 at the end of 1988 from 10.9:1 and 1.19 in 1984. Although this represents a negative trend line, better than expected profitability in 1988 coupled with the new deposit schemes and heavier concentration on lending to developers, should enable CIH to expand its lending activities (paras. 4.18-4.19). Projected financial indicators from 1989 to 1994 are presented in Annex 6. 4.15 To ensure CIH's efficient operations and improve its financial position, CIH agreed, during loan negotiations, to maintain: (a) at least a 2.2% spread; (b) operating expenses at no more than 1.3% of average total assets; (c) a debt/equity ratio below 15; (d) a equity to total assets ratio of at least 1:18; (e) a liquidity ratio on sight deposits higher than 20X; and (f) a maximum exposure of 20% on any subproject.  - 25 - 4.16 A definition of the performance indicators presented above is provided in Annex 7. At CIR's request, part of the provisions for losses on the loan portfolio in default will be included as "quasi equity" in the calculation of the debt/equity ratio. The share of provisions to be considered as "quasi equity" will be determined on the basis of an annual assessment of the risk of CIH loans in default. This assessment will be carried out in conjunction with CIH's annual audit by independant auditors acceptable to the Bank. Table 10: CIH - Financial Performance Indicators Based on Audited Data. 1984-1988 (Current figures) 1984 1985 1986 1987 1988 LIQUIDITY RATIOS Current ratio 1.96 1.90 1.50 1.43 1.57 Quick ratio 1.17 1.27 1.07 0.98 1.09 Changes in working capital (53.70) (0.38) (99.85) 11.77 273.40 Government receivables/ current assets 13.8% 24.1% 25.3% 27.6% 27.0% LEVERAGE RATIOS Debt/Equity ratio 10.94 12.53 12.40 14.09 13.72 Loan investment ratio/ total outstanding loans (*) 14.26 14.64 14.42 14.05 13.80 Debt/Loans ratio 0.77 0.86 0.86 1.00 0.99 Debt service coverage ratio 1.19 1.16 1.14 1.11 1.13 ACTIVITY RATIOS Administrative expenses as 2 of average total assets 0.96% 1.10% 1.07% 0.98% 1.10% Average collection ratios 256 192 146 168 179 Foreign currency debt as % of LT debt 20.09% 16.41% 15.16% 21.20% 19.68% IBRD debt as % of LT debt 14.81% 13.05% 13.05% 13.17% 11.95% PROFITABILITY RATIOS Income from loans as % of average loan portfolio 14.00% 14.66% 14.71% 14.63% 14.92% Cost of LT debt as % of average LT debt 10.65% 10.34% 11.05% 11.96% 11.71% (A) Gross income as % of average total assets 12.14% 12.35% 12.31% 12.21% 12.49% (B) Financial expenses as % of average total assets 9.45% 9.79% 9.92% 10.21% 10.26% Spread = (A-B) 2.69% 2.56% 2.39% 2.00% 2.11% Return on equity 11.52% 10.68% 9.97% 9.30% 10.09% Net return on assets 0.83% 0.71% 0.62% 0.54% 0.64% Net profit margin 4.16% 3.12% 2.83% 2.56% 2.72% Profit before taxes as % of average equity 23.90% 21.97% 21.16% 17.63% 20.03% Provision for losses as 2 of current assets 14.31% 16.65% 15.00% 14.70% 13.81% (*) 18 non-commercial housing loans and nine other loans  - 26 - D. Status of Loan Portfolio 4.17 As of December 31, 1988, CIH's housing portfolio represented 67% of its total portfolio.-' Arrears in principal and interest of over six months on the housing loan portfolio amounted to DH 59.2 million (US$6.9 million) as of December 31, 1988, or 2% of the housing portfolio. These arrears present no special risks because the aggregate VIT on CIH's mortgage portfolio far exceeds any risk of loss on these loans. It is unlikely that CIH's lending operations in low- and moderate-cost housing will have an adverse effect on its housing portfolio. Experience in developing and developed countries shows that there is no special repayment risk attached to granting housing loans to low-income groups. On the other hand, CIH's hotel and tourism portfolio affected by arrears represented 11% of the total outstanding balance of that portfolio in 1988. The status of CIH's hotel and tourism portfolio has improved during the last two years, as a result of more careful follow-up. CIH's provisions for loans in default conservatively amounted to DH 157 million (US$18.2 million) at the end of 1988, or 52% of total arrears. Table 11: CIH: Loans in Arrears of Principal and Interest over Six Months, 1984-1988) (DH Millon) (Current figures) 1984 1985 1986 1987 1988 Housing Loans 41.7 42.7 53.3 59.1 73.8 Hotel and Tourism Loans 88.1 102.2 126.7 192.7 218.0 Commercial Loans 26.4 53.7 44.7 47.2 49.0 Total Arrears 156.2 198.6 224.7 299.0 340.8 As % of Total Loans 4.6% 5.0% 4.5% 5.1% 4.8% Housing Arrears As % Total Arrears 26.7% 21.5% 23.7% 19.8% 21.7% As % Housing Loans 1.9% 1.7% 1.8% 1.8% 1.9% Provisions for Arrears 116.2 137.0 148.9 157.0 196.2 As % of Arrears 74.4% 69.0% 66.3% 52.5% 57.6% E. Prospects for Future Growth and Financial Performance 4.18 Under its present institutional setup (para. 4.01) CIH can manage increased lending activity. CIH projected lending operations and the pipeline of subprojects sponsored by public developers (Annexes 8, 9, and 10) show an increase in total volume of lending from DH 2.6 billion in 1989 to DH 6.5 billion in 19C4. In the face of increased lending, CIH is prepared to I/ Excluding short-term loans to developers.  - 27 - adjust its operations to: (a) achieve a more favorable balance between long-term mortgage loans to individuals and medium-term loans to developers; (b) offset foreseeable liquidity problems; and (c) cover the higher cost of long-term borrowing due to the elimination of BM rediscounts. This portfolio restructuring will entail a continued shift away from lending for hotels and tourism towards lending for housing, particularly for low-income units. Resources mobilized through sight and term deposits are expected to help offset the higher cost of borrowing and lower margins resulting from reduced statutory lending rates. Financial projections (Annexes 11, 12, and 13), prepared by the appraisal mission and updated prior to negotiations, indicate that CIH can maintain its profitability and a sound financial position. Sensitivity tests of the annual return on CIH's operations, i.e., spread, show that this return is significantly affected by decreases in lending and only marginally affected by decreases in deposits. In particular, if the lending targets were reduced by half to 9% p.a. on average, instead of the projected 18X, and the growth of deposits were to remain stable at 252 p.a. on average, the return would decrease by approximately 30%; if deposits were to grow at 5% p.a. and lending were to remain stable, the return would drop only 10%. This is because CIH's lending growth is expected to consist mainly in commercial loans, which have a more favorable spread and cash turnover, whereas deposits represent a limited, albeit profitable, source of funding. The table below summarizes cash-flow projections for 1989-94. Table 12: CDH: Projected Sources and Application of Funds, 1989-1994 (DH MiUion) Current figures 1989 1990 1991 1992 1993 1994 SOURCES Internal Sources Loan Repayment 1,731 2,265 2,928 3,579 4,264 4,741 Other 631 547 941 984 900 1,169 Borrowing Local 1,775 1,850 2,350 2,450 3,225 4,000 Foreign 359 672 416 427 718 700 Deposits 305 450 500 550 600 650 Total 4,801 5,784 7,135 7,990 9,707 11,260 APPLICATIONS Disbursements 2,610 3,136 3,746 4,539 5,475 6,451 Debt Service 1,908 2,190 2,840 2,948 3,625 4,124 Working Costs 278 320 372 440 516 613 Total 4,796 5,646 6,958 7,927 9,616 11,188 Surplus/Gap 5 138 177 63 91 72 4.19 CIH's projected external resource requirements are expected to amount to US$2,494 million for 1989-1994. Identified resources will cover 862 of  - 28 - the financial needs. Although the amounts to be borrowed annually from the domestic market have not yet been fully determined, the absorptive capacity of this market is limited. CIH will likely have to borrow internationally, in addition to the Bank loan. F. Accounts Receivable to Government Transfers and Hotel Arrears 4.20 Under present arrangements, the Treasury assumes the bulk of the foreign exchange risk (paras 3.22 and 3.23). Due to the rapid depreciation of the Dirham in relation to creditors' hard currencies, financial institutions have incurred substantial exchange losses. The Treasury has been unable to keep up with reimbursements, and in the case of CIH, has accumulated arrears that, at the time of project appraisal in July 1988, reached the amount of DH 234 million (US$27 million). By the same token, the Treasury has been unable to honor its obligations in a timely manner on the account of interest-rate subsidies (para. 2.21) and has accumulated arrears for DH 265 million (US$31 million) at the same time. In addition, previous agreements between the Government and CIH to settle loan payment arrears on CIIH loans for state-owned hotels were yet to be fulfilled, and there was a total residual amount of DH 147 million (US$17 million). 4.21 The perpetuation of the above receivable on CIH's cash flow generates a substantial loss in profitability due to the high cost of having to borrow on a short-term basis to compensate for these delayed revenues. Moreover, the Government does not pay interest on arrears. MOF is aware of such a situation and is committed to remedying it. Since project appraisal, MOF has settled or agreed to settle its arrears as follows: (a) Foreign Exchange Losses. The amount settled totals DH 314 million, of which DH 104 million were paid in cash and the remaining DH 207 million in Treasury bonds carrying a five-year maturity and a 6% interest rate. Pending arrears to the end of 1988, in the amount of DH 70 million, will be settled by December 31, 1989, either cash or with Treasury bonds; (b) Interest-Rate Subsidies. The amount settled totals DH 251 million, of which DH 96 million has already been paid in cash and the remaining DH 155 million has been money-ordered. Pending arrears to the end of 1988, in the amount of approximately DH 180 million, will be settled by December 31, 1989, through Treasury bonds carrying a five-year maturity and a 82 interest rate; and (c) Loans to State-Owned Hotels. Pending arrears mainly concern the Hyatt Regency hotel for a total amount of DH 100 million. The Treasury will settle these arrears by December 31, 1989, either in cash or with bonds. 4.22 Government arrangements to settle pending arrears to CIH were confirmed in a telex (June 22, 1989) sent by the General Director of the Treasury to CIH's Chief Executive Officer.  - 29 - V. PROJECT BENEFITS. RISKS AND ENVIRONMENTAL IMPACT A. Project Benefits 5.01 Morocco's housing supply system is strongly biased towards the production of high standard homes which are considered more profitable and relatively easy to market. By the same token, the credit system favors the buyers of more expensive homes, who are more affluent and therefore considered more creditworthy. This bias promotes unwarranted overinvestment. It also ignores the savings capacity of low-income households for housing, as substantiated by the yearly construction of thousands of unauthorized dwellings on the outskirts of major urban areas. 5.02 By providing credit for financing the development of some 15,000 low- and moderate-cost housing units over a two-year period, the project will contribute to relieving the housing shortage in major urban areas, promote homeownership by low- and moderate-income households, and redirect part of the domestic funds available for housing finance towards more cost-effective types of contruction. Besides the noticeable social benefits, shifting housing production towards affordable standards will meet high-volume demand resulting from demographic pressure while containing investment. The latter benefit has a positive macroeconomic impact since it frees up resources for other productive activities. 5.03 Provision of credit under the project will be associated with institutional development aimed at improving CIH's ability to mobilize resources for housing finance and to plan its future lending activity. Resource mobilization through an appropriate housing savings scheme will raise the contribution of formal credit to housing finance to levels substantially highier than the present 15X. Since the construction and purchase of many homes are made with cash that is often kept out of the financial system, the above savings scheme is expected to recycle cash into the housing sector with unpredictable multiplier effects. Bank assistance to CIH will also come at a critical juncture for the institution. Its growth objectives to meet the financing needs of the housing sector faces important challenges related to its resource structure and requirements, its profitability, its recovery of Government arrears on foreign exchange risk losses and interest-rate subsidies, and its relationship with the commercial banking system. Continued Bank assistance to CII through the supervision dialogue and the studies under the project will help the institution to synchronize its organizational growth and expanded lending activity with sectoral development policies and resource mobilization. 5.04 As described in para. 3.14, housing production, in particular for low- and moderate-income households, is constrained institutionally and organizationally at the local government level. Ultimately, the issues will focus on ways to make municipalities more dynamic and to coordinate their actions with those of public utilities, landowners, and land developers. Such issues must be addressed before land for housing construction can be mobilized and provided with necessary infrastructure in a timely and efficient manner. MOI, as the Central Government entity responsible for local communities and  - 30 - corresponding utility agencies, has a unique role in ensuring the achievement of the above objective. The project will assist MOI to this effect as well as promote cooperation between it and MOH to deal with the technical aspects of housing development. 5.05 In view of the nature of the loan, which mainly consists of a line of credit to a financial intermediary, estimating a project ERR would prove unreliable. The ERRs computed for a sample of 10 subprojects financed under the First Housing Finance Loan range from 15% to 20X. It is expected that ERRs of subprojects financed under the new loan will be in the same range and, therefore, well above the opportunity cost of capital (para. 3.07). B. Project Risks 5.06 There are three main risks under the project. The first is related to the type of housing subprojects that will be actually financed. The project will channel about 50% of Bank financial assistance to the financing of housing units with VITs of less than DH 150,000 (US$17,500), with the remaining funds used for housing units valued between DH 150,000 and DH 300,000 (US$35,000). CIH, however, will be unable to achieve that objective without an adequate demand for credit. The project will mitigate this risk through institutional development programs, in particular the one designed to promote availability of affordable serviced land for low- and moderate-cost housing. CIH's planned housing savings scheme will provide greater insight into the savings capacity, and thus creditworthiness, of low-income households. It will thus allow CIH to adopt more flexible lending criteria rather than those based exclusively on the official earnings of the household head. 5.07 The second risk is related to the possibility that CIH's future lending operations and profitability may be limited by Morocco's tight financial market characterized by the rising cost of long-term resources, and due to Government inability to prevent new arrears on its payments of interest-rate subsidies. This risk could be minimized through effective project supervision to ensure compliance with financial covenants and Government guarantees relating to its transfers to CIH. 5.08 The third risk is the capacity of MOI and MOH to manage their respective institutional development programs. Both Ministries have recently undergone reorganization of their departments dealing with urban and housing development and are adapting to the Government's new decentralization policies (para. 3.14). Careful selection of external consultants to assist in preparing the studies envisaged under the project, and the effective participation of central and local government staff in these studies, will enhance the prospects of a successful implementation of the project components. C. Project Environmental hnpact 5.09 The construction of residential buildings and housing units financed under the project is expected to be carried out according to appropriate urban planning, architectural, and engineering standards. Consequently, it will not have a negative environmental impact. In addition, increased lending for low- and moderate-cost housing associated with measures to increase the supply of serviced residential land will help integrate part of the presently unauthorized housing production into the formal sector.  - 31 - This, in turn, will help control urban sprawl, as well as unsafe housing development (i.e., lack of sanitary facilities and basic infrastructure). The project will, therefore, have a positive environmental impact. VI. AGREEMENTS REACHED AND RECOMMENDATIONS 6.01 During negotiations agreements were reached on the following points and recorded in the loan documents: - project objectives and description (paras. 3.02-3.09); - project monitoring and reporting requirements (para. 3.10); - CIH's financial performance indicators (para. 4.15); - studies financed under the project and their schedules (paras. 3.12-3.13 and 3.15-3.19); and - settlement to CIH, by the Government (Treasury), of pending arrears for foreign exchange losses on international borrowings, interest-rate subsidies, and loans in default on state-owned hotels (para. 4.21). 6.02 Given the above agreements, the project is suitable for a Bank loan of US$77.5 million to CIH, with the Guarantee of the Kingdom of Morocco, and US$3 million to the Kingdom of Morocco, with terms of 20 years, including five-year grace periods.  - 32 - 'ANNEXES Annex 1: CIH: Estimated Disbursement Schedule Annex 2: CIH: Summary Cost Table Arn ex 3: CIH: Organizational Chart Annex 4: CIH: Audited Income Statements (1984-1988) Annex 5: CIH: Audited Balance Sheets (1984-1988) Annex 6: CIH: Projected Financial Performance Indicators Annex 7: CIH: Definition of Performance Indicators Annex 8: CIH: Projected Growth Rate of Lending Operations Annex 9: CIH: Projected Commitments CIH: Projected Disbursements Annex 10: CIH: Projected Project Pipeline (Public Projects) Annex 11: CIH: Projected Income Statements (1989-1994) Annex 12: CIH: Projected Sources and Applications of Funds (1989-1994) Annex 13: CIH: Projected Balance Sheets (1989-1994)  - 33 - ANMEX I KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT Estimated Disbursement Schedule Estimated Cumulative Cumulative Disbursement Total Disbursement IBRD Fiscal Year US$ Million USS Million Percentage A. Loan to CIH 1990 First Semester 0.0 0.0 Second Semester 11.5 11.5 152 1991 First Semester 8.0 19.5 251 Second Semester 8.5 28.0 362 1992 First Semester 9.5 37.5 48S Second Semester 10.0 47.5 61S 1993 First Semester 11.0 58.5 751 Second Semester 8.5 67.0 861 1994 First Semester 6.0 73.0 94X Second Semester 3.0 76.0 981 1995 First Semester 1.5 77.5 1002 B. Loan to the Kingdom of Morocco 1991 First Semester 0.2 0.2 072 Second Semester 0.3 0.5 171 1992 First Semester 0.5 1.0 331 Second Semester 0.5 1.5 502 1993 First Semester 0.5 2.0 671 Second Semester 0.5 2.5 831 1994 First Semester 0.5 3.0 1001  KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJEC Summary Cost Table CIH investments Corresoondina to Bank-ASsisted Prgiects Type of Loans ---- Total Investment ---- Total Investment ----- --- Financing Structure ---- - Bank Financing - in OH Million in uSt Million USS Million as I of Local Foreisn Total Local Foreign Total Bank CM Sub-borrowers Fgreian lotal Construction by Developers 1.857 525 2.382 216 61 277 61 161 55 l00S 22S Land Development 2S9 Si 310 30 6 36 6 16 14 lO0S 17X Individual Construction 241 86 327 28 10 38 10 13 15 130w 26S TOTAL 2.357 662 3.019 274 77 351 77 190 84 10O 2ZX w  MOROCCO SECOND HOUSING FINANCE PROJECT CIH ORGANIZATIONAL CHART PRESIDENT ~- Data Proces-sarg Advisor y Unit DIRECTOR - Internal Audit Adviior y Unit DENERAL - Strategq and Development Planning Advisory Unit - Public Relations Advisoryj Unit DRECTOR LGENERAL |DE PUTY DlIREC TOR GE NERALv FINANCIAL ACCOUNTING OPERATIONS NETWORK HUtOAN REBEARC:H RESOURCES DEPART MENT DEPARTMENT DEPARTMENT REPARTCESNT DEPAPTME NT - Treasury Division - General Accountig - Consurner Relations - Corviwrcial Division - Trasr.mng DCvo, - itt Ers Dtivisuor - Participations and External Division Divsios - Moritorinq and Control Divisior - Cv rgr,.jtr.st &l.islur. - tudir; Diviision fImance DiviSsion - Consumer Accountmg - Projftt Appraisal - fIr.mr ,idl Moyemeht. Division - Pr ocurerVtnt tl livisin.r - Leqal Division Division Division - Aqency Network Division - Legal Paniel (or - Budget Division Project Supervision Prour,ement tCvisi.,r. - EAterna Relations LC ision Divsion - Project Post-Appraisal Diviswn  - 36 - ANNEX 4 KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT CIH: Audited Income Statements 1984-1988) in Million DH 1984 12&5 198 198 an INCOME Interest on Loans 494.14 576.64 689.88 825.43 1,022.70 Dividends 0.11 0.23 0.28 1.98 0.34 Other Income 23.27 20.84 26.26 25.54 37.97 TOTAL INCOME 517.52 597.71 716.44 852.95 1,060.51 EXPENSES Personnel Expenses 32.91 40.82 46.33 51.64 59.65 Other Operating Expenses 8.07 12.21 15.86 17.07 33.71 Charges on Short-Term Borrowings N/A 30.54 31.32 25.90 31.13 Charges on Long-Term Borrowings 349.40 393.84 500.07 635.74 774.57 Depreciation 3.28 4.58 4.84 5.39 6.46 Amortization 3.74 4.27 4.73 7.81 10.67 Provision for Losses 46.46 40.61 36.38 38.13 48.89 TOTAL EXPENSES 443.'.6 526.87 639.55 781.69 965.08 Profit before Taxes 73.66 70.84 76.89 71.26 9S.43 Income Taxes 38.15 36.23 40.68 33.68 40.89 NET PROFIT 35.51 34.60 36.22 37.58 54.54 ALLOCATION OF NET PROFIT Total Reserves 14.48 11.30 12.66 9.27 28.29 Dividends & Director's Fees 17.32 21.17 21.18 26.17 26.17 Provision for Housing Finance 3.71 2.13 2.38 2.14 0.08 TOTAL 35.51 34.60 36.22 37.58 54.54  ANNEX 5 KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT CIH: Audited Baltnce Sheets (1984-1988) in Million OH (Current figures) 19m8 i2f 198 lim ASSETS Cash & Banks 62 34 98 29 102 Maturities due & Arrears 664 597 627 755 910 (Less Provisions) (116) (137) - (149) (157) (196) Current Maturities of Loans 366 336 388 411 477 Interest Rate Subsidies & Exchange Risk (Governt.Due) 186 336 426 522 629 Other Debtors 261 320 397 454 537 (Less Provisions) (76) (95) (104) (121) (127) TOTAL CURRENT ASSETS 1,346 1.392 1.684 1.893 2.33k Housing LT Loans (CNP,OPL.ANP & HBM) 1,389 2,489 2.949 3.259 3.787 Hotel Loans (OCH) 953 1,110 1,407 1,708 2,320 Housing ST Loans (OPF & OPVT) 942 321 508 783 889 other Commercial Loans (OTT,OCF & Others) 57 50 52 61 101 Total Loans Portfolio 3.341 3,970 4,916 5.810 7.097 (Less Current Maturities) (366) (336) (388) (411) (477) Equity Portfolio 95 108 129 136 130 (Less Provision for Depreciation) (17) (17) (15) (15) (15) Equipment Bonds & National Loan 20 24 27 31 217 TOTAL PORTFOLIO 3,073 3.748 4,668 SSS1 6,952 Fixed Assets 31 45 52 67 118 (Less Depreciation) (11) (15) (21) (26) (32) Deferred Charges 34 40 44 58 72 TOTAL ASSETS 4,473 S,209 6.427 7.543 9,442 LIABILITIES Accounts Payable 2 19 21 31 69 Current Maturities of Debt 265 349 SO1 766 740 Creditors & Charges Due 381 327 560 539 636 Income Taxes Payable 38 36 41 34 40 TOTAL CURRENT LIABILITIES 686 731 1,123 1,369 1,485 Central Bank 250 250 0 0 0 Treasury & Other Domestic Borrowings 65 53 49 45 364 Long-Term Bonds 1,796 2,133 2,433 2,651 3.213 Medium-Term Bonds 662 1,031 1,681 1.834 2.178 Sight Deposits 202 Total Domestic Borrowings 2,772 3,467 4.164 4.530 5.957 IRBO Borrowings 514 541 641 765 886 IFC Borrowings 0 0 0 321 431 Other Foreign Currency Borrowings 183 139 103 145 142 Total Foreign Currency Borrowings 697 680 744 1.232 1,459 TOTAL LONG-TERM DEBTS 3.469 4,147 4,908 5,761 7,416 Share Capital 210 210 260 260 385 Capital Surplus (Reserves) 81 94 108 117 101 Accumulated Retained Earnings 26 27 28 35 54 TOTAL EQUITY 317 331 396 412 541 TOTAL LIABILITIES 4,473 S,209 6,427 7,543 9,442  - 38 - ANNEX 6 KINGDOM OE MOROCCO STAFF APPRAISAL REPOP? SEC0O HOUSING FINANCE PROJECT CIH: Financial Performance Lvjicators (19A8-19941 in Hillion OH (Current figures) 18 1B 11 1992 1993 1224 LIQUIDITY RATIOS Current Ratio 1.57 1.74 1.47 1.63 1.47 1.S3 1.67 Quick Ratio 1.09 1.26 1.09 1.22 1.10 1.16 1.28 Changes in working capital 273 404 (74) 469 (111) 340 C22 Government Receivables/ Current Assets 27.0% 13.3% 11.3% 10.2% 9.5% 8.9% 8.2% LEVERAGE RATIOS Debt/Equity Ratio 13.72 11.21 12.27 13.80 11.74 12.38 13.29 Loan Investment Ratio (*) 13.80 13.2S 12.76 12.71 12.73 12.76 12.78 Debt/Loans Ratio 0.99 0.85 0.96 1.09 0.92 0.97 1.04 Debt Service Coverage Ratio 1.13 1.15 1.16 1.18 1.21 1.24 1.25 Total Assets/Equity 17.46 14.53 16.23 17.66 15.40 15.92 16.87 ACTIVITY RATIOS Operating Expenses as % of Average Total Assets 1.18% 1.14% 1.09% 1.0S% 1.03% 1.00% 0.97% Average Collection Ratios 197 171 152 134 123 113 112 Foreign Currency Oebt as % of LT Debt 19.68% 19.51% 21.16% 20.90% 20.34% 19.70% 20.71% IRBO Debt as % of LT Debt 11.95% 9.96% 10.41% 10.96% 12.55% 11.34% 10.07% PROFITABILITY RATIOS Income from Loans as % of Average Loan Portfolio 14.92% 14.48% 14.20% 13.95% 13.74% 13.58% 13.42% Cost of LT Debt as % of Average LT Debt 11.71% 11.13% 11.84% 11.69% 11.48% 11.34% 10.86% (A) Gross Income as % of Average Total Assets 12.49% 12.34% 12.37% 12.36% 12.44% 12.54% 12.57% (B) Financial Expenses as % of Average Total Assets 10.26% 9.80% 9.78% 9.63% 9.48% 9.40% 9.30% Spread = (A-B) '.23% 2.54% 2.59% 2.73% 2.97% 3.14% 3.26% Return on Equity 10.09% 9.16% 11.13% 13.91% 14.44% 16.59% 18.78% Net Return on Assets 0.64% 0.69% 0.75% 0.85% 1.01% 1.13% 1.23% Net Profit Margin 2.72% 2.76% 2.99% 3.38% 3.91% 4.25% 4.66% Profit Before Taxes as % of Average Equity 20.03% 18.93% 20.08% 25.25% 28.94% 30.86% 34.70% Provision for Losses as % of Current Assets 13.81% 12.56% 11.16% 10.79% 11.03% 10.99% 10.70% (*) (18' non-commercial housing loans + 9* other loans)/total outstanding loans)  - 39 - ANNEX 7 KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT Definition of CIH Performance Indicators A. SPREAD = (total operating revenue - financial expenses)/average total assets of current and previous year. Total Operating Revenue = paid interest on loans + paid interest on arrears + fees. Financial expenses = interest paid on debt + fees + commissions + provisions for exchange risk and other losses. Average total assets = as shown in the audited balance sheet. B. OPERATING EXPENSZS: as percentage of average total assets. Operating expenses include depreciation on fixed investments. C. DEBT/EQUITY RATIO = long-term debt/equity. Long-term debt = outstanding balance of long-term debt. Equity = paid in share capital + accumulated retained earnings + reserves + provisions for losses considered as quasi-equity. D. EQUITY/TOTAL ASSETS Equity (see above) Average total assets (see above) E. LIQUIDITY RATIO: as percentage of sight deposit liquidity = cash + Treasury bonds. F. MAXIMUM EXPOSURE = outstanding loans granted to a single subproject as against percentage of total equity including provision for losses considered as quasi-equity. Maximum exposure ratio would not include Government fully guaranteed loans.  KINGODN OF MOROCCO STAFF APPRAISAL REPORT SECONO HOUSING FINANCE PRJECT CIH: Proiected Growth of Lendina Operations (1988119941 (in Million DH) (Current figures) 1988 1989 1990l 1991 1922 1993 1222 DH M iGrowth Rate Annual Growth Rate t%1 18.5% 13.7% 18.9% 18.8% 19.7% 19.9% of which: HOUSING 1,854 Construction (CNP+OPL) 377 -35.3% 20.0% 19.2% 20.4% 20.5% 20.0% Prefinancing (OPF) 896 -0.5% 25.9% 24.7% 22.6% 24.6% 25.0% Acquisition (ANP) General Regime 434 14.3% 20.0% 19.2% 20.4% 20.5% 20.0% Sites & Services (OPVT) 50 134.5% 20.0% 19.4% 20.9% 19.2% 20.0% Acquisition (HBM) Special Regime 97 212.4% 20.0% 19.4% 20.9% 19.2% 20.0% TOURISM 977 Hotel (OCH) 974 2.1% 10.0% 10.4% 9.4% 10.8% 10.0% Transportation (OTT) 3 747.0% 20.0% 25.0% 16.7% 17.1% 15.0% COMMERCIAL 149 Other than Tourism (OCF) 149 205.4% -18.9% 24.0% 25.8% 25.0% 25.0% Annual Commitments (OH Million) 2,980 3,530 4,013 4,770 5.666 6,784 8,136 IO  KINGOOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT CIH: Proiected Commitments (Housina Sector only) (in Million OH) (Current figures) - ---------- CIN Commitments (in Million DH) ----------- -f which refinancable by the Bank loan fin 000 US 1292 1990 1991 192 1993 Total 1989 1990 1221 1322 1993 Total Prefinancing (OPF) 892 1,122 1,399 1,715 2,136 7,264 0 25,020 26.305 28.939 34,997 115,261 Sites & Services (DPVT) 117 141 168 203 242 871 0 5.703 6,614 2.26 .988 29.070 Subtotal 1 1,009 1,263 1.567 1,918 2,378 8,135 0 30,723 32,918 36,704 43,985 144,330 Construction (CNP + OPL) 244 293 349 420 507 1,813 0 8,487 9,081 9.748 10,181 37.497 Acquisition (ANP) General Regime 496 595 710 855 1,030 3,686 0 15,076 16,443 18,047 19,315 68,881 Other Commercial (OCF) 455 369 458 576 720 2,578 0 0 0 0 0 0 Acquisition (HBM) Special Regime 303 364 434 525 626 2.252 0 6.652 30.261 34.832 39.514 11L1260 Subtotal 2 1,498 1,621 1,951 2,376 2,883 10,329 0 30,215 55,785 62,627 69,010 217,638 Hotel Loans (OCH) 994 1,094 1,208 1,321 1,463 6,080 TOTAL 0 60,938 88,704 99,331 112,995 361,968 Other Tourism Loans (OTT) 29 35 44 S1 60 219 Subtotal 3 1.023 1,129 1,252 1,372 1,523 6,299 TOTAL 3,530 4,013 4,770 5,666 6,784 24,763 EXCHANGE RATE US$ 1/DH 1988 199 190 1991 1992 1 8.21 8.62 8.88 9.15 9.42 9.71 t- goX Ftm  KINGDOM OF MRlROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT CIM: Prolected Disburse atu (Housing Sector only) (in Million DH) (Current figures) - --------- CIH Disbursements in Million DM ------------ of which refinancable by the Bank loan (in 000 USS) 1989 1222 191 22 193 Tota 199 1290 1221 112 L993 Tota Prefinancing (OPF) 580 730 910 1,140 1,420 4,780 0 16,272 17.108 19,235 23,261 75.875 Sites & Services (DPVT) 60 72 86 104 124 446 0 3.648 4.230 4.9626 5.749 l1892 Subtotal 1 640 802 996 1.244 1,544 S,226 0 19,920 21,337 24,201 29,010 94.468 Construction (CNP + OPL) 217 260 310 373 450 1,610 0 7,537 8,064 8,649 9,040 33,290 Acquisition (ANP) General Regime 433 520 620 747 900 3,220 0 13,172 14,366 15,774 16,876 60,188 Other Commercial (OCF) 200 251 312 392 489 1,644 0 0 0 0 0 0 Acquisition (HBM) Special Regime 300 360 430 519 620 2.22 0 6.586 29.962 34.421 39.124 110.093 . Subtotal 2 1,lSo 1,391 1,672 2.031 2,459 8,703 0 27,295 52,392 58,844 65,040 203,571 ^ Hotel Loans (OCH) 700 769 850 929 1,029 4,277 TOTAL 0 47,214 73,730 83,045 94,050 298.039 Other Tourism Loans (OTT) 21 24 30 35 41 1i5 Subtotal 3 721 793 880 964 1,070 4,428 TOTAL 2,511 2,986 3,548 4.239 5,073 18,351 Percentage Elinible for Bank's Refinancing by Lendino Product If VIT < 150.000 DH - Bank's Refinancing 65% If VIT > 150.000 DH. Bank's Refinancing 40% 1982 1990 1991 12= 1993 1989 1929 1991 122 1993 OPF 0% 12% 8% 6% 6% 0% 30% 30% 30% 30% OPVT 0% 0% 0% 0% 0% O0 69% 69% 69% 69% CNP + OPL 0% 15% 12% 9% 6% 0% 40% 40% 40% 39% ANP 0% 10% 8% 6% 4% 0% 40% 40% 40% 39% I' Credit Foncier 0% 0% 0% 0% 0% 0% 0% 0% 0% O% P HBM (*) 0% 25% 95% 90% 85% 0% 0% 5% 10% 15% (t) taking into account the IBRD disbursement through Loan 2245-MOR. 0'  KINGDOM OF MOROCCO STAFF APPRAISAL REPORT SECOND HOUSING FINANCE PROJECT CIH: Pipeline of Subproiects (1989/1991) 1989 1990 199) Total Average Units CIH Loan Units CIH Loan Units CIH Loan Units CIH Loan Subproject Type of Unit Cost Amount Amount Amount Amount Cities Developers Names Loans (DH) 1 000 OHD __ 000 OM) (000 O) (000 OH) Mohammedia Self-Help Const. Alia III CNP 100,000 750 45,00C 750 45,000 Sidi Bernoussi Self-Help Const. Al Qods CNP 90,000 400 i9,000 400 19,000 Ben Slimane Self-Help Const. L. Meriem (upgr.) CNP 90,000 375 15,000 125 5,000 500 20,000 Casablanca Public Developer Attacharouk ANP 80,000 250 10,000 250 10,000 Ain Sebaa Municipality Hassan II OPF 80,000 400 16.000 400 16,000 Ain Sehaa Municipality Douar Bouih OPF 80,000 250 400 20,000 400 20,000 Khourigba Self-Help Const. Al Qods CNP 80,000 10,000 200 8.000 450 18,000 Khourigba Self-Help Const. Al Massira CNP 120,000 150 6,000 100 4,000 250 10,000 Oued Zem Self-Help Const. El-Dahab CNP 120,000 100 6,000 50 3,000 150 9,000 Oued Zem Self-Help Const. El-Wahda B CNP 110,000 20 800 20 800 Oued Zem Self-Help Const. El-Wahda A CNP 110,000 150 6,000 1SO 6,000 Oued Zem Self-Help Const. El-Wahda Ext/upgr. CNP 80,000 100 4,000 100 4.000 Beni Mellal Self-Help Const. Atlas CNP 125,000 140 8,400 80 4.800 220 13,200 Kasba Tadla Self-Help Const. Rachidia CNP 120,000 70 4,200 70 4,200 Beni Mellal Self-Help Const. El Messira (upgr.) CNP 90,000 200 8,000 400 16,000 600 24,000 Fkih Ben Salah Self-Help Const. Nezha CNP 120,000 300 18,000 100 6,000 400 24,000 Fkih Ben Salah Self-Help Const. Ezzouhour CNP 120,000 250 15,000 250 15,000 I Afourer Self-Help Const. Annasr CNP 120,000 150 9,000 150 9,000 .- Ksour Mamra Self-Help Const. Nahda CNP 120,000 100 S,000 100 6,000 200 12,00C w S. Bennour Self-Help Const. Widad CNP 120,000 100 6,000 100 6,000 200 12,000 I Sir Jdid Self-Help Const. Nidal CNP 100,000 50 3,000 50 3,000 El Jedida Self-Help Const. Mouilha CNP 120,000 130 7,800 200 12,000 330 19,800 Temara Province El Massira OPF+ANP 90,000 200 8k,000 S00 20,000 700 28,000 Sale Province Moulay Ismail OPF+ANP 90,000 400 16,000 300 12,000 700 28,000 Rabat Self-Help Const. Ennahda (Moh Land) CNP 90,000 350 14,000 300 12,000 650 26,000 Sale Province Hay Errahma ANP 100,000 250 10,000 250 10,000 400 16,000 900 36,000 Kenitra Self-Help Const. Ouled Dujih/Moh La CNP 90,000 250 10,000 400 16,000 650 26,000 Souk Laarba Hind (Moh Land) CNP 90,000 200 8,000 200 8,000 400 16,000 Arbaoua Oued Makha2ine CNP 110,000 100 6,000 100 6,000 200 12,000 Sidi Yahya Fath CNP 80,000 100 4,000 100 4,000 200 8,000 Tiflet Andalous (upgr.) CNP 80,000 250 10,000 250 10,000 500 20,000 Khemisset El Kettania ANP 110,000 50 3,000 50 3.000 Marrakech Public Developer El Messira II&III OPF+ANP 140,000 250 10,000 300 12,000 400 16,000 950 38,000 Marrakech Public Developer Jbilet ANP 140,000 100 6,000 100 6.000 Essaouira Province Skala OPF*ANP 120,000 375 22,500 125 7,500 500 30,000 Meknes Borj Moulay Omar CNP 90,000 250 10,000 250 10,000 300 12,000 800 32,000 Meknes Sidi Baba CNP 80,000 150 6,000 200 8,000 250 10,000 600 24,000 Meknes WaJharous CNP 80,000 200 8,000 200 a,ooo 250 10,000 650 26,000 Sidi Bernoussi Erac Charab OPF+ANP 130,000 100 6,000 100 6.000 Z Sidi Bernoussi Erac El Menzeh/Al Qods OPF+ANP 130,000 1oe 6,000 100 6,000 te Casablanca Municipality Oulad Ziane OPF+ANP 150,000 160 9,600 40 2,400 200 12,000 X Casablanca CGI El Qods ANP 150,000 150 12,000 150 12,000 . Dujda ERAC Ohar Mhalla OPFtANP 150,000 20 1,200 20 1,200 40 2,400 80 4,800