Morocco - Land Development

 ICRR 10816 Report Number : ICRR10816 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 03/07/2001 PROJ ID : P005514 Appraisal Actual Project Name : Land Development Project Costs 321.5 179.3 US$M ) (US$M) Country : Morocco Loan /Credit (US$M) Loan/ US$M ) 132.5 65.6 Sector (s): Urban Housing Cofinancing 169.3 113.1 US$M ) (US$M) L/C Number : L3618; L3619; L3620; L3621 Board Approval 93 FY ) (FY) Partners involved : Closing Date 06/30/2000 06/30/2000 Prepared by : Reviewed by : Group Manager : Group : 2. Project Objectives and Components a. Objectives The original objectives were: (a) to provide serviced residential lots at affordable prices specifically targeted to squatter and low-income families; (b) to provide medium-term financing to private sector property developers for construction of housing for low -income families; (c) to foster the participation of private sector banks in the housing finance sector; and (d) to improve the housing finance sub -sector, housing subsidy policies, and the land delivery process. After formal project restructuring at mid -term, objective (c) on private sector bank participation, was dropped upon the realization that it was overly ambitious . The other three objectives remained unchanged . b. Components (i) Financing land development sub -projects of the National Infrastructure and Construction Company (SNEC): 17,100 serviced residential lots for private development of up to 50,800 units, 93% of which for low-income owners and tenants (US$157.46 m. - 53% of total cost); (ii) Line of credit to five public and private banks (inc. Crédit Immobilier et Hôtelier (CIH); Société Générale Marocaine de Banque (SGMB) and Wafabank) to finance: (a) private sector developers' residential lots and housing for low-income families, and (b) long-term loans for owners of developed lots to build their own dwelling (US$141.10 m. - 46% of total cost); (iii) Studies for the Ministry of Housing of land development and housing finance issues, plus a socio -economic analysis of squatter rehousing (US$2.46 m. - 0.8% of total cost); (iv) Institutional development of SNEC and CIH inc . training and technical assistance (US$1.64m. - 0.5% of total cost). c. Comments on Project Cost, Financing and Dates Final costs of US$179.3 million were only 56% of those foreseen at appraisal . Constraints in SNEC's financial capacity in a weaker market for lots than expected, and a lack of interest by private banks to participate, are the principal causes of the shortfall . The Bank loan approved in an amount of US$ 132.5 million was only 50% disbursed at completion, when it accounted for 36.6% of all funding under the project . The project was approved on 06/10/93 and it was closed on 06/30/00 as scheduled. 3. Achievement of Relevant Objectives: Objective (a) of providing serviced lots for low -income families was partially achieved . 11,433 lots--60% of which were for low-income beneficiaries--were built, meeting the lower target revised at mid -term. A number of factors explain why the original target could not be met, including : (i) SNEC had reached is credit capacity limit and could not absorb all funds that the project planned to on -lend to it; (ii) land acquisition delays; and (iii) lower than expected demand for lots in small towns; Objective (b) was achieved with some shortfall and some caveats . Funding was provided only through CIH . Private banks did not participate. It is not clear to what extent this financing of housing developers brought benefits to low-income households. Objective (c)--which was dropped at mid-term--was not achieved in the absence of private banks' interest in financing low-income housing in the continued absence of comprehensive reform of the sector and Morocco's subsidy system. Objective (d) was achieved. The institutional capacities of both CIH and SNEC were enhanced (notwithstanding latter's credit ceiling constraint upon the scale of operations ). Better, albeit still sometimes partial, understandings of urban land development in Morocco, the financial and fiscal aspects of housing finance and resettlement operations of shantytown dwellers were obtained through studies completed under the project . 4. Significant Outcomes/Impacts: The project succeeded in initiating reforms in the housing finance sub -sector, housing policy subsidies and the land delivery process. Low-income households constituted the majority of beneficiaries of the serviced urban lots delivered through the project. 5. Significant Shortcomings (including non-compliance with safeguard policies): Project design was not realistic since the Moroccan authorities were not ready to provide suitable incentives for private property developers and private banks to participate in financing low -income housing. Project design also did not take into account the lessons learned from previous projects, despite the Bank's long history of prior involvement in Morocco through two urban upgrading projects, two housing finance projects and two municipal development projects . There was no clear strategy for housing sector reform at appraisal, and right through to mid -term. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Unsatisfactory Unsatisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: 1. To be effective, land development projects should involve municipalities and other regional stakeholders and be integrated with broader urban and environmental development programs . 2. Piloting private bank financing of private developers as part of a low -income housing project is doomed to fail in the absence of financial incentives for private banks to compete with public sector banks in offering finance for low-income housing. 3. The timely and successful implementation of a land development for low -income families on a very large scale requires a country's institutional and regulatory frameworks governing land use and the housing sector to be already in place. 8. Assessment Recommended? Yes No Why? An audit would provide an opportunity for a closer look at particularly important lessons for urban and housing sector reform in a country which has been under -audited in recent years. 9. Comments on Quality of ICR: This is a very good ICR. Among its many positive features : Convincing evidence of project outputs well presented and tabulated . All topics pertinent to the project performance are covered . Before and after-project scenarios are considered when assessing outcome achievements . Very clear presentation of actual performance results achieved vis a vis the appraisal targets . Inclusion of a thoughtful analysis of the effects of the macroeconomic situation upon project performance . Candid report of project shortcomings, including those deriving from the performance of the Bank itself . Had the report been more concise, included a borrower assessment (to be provided), and avoided a number of minor errors/omissions (e.g. treating project agency funds as cofinancing, lack of contingencies in project financing table, could be more concise), it would have been rated exemplary .