Buying Off Plan Property in Morocco

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Buying Property in Morocco - Moroccan Off Plan Property Buyers Guide

Morocco has long been associated as a place that the wealthy and famous go to and recuperate, especially in areas such as Marrakesh and Casablanca. Nowadays it has become a chic destination to go on holiday, first of all by the French who have a long history and cultural relationship with Morocco since it was under French rule for many years. More recently it has become increasingly visited by other Europeans, firstly on day trips from the Costa del Sol back in the seventies and eighties and then by tourists who were a little more adventurous who were willing to visit for a week or so.

Nowadays Morocco is a viable option for tourists and second home owners that cannot afford the high prices of other Mediterranean hot spots or simply feel that they can get more for their money.

The climate in Morocco boasts similar qualities to that of southern Spain with relatively warm and dry winters, followed by hot and steamy summers. Morocco is surprisingly green with lush landscapes framing the cities and coastlines.

The Medina's of the cities provide a unique atmosphere of hustle and bustle without the intrusion of cars and other transport. For those of you lucky enough to get a glimpse of the many hidden gardens that can be found behind the high walls, you will soon realize that life in the city is far more civilized than you previously thought.

Foreigners can now freely purchase properties in Morocco with the exception of agricultural land.

Rental Yields in Morocco

Rental yields in Morocco vary depending on the location, however quality properties in Marrakesh often achieve in excess of 8% per annum especially with villas and traditional Riads. Newer regions such as though being constructed as part of the Vision 2010 - Plan Azur developments will probably not create the same revenues but with the increase in tourism, the heavy marketing of these off plan developments they should still yield very well. Some of the developers are offering Guaranteed Rental Schemes having already brokered agreements with travel companies and carriers.

Taxes and Costs

Rental Income - in Morocco ranges between 13% and 44% of the NET Rental Income. This is calculated by taking 40% away from the Gross Rental Income. This 40% deduction takes into account theoretical income generating expenses in lieu of itemized deductions.

If you calculate the highest tax rate based on your Gross rental Income it equates to just over 26% which is comparable with many European countries. In Morocco rental income is charged under personal income tax or Impot General sur le Revenu which is more commonly known as IGR. This tax is not applicable until the property has been owned for three years by the same owner. Tangier offers a 50% reduction of the taxation rate in the city areas

Capital Gains Tax - CGT - Taxe sur les Profits Immobiliers - TPI

Any profits made on a property in morocco are taxable at 20%, with a minimum of 3% of the total sales price. The taxable gain is computed by deducting from the selling price

• acquisition price

• incidental costs

• transfer costs

• investment expenses

• interest payments

Capital gains are not applicable if the property has been a primary residence for at least five years and the price is less than MAD 1 million or the property has been a primary residence for at least 8 years if valued at over MAD 1 million or has been owned for ten years or more.

Gifts between direct family E.G parents and children, and brothers and sisters, are tax-free.

Inheritance Tax - IHT - Droit de Succession
In Morocco there are two sets of laws pertaining to Inheritance Tax depending on your religion - one for Muslims and another for non-Muslims. Inheritance Tax in Morocco depend upon the relationship between the deceased and the heir. Inheritance tax is levied at 0% between family members. We recommended that you make a Moroccan will to cover the estate in the country.

Property Tax in Morocco - Tax Urbaine

The annual property tax in Morocco is assessed on the rental value of the property and its location. Typical tax rates are 10% but can vary depending on local authorities. If the property is a primary residence a flat fee of 25% of the assessed rental value is subject to the 10% tax or similar authority rate.

Off plan developments and new buildings are exempt from paying property tax for the first 5 years following completion.

Rubbish Collection - Fiscalite des Collectivites Locales

There is a 5 year grace period on new properties in Morocco. Thereafter it will be charged at 10% of the annual rental value of the property

Foreign Ownership is allowed in Morocco and foreigners can buy just about any form of real estate with the exception of agricultural land. Prior to signing any sales agreements we would advise you to open an account in an Moroccan bank that enables foreign currencies to be converted to Dirhamâ's, which is the Moroccan currency and the one that will be used for the sales transaction. By utilising a bank account you will find repatriation of funds in the future far easier.

You should ideally retain a qualified real estate agent as well as a reputable Moroccan lawyer that speaks fluent English or your first language so that they can translate all of the relevant documents as well as explain the ins and outs of property purchase in Morocco. Many of the local 'Simsaar' or estate agents do not speak English so dealing with international companies who have a local team is normally advisable.

Once a property has been located it is normal to pay a holding deposit which will remove the property from the market. Try and make all payments through your lawyer as many resale properties in Morocco have occupants and you should ensure that they have left prior to handing over the full amount.

Buying a property in Morocco is much the same as buying one in France or in Spain. A Notaire - public notary will act for both parties, drawing up of the sales documents, preparing the title deeds and ensuring that all of the necessary documents integral to the sale are in accordance with the law. Once the sale has been closed the Notaire will register the new Title Deeds in the Land Registry office.

Rent you property in Morocco.

Rent can be freely agreed between the owner and the tenant. The law in Morocco are Pro Landlord and many landlords will ask for a guarantor to be named, who is legally obliged to pay for any debts accrued by the tenant especially on long term rentals.

Buying Property in Morocco - Economic Growth

Morocco or the Kingdom of Morocco as it is officially called, continues to prosper as it heads towards 2010 and the final stages of the Plan Azur. Once a French Protectorate, Morocco is an eclectic blend of modern day necessity, French heritage and Arabic traditions.

Together these factors are helping to increase GDP and international trade has expanded thanks to the 2004 signing of the Free Trade Agreement between Morocco and the US. IN 2006 the Pan- European Cumulation System was also extended to include Morocco which sets out predetermined taxation issues.

Tourism is growing rapidly and with the new Plan Azur projects it is expected to continue exponentially. Currently there are just under, 2000 flights each week into Marrakech and the prices are relatively low. Together with easy travel networks from the south of Spain to northern regions of Morocco the tourism boom is surely going to continue growing.

Employment in Morocco remains fairly high at a national 9.7%, however urban unemployment is actually at around 15%, with rural areas concentrated within the agricultural sector.

The Buying Process in Morocco

Once you have determined the property that you wish to purchase, you will need to make a verbal offer through your estate agent or Simsaar, which once agreed will lead to a reservation deposit and a preliminary sales / reservation will need to drawn up by your lawyer - this will typically be 3000 Euros.

Normally you will have about 4 weeks to prepare to pay the initial sales contract, at which time you will need to pay 30% of the total sales price. Once the deposit sales agreement has been signed, you will arrange your finances and your lawyer will start the relevant searches once the vendor has supplied the initial paperwork. You will be given 30 days for you lawyer to do their due diligence on the property and then you will be expected to close on the sale.

If you are buying an off plan property in Morocco, the final closing will be once the property has been signed off and it has been given its Habitation License and the utilities are connected. In some cases properties will only be signed over, after the entire Phase or project has been completed and signed of by the local authorities.

All contractual agreements will be signed in front of an Notaire - a Public Notary. The Notaire will ensure that all of the documents, paperwork, receipts and contracts are legally valid for both the purchaser and the vendor.

Once, the sale has been completed, stamp duties and relevant lawyers and notaries fees have been paid, the Notaire will have the new title deed sent to the Land Registry to be registered in your name. This registration process is fairly straightforward and is normally completed within a few days.

If you are unable to be in Morocco each time important signings need o take place, we advice that you make a Power of Attorney so that your lawyer can sign on your behalf. This must be signed by the Moroccan Consulate. And certified by the, 'UK Foreign and Commonwealth Office'.

Mortgages are best arranged in your home country, with funds being transferred to your Bank Account in Morocco prior to being paid via your lawyer to the vendor. This can speed up the buying process and also ensures that your funds have been registered as entering the country making repatriation at a later date far less complicated

VAT in Morocco is paid on any services and purchases. The Sales Price SHOULD include the VAT when purchasing property in Morocco

In 2002 the Moroccan Government passed a law, which came into force in 2003, dictating how contracts should be presented in order to put an end to a thriving Black Market. This law is very much in the buyersâ' favour and stipulates that preliminary sales agreement can ONLY be drawn up by a Notaire or a qualified Moroccan lawyer AFTER the foundations have been completed. The developers must provide a Bank Guarantee to secure the funds of purchasers. The Preliminary Sales Agreement should also show how and when stage payments are due to be paid unless otherwise agreed in the written contract

Many Moroccan developers feel that the new law is to harsh and many have been caught trying to operate around the law. It is vital that your lawyer performs his searches diligently!

Morocco does not have Title Deeds - Melkia - per se - proof of ownership is guaranteed by registration of the property in the Land Registry. The Land Registry will place its stamp on the deed of sale and the Notaire will give a certified copy to the new owner after about two months. Up until this document is given to the owner, the Notaire will supply a Certificate of Ownership which id legally valid and can be used to connect your utilities.

Current areas of interest for off plan investors are Marrakech, Casablanca, Fes and Tangiers as well the developments that are part of the Plan Azur - Port Lixus, Larache, Mediterranea Saidia, Saidia, Mazagan, El Jadida, Taghazout, Agadir, Plage Blanche, Guelmim