Residual method Morocco — step-by-step calculation
Detailed calculation to value land with strong constructible potential. IVS 410 and RICS VPGA 10 standards applied to Moroccan context with realistic inputs: exit price, construction costs, promoter margin, hazards, sensitivities.
Land Value = HT Programme CA – Construction costs – Studies and fees – Financial costs – Promoter margin – Hazards. Everything depends on input reliability. An inflated input biases the result.
Step 1 — Define theoretical buildable programme
Land surface (S_f) in sqm. Plot ratio (COS) per applicable master plan. Max height and number of levels. SHOB and SHON theoretical. Mix residential/tertiary/commercial per zoning. Net sellable surface by typology. In Morocco, sellable surface = SHON less common parts (stairs, landings, technical rooms). Typical residential coefficient: 0.80-0.85.
Step 2 — Estimate exit price per sqm
Base: recent comparable transactions (12-24 months) on same neighbourhood, adjusted: sale price inflation to anticipated delivery date; targeted finish standard (economic, mid-range, premium); specific programme advantages; risk discount of unsold units in down cycle.
Step 3 — Estimate construction costs
Moroccan 2025-2026 sectoral ranges (case-by-case confirmation): Economic residential: MAD 3,800-5,200/sqm SHOB. Mid-range residential: MAD 4,800-6,500/sqm SHOB. Premium residential: MAD 6,500-9,000/sqm SHOB. Quality tertiary (Grade A): MAD 6,500-9,500/sqm SHOB. Industrial Grade A: MAD 3,500-5,000/sqm SHOB. Add studies and fees 4-7%, VRD 8-15%, exterior amenities, collective equipment.
Step 4 — Financial costs, margin, hazards, sensitivities
Model disbursement and collection curve on chantier duration (18-36 months). Moroccan 2026 promoter loan rate: 7-9%. Financial costs = interim interests on weighted average debt. Target margin: 15-25% of CA. Hazards: 5-10% for technical, commercial, regulatory risks. Sensitivities: exit price ± 5-10%; construction + 10-15%; delay + 6-12 months; financing + 100-200 bps; margin - 5 points. Report must present a land value range between low, central, high scenarios.
- Zoning verified (COS, height)
- Sellable surface coefficient applied
- Exit price benchmarked
- Construction cost line-by-line
- Financial cost modelled
- Margin and hazards justified
- Sensitivities documented
- Agricultural value floor check
- Exit price overstated
- Construction cost understated
- Sensitivities absent
- Land charge superior to MALC
FAQ
Why is the residual method preferred for land valuation?
Because raw market comparables rarely exist for land with significant constructible potential. The residual method backs the price up from the project end-economics — what the developer can pay and remain profitable.
What's the typical margin for a Moroccan residential developer?
15-25% of CA target. Liquid premium zone: 12-18%. Economic in distant peri-urban: 20-25% to compensate for higher risk.
Related reading
- Developer land — residual + feasibility
- Agricultural land buildable — Rabat case study
- LTV LTC DSCR — bank ratios
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