The family ended up cut off and surrounded by water, when a wave knocked Inaayah one way and her parents the other, the relative said.
She disappeared from view before her father could reach her.
The parents, who are still in Casablanca, have reportedly turned to a private search operator with a helicopter to assist with the search.
A neighbour of the family, who did not wish to be named, told the BBC Inaayah, a pupil at Roe Lee Park Primary School in Blackburn, was a “lovely, bubbly, cheeky little girl”.
She said she was the only child of her “hardworking” parents, and was “their whole world”.
“We’re all just in shock. We’re devastated,” she said.
Gillian Wilton, head teacher at Roe Lee Park Primary School, Blackburn, said: “We are extremely upset to hear the news of Inaayah Makda, who is currently missing in Morocco.
“Our immediate and heartfelt thoughts are with her, her parents and family at this devastating time.
“We will continue to pray for Inaayah’s safe return and know that all our school community will have her in their thoughts and prayers.
“The school would also like to offer our continued support to our pupils and parents.”
She asked that parents contact the school if they needed any help and support.
Blackburn MP Adnan Hussain said he was “heartbroken” by the incident and had been in touch with Inaayah’s family.
He said: “I’m aware the family is doing all that they possibly can to locate Inaayah. My understanding is they’ve been out on the beach all day trying to locate her.
“It’s a dreadful and distressing situation and given that they’re in a foreign land they deserve all the help that they possibly can obtain.”
He added: “I am urgently raising this matter with the UK authorities, including the Foreign Office, to ensure every possible step is being taken to support the search efforts and to provide the family with all the assistance they require at this deeply distressing time.”
The Foreign Office said it was “supporting the family of a British national reported missing in Morocco” and was “in contact with local authorities”.