As Allied forces prepare for a full withdrawal from Afghanistan by 2014, the war-ravaged country is battening down the hatches yet again.
A series of three dozen co-ordinated Taliban suicide attacks in central Kabul and three provinces in eastern and southern Afghanistan on 15 April heightened already major security concerns.
And as Estates Gazette went to press, news came of more than 30 civilians killed by Taliban suicide attackers and a NATO air strike on Wednesday.
For the country’s once-booming, yet chronically underdeveloped property industry, the renewed instability is crippling.
Wealthy Afghans have been taking their money abroad, mostly illegally. Since Barack Obama became US president in 2009 with a clear policy for full withdrawal, Afghanistan’s central bank has been forced several times to place a $20,000 (£13,000) cap on cash withdrawals to prevent bank runs. And international aid, which, according to the World Bank, comprises 97% of Afghanistan’s gross domestic product, is also set to decrease once the Americans pull out.
The value of real estate in the capital, Kabul, and in other urban centres has been falling since the withdrawal was announced in 2010. Late last year, property dealers estimated commercial and residential sales in 2011 were down nearly 40% year-on-year because of the rising insecurity and political uncertainty.
Toryalai Babakarkhail, a small real estate agent in Kabul and former brick-kiln operator, says prices bounced back in December 2011 but by early 2012 there were no signs that the situation would stabilise.
Today there are about 8,000 real estate agents in Kabul alone and the Afghan government is belatedly trying to regulate the business. All are men because no woman has yet ventured into a traditional market where many dealers are part-timers doing business through relatives and friends.
Chartered surveyor Richard Scarth is a 44-year-old Royal Navy reservist from London who was sent to serve in 2003, first to Iraq and then Afghanistan. He stayed on and set up his own company, Property Consulting, in Kabul to deal with investment and leasing and is the only qualified chartered surveyor operating in the country.
Because only Afghans could own property and perform transactions under the law, Scarth set up his practice with an Afghan partner, Torialai Bahadery. “My training in the UK and his Afghan knowledge enabled us to strike a balance,” he says. “We brought new things to our business and our ideas were copied.”
Scarth, who has moved to Dubai after living in Kabul from 2004 to 2008, travels to Afghanistan frequently to oversee his business. He says he is not overly concerned about what will happen after the Americans leave. “Afghans are resourceful and will carry on. The foreign aid benefited a small number of people only.”
Certainly, compared with the Taliban years, when some dealers fled the country, fearing that the Taliban interpretation of Shariah law considered estate agents satanic, the country’s property market seems a lot more stable.
War booty
The rule of law took a back seat when the Afghan Mujahedeen and Taliban seized power in the 1990s and gunmen occupied properties in Kabul and other cities. Both used the term “mal-i-ghanimat” (war booty) to justify takeovers because they had fought their way to victory and were the new rulers.
Apart from warlords occupying properties and picking the best bungalows to use as their accommodation, another problem experienced during the Mujahedeen and subsequent Taliban rule was a high number of property disputes. This was because houses and markets, along with ownership documents, were destroyed during the 1994-96 battle for Kabul.
In frontline localities such as Karte She and Karte Char, whole neighbourhoods were blown to pieces and building material carried away. It was difficult to figure out the boundaries of houses and shops and ownership disputes were common. In their own tough manner, Taliban leaders tried to resolve ownership issues, but local people complain they were not keen on reasoning and the courts often gave arbitrary decisions.
After the regime was toppled in 2001, the situation was reversed as Hamid Karzai was installed as president of a pro-West government. The property market boomed, fuelled by demand from repatriated Afghan refugees from Pakistan and Iran and internally displaced families. Kabul’s population rose to three million in 2003 and to almost five million in 2011.
Under Karzai, high levels of international assistance and demand for property pushed up real estate prices in Kabul and other cities and towns. Demand was high for any type of accommodation, even flats in the rundown Soviet-built housing complex Makroryan.
“There weren’t many buyers or people wanting to rent properties during the Taliban regime,” says businessman Ghulam Sarwar. “We had rented out a four-bedroom bungalow furnished with about 20 carpets for $180 a month. Six months after the fall of the Taliban regime and the arrival of foreigners, the same house was rented by an aid agency for $3,000 a month.”
In Wazir Akbar Khan, Kabul’s diplomatic quarter, Sarwar recalls that a house-cum-compound rented by a UN organisation was available for sale at $1.5m during Taliban rule, but its asking price now is about $20m.
One of Asia’s hottest property markets
In 2003, media reports described Kabul as one of Asia’s hottest property markets after house prices rose tenfold since 2001. Despite its pot-holed streets, Wazir Akbar Khan still fetched the highest rates because it was inhabited by the ruling elite and was considered relatively safe, with electricity and running water available in its concrete homes with patches of garden. In 2008 alone, Kabul’s property prices rose by a reported 75%.
Many Afghans then switched jobs to become real estate brokers to take advantage of a demand for space from rich overseas organisations.
“It was a gold rush,” says Scarth. “There was economic growth after three decades of conflict, with people returning to Afghanistan, money flowing in and foreigners bringing aid money and spending. The market has seen a sharp rise and fall, and prices are now levelling up.”
The boom prompted a series of property projects to meet housing needs and stimulate the economy. The biggest was the Kabul New City mega project, initially co-ordinated by the Dehsabz-Barikab City Development Authority in 2006 with backing from the Japanese government and the French private sector. It proposed to eventually build 500,000 homes on a 740km2 site on the outskirts of Kabul for 3m people, generating 500,000 jobs.
But the global economic downturn and the imminent withdrawal of Western troops have cooled enthusiasm for such schemes.
According to Scarth, it is more basic improvements that the country needs most. Afghan traders would love to become manufacturers and create jobs, but the government has been slow to release land for setting up workshops and factories and developing infrastructure. Scarth is disappointed that the industrial park at Bagrami, outside Kabul, has not met expectations.
Scarth admits doing business is not easy because of many factors, including lack of rule of law. He says land-grabbing is an issue and courts are not too reliable. “We check titles for clients. We cannot guarantee them 100%, but we know the tricks of the trade.”
And as the 2014 pull-out looms, it looks like Scarth and his colleagues will need to remain even more resourceful.
Continuing our Afghanistan coverage, see next week’s EG Life for a look at how the army is working to rebuild the country.
