Fear Drives Baghdad's Housing Bust
Under Threat and Desperate to Flee, Some Families Sell at Any Price

By Megan Greenwell
Washington Post Staff Writer
Friday, September 21, 2007

BAGHDAD -- Esad Ismael broke the most important promise he ever made.

As his father lay on his deathbed two years ago, Ismael, 43, vowed never to sell his family's home. His father and grandfather had spent all their savings to build the sprawling two-story house in Baghdad's wealthy Mansour district 70 years ago. Family memories were tucked between every tile on the floor.

But Ismael, a Sunni clothing merchant, was living in an area that was falling under the control of the Mahdi Army, Iraq's largest Shiite militia. Mindful of his promise to his dying father, he refused to move even after he began finding death threats pasted to his front door. After his brother was murdered, he gave up.

"It's bad that I sold our home, but what is worse is that I sold it for only 145 million dinars," Ismael said, naming a price equivalent to about $118,000 -- less than half the house's appraised value in late 2003. "It's an insult to my father to sell it so low. But what choice did I have? They would have killed us."

With hundreds of thousands of Baghdad residents having fled their homes for the relative safety of segregated neighborhoods or foreign countries, a clandestine system of buying and selling property off the books has supplanted more traditional real estate practices. If families being pushed out are lucky, they are able to sell their homes for some small price, as Ismael did. Wait too long, and their houses might be seized at gunpoint.

Real estate agent Mahir al-Sultani said business has all but dried up -- ironic, he admits, considering how many people are moving in and out. Without exception, half a dozen real estate agents said that houses are still being bought and sold, but that licensed agents have been largely cut out of the equation.

"It all happens so quickly and in secret," Sultani said. "What if the real estate agent is a militia member, and then you trust him with your money? Nobody trusts anybody, of course, so they don't want a man in the middle."

Sultani has sold three houses this year, each of which had been on the market for more than six months and sold for about half of its 2003 value. Meanwhile, residents in Karrada, the affluent district where he lives and works, say that at least a half-dozen properties have sold off the books within a few days of their owners deciding to flee.

Immediately after the U.S.-led invasion in 2003, home prices in Baghdad skyrocketed, fueled by widespread expectations that the war would end quickly and foreign corporations would pour money into Iraq's economy. Rich families who had left the country under the rule of Saddam Hussein returned, buying extravagant homes in upscale neighborhoods such as Karrada, Kadhimiyah and Mansour. Scores of new real estate companies opened across Baghdad.

"All my friends were asking me how to become a real estate agent. Some weeks, I was selling a home every day to people as investment properties," said Jawad al-Maliki, who operates a real estate company in Kadhimiyah, in western Baghdad. "They thought when all the foreign investments came Baghdad would be the new Dubai."

But as the war dragged on and insurgent groups gained power, property values began a free fall that real estate agents say has not yet hit bottom. The wealthy families who had returned to fancy homes in Baghdad left again for the stability of Jordan or Syria, in many cases leaving their houses empty. Lower- and middle-class people, desperate to afford the high cost of emigrating, rushed to sell their homes for any price. Altogether, nearly a million people have been displaced from Baghdad, according to the Iraqi Red Crescent Society.

"The neighbors told us how much we could get for it based on how much the militia would pay," said Sabah Nouri Motlaq, a Sunni who helped sell his brother's house in Sadr City, an overwhelmingly Shiite slum controlled by the Mahdi Army in eastern Baghdad. "They didn't have any choice, and if we had said no, they would have pushed us out for no money or killed us."

Under pressure from the Mahdi Army, Motlaq's brother earlier this year accepted 10 million dinars for his home -- about $8,000, compared with its $28,000 value in 2003. By the time he had moved his family out of Baghdad and found a new job, the money was gone.

Several people who sold their houses to escape campaigns of ethnic cleansing -- generally by the Mahdi Army in Shiite neighborhoods and, less frequently, the insurgent group al-Qaeda in Iraq in Sunni areas -- said they first received letters ordering them to leave their neighborhoods. Subsequent letters brought more-dire threats, the sellers said, recounting similar experiences.

The Mahdi Army often uses Shiite neighbors who are friendly with Sunni families to encourage the latter to sell. If the family refuses, its members become targets for violence and the offer price for the home drops. When they agree to sell, they are paid in cash and ordered to leave immediately so that militia members can move in.

"At first I hid the letters from my family and didn't listen," Ismael said, crying as he described his experience during a telephone conversation from his home in Damascus, Syria. "But when they killed my brother, I had to protect my wife and family and leave. If I had done it earlier I might have gotten more."

The $118,000 that Ismael did collect through his neighbor is not enough to buy a house in Damascus, where he moved, nor in Amman, Jordan, or Beirut, where the population boom from Iraqi refugees is driving up real estate prices. Now he lives with seven other family members in a rented one-bedroom apartment, for which he pays $600 a month.

People who move to safer areas of Iraq often cannot afford housing similar to what they left behind. A recent influx of refugees relocating in Anbar province, a region west of Baghdad where violence has dropped in recent months, has doubled the average home price in Ramadi, the provincial capital. Homes in Iraq's largely peaceful Kurdish region can cost up to three times the price of a similar property in Baghdad.

"This money will never get a house in Ramadi," Motlaq said. "When we received the money, it had no taste because it wasn't even close to the real value. The money is being wasted on a tiny rented house because we can't buy anything."

Some people whose lives are not in immediate danger do list their homes with real estate agents in hopes of getting more money, but they are often frustrated by a dearth of potential buyers. After the initial rush to buy property in 2003, optimism about the future of Iraq dissipated, and now few people are willing to take advantage of low prices in the hope that security improves enough to allow them to move back.

Ali Hamid Naif had not been directly threatened when he decided to leave the Sholeh neighborhood of Baghdad last year, but general fears about his family's safety prompted him to move to Ramadi. His neighbors negotiated an offer for his house, but he scoffed at the low price and enlisted a real estate agent's assistance. His home, which was worth about $120,000 in 2003, has been on the market for 13 months for $72,000.

"Right now I am allowing a friend to live there for free so the militia will not move in," Naif said. "The neighbors are trying to help me, but they are offering 20 million [about $16,000], and I cannot sell it for that little."

Real estate agents said many people are unrealistic in setting asking prices for their homes.

"Real estate depends on security, and right now the only people in Baghdad are the ones who can't afford to go somewhere else," Maliki said. "With the security this bad, the only houses that can sell are very cheap."

The reduced property values mean that Maliki is barely able to scrape by on his commissions. When he does make a sale, he must make special arrangements to prevent a kidnapping or robbery during the exchange of money.

"These operations are always undercover, in secret," he said. "I am always afraid. Nobody brings security in because they want it to be low-profile, but usually everybody carries a pistol to the meetings."

Special correspondent Naseer Nouri contributed to this report.

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