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Grey days for the property market

Rohullah Rahimi
The real estate market skyrocketed from 2002 with the arrival of foreign armies, organizations and aid. Since prices peaked two years ago, fears about post-2014 scenarios and ever bold insurgent attacks have sent…
6.05.2012  |  Mazar-e Sharif
Mazar's Blue Mosque has lost its dominance of the skyline in the past decade. (Photos: Rahimi)
Mazar's Blue Mosque has lost its dominance of the skyline in the past decade. (Photos: Rahimi)

It’s a skyline no one would have recognized ten years ago. Where the domes of the Blue Mosque once dominated views in Mazar-e Sharif, they have been increasingly obscured by construction as property money gravitates north.

Mazar is a happening place and business is steady, says developer Ibrahim Zada, who has invested 100 million dollars in projects around the country. But, he notes, the locals are not buying, and city is more of a refuge for capital in anxious times rather than the site of a full-fledged property boom.

“People who are buying real estate here either returned from neighbouring and other foreign countries or relocated from provinces like Kabul, Herat, Kandahar or central Afghanistan,” said Zada, who longs for the boom days of 2009-2010. 

“A year ago, when the security situation was good and there was no news about the withdrawal of foreign troops, real estate prices went up every day.”

As in many areas of the economy, the real estate market fell sharply because of growing concerns for the future. In Kabul, prices slumped 40 per cent and more as investors decided to hold off, and foreign organizations gave up large houses they had long occupied for top dollar. 

According to realtor Haji Saida Jan, a 100-square-metre plot of land in the city’s prestigious Wazir Akbar Khan district, which houses foreign embassies and government buildings, used to sell for 150,000 dollars. Today it might sell for between 75,000 and 85,000 dollars.

Jan's operations in other parts of the country have also been hard hit: “In the centre of Jalalabad, 100 square metres used to go for 60,000 dollars, now it’s about 30,000 because no one is buying.”

It all hinges on perceptions of what will come after the withdrawal of  foreign combat troops in 2014. As the developer Zada says, “everything in Afghanistan is dependent upon the security and political situation.”

Pact is no magic wand

Developers are hoping things will start moving again with the recent signing by presidents Barack Obama and Hamid Karzai of the US-Afghan strategic pact governing bilateral relations from 2014-2024.

Demand in the north is high enough to keep building, but investors are also waiting for clues about the post-2014 situation.

Cementing political, military and economic support for Afghanistan, the agreement has drawn a mixed reception. Some people regard it as a sell-out to US control, but despite its vague terms and shortcomings, many others still see it as offering stability in the coming years. 

“I personally became very happy when I heard that this pact was signed. It helps people be more optimistic about their future,” said Muhammad Reza, a store owner in Kabul’s Kotay Sangee district. 

But the first indications are that no one is rushing to buy property and get the ball rolling again. Despite the fanfare over the pact, people remember how after the Soviet withdrawal in 1989 the mujahedin groups began fighting among themselves, said Haji Farhad, a real estate dealer working in the east of the capital.

“People and buyers think the past will be repeated in Kabul after 2014, they are not purchasing land and are waiting to see how the situation develops.”

Much capital has already fled to country for safer destinations like Dubai. Amir Abdul Wahab, executive director of Balkh’s Chamber of Commerce and Industries, says nearly fifteen percent of privately held assets went overseas in the past year.

Northerly current

But people are also moving assets and also their families north to Mazar, a city of more than 300,000 people which apart from occasional upheavals like the February rioting over American burning of Qu’rans, has avoided much of the violence affecting the country and has a steady local economy. 

One of these is Ghafoor Zee, who came here with his family from southern Afghanistan and wants to buy an apartment in one of the city’s new suburbs. He complains about the high prices here, but adds, “It’s worth it though because the security situation is good and there are more economic opportunities.”

“A year ago, when there was no news about the withdrawal of foreign troops, real estate prices went up every day.”

As far as developers like Zada are concerned, Mazar is the new favourite as Kabul’s real estate market tanks. Not only is the city itself generally secure and ripe for commercial and residential projects, but it has sprouted tentacles of new towns around it, over sixty of them in total. 

Others also developing this more affordable satellite town belt say business is still good. A property south of the city that cost 3,000 dollars four years ago will go for between three and ten times as much today, said Yar Muhammad, director of Khalid Real Estate.

Mostly though, Mazar’s strength seems to be in its market being just stable rather than soaring. 

Amanullah Azizi, the director of Kamal Nabi Zada, a separate development company in the city, said returns have not been so good on its investments of around forty million dollars in housing projects. But there were no significant losses either, and prices here are not so far behind the capital, he notes.

Walled apartment complexes now aspire to western quality, incorporating stores and mosques for residents.

“I sell a three-room apartment for 70,000 dollars in Kabul and 60,000 dollars in Mazar-e Sharif,” said Azizi, who charges 120 dollars per square metre.

His competitor Zada caters for the wealthier end of the market, selling three-room apartments for up to 120,000 dollars. “People can afford this price,” he says of his target clientele, mainly families of professionals and newly wed couples looking for western-style quality. Latest projects meet international standards, with parking lots, playgrounds and recreation parks, with supermarkets and mosques nearby and guaranteed power supply all year round.

But Mazar is not the only place doing well. Other northern provinces are also benefitting from recent improvements in security. In Kunduz, progress is reflected in rising land prices, drawing buyers and investors from the neighbouring provinces of Takhar and Badakhshan.

Sayeed Kamal Manawee, the vice chancellor of Kunduz University, said the change in a few months has been dynamic. “Last year when Kunduz was insecure I could sell a 100-square-metre plot of land for 80,000 afghanis (1,660 dollars) but now it is worth 300,000 afghanis."