Corruption, money laundering drive red-hot Baghdad property market

“Some areas are more expensive than Dubai and London,” real estate broker Mohsen al-Hamid said.

An agent talks to a client at a real estate office in Baghdad September 10, 2008. (photo credit: CEERWAN AZIZ/REUTERS)
An agent talks to a client at a real estate office in Baghdad September 10, 2008.
(photo credit: CEERWAN AZIZ/REUTERS)

Real estate sales in Baghdad, are booming, especially in high-end areas, with prices in the Iraqi capital, exceeding those in several Arab and European capitals.

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Experts attribute this phenomenon to money laundering operations and efforts by corrupt officials to keep their wealth in assets instead of banks.

One square meter (about 11 square feet) of land in the Yarmouk area, in western Baghdad, can sell for up to $11,000. Officials’ bids on especially desirable plots have reached $16,000 per square meter.

In other areas, such as the Jadriya neighborhood near the Green Zone, and the Mansour district in western Baghdad, where many embassies are located, the price per square meter exceeds $3,000, while in Zayouna in the city’s east prices have reached $7,000.

The prices have made it very difficult for families to buy homes. As a result, many real estate developers have reduced the size of housing units to 100 square meters to make them more affordable. About 70% of the 41 million Iraqis live in urban areas.

A general view of the buildings at Bismayah residential project in Baghdad, February 26, 2015. (credit: REUTERS/THAIER AL-SUDANI)A general view of the buildings at Bismayah residential project in Baghdad, February 26, 2015. (credit: REUTERS/THAIER AL-SUDANI)

Corruption in the housing market

“It is not possible to limit purchase and sale contracts. Therefore, corrupt officials resort to saving their money in real estate.”

Source from the Iraqi prime ministers office

An informed source in the Prime Minister’s Office, who is close to the incumbent, Mustafa al-Kadhimi, told The Media Line: “There is a really big rise in the Iraqi real estate market, especially in the capital, Baghdad, the largest part of which is due to the storing and laundering of money by corrupt officials.”

The government of Prime Minister Mustafa al-Kadhimi has clamped down on corrupt officials and has prevented the transfer of funds in large quantities abroad, according to the source. “Many bank accounts containing large amounts of cash were seized,” the source said, adding that, because the Iraqi economy is cash-based, “it is not possible to limit purchase and sale contracts. Therefore, corrupt officials resort to saving their money in real estate.”

“There are other factors that contributed to the increase in the price of real estate, including the desire of everyone to own property in the Iraqi capital, especially those who were displaced from provinces destroyed by the war with ISIS, in addition to the stagnation of the market during the coronavirus pandemic,” the source added.

Abu Seif, a real estate broker who worked for a long time with “Q,” the head of a pro-Iranian militia, told The Media Line: “Over several years, this official bought real estate worth over $100 million, money he obtained from government funds in addition to the Khawat,” protection money exacted from business owners in the areas controlled by his militia by threatening to destroy the property of or kill anyone not paying.

Q’s militia, as part of Al-Hashd al-Sha’bi, receives support from the state, but the number of its fighters registered with the government is much higher than the actual number of soldiers it has on the ground; therefore, the salaries of the ghost soldiers “go into the president’s pocket,” according to Abu Seif.

Al-Hashd al-Sha’bi, known in English variously as the Popular Mobilization Forces, the People’s Mobilization Committee, and the Popular Mobilization Units, is a state-sponsored umbrella organization made up of some 67 mostly Shiite armed factions with around 128,000 registered fighters. However, around 70,000 of those registered fighters exist only on paper, a government investigation found.

“There are also several projects whose contracts were awarded to the militia’s economic arm. These projects were ‘ink on paper,’ and they did not have a real existence, but their bills were fully paid,” the real estate broker said.

“There are also properties that were purchased at prices that exceed their market value. I witnessed the purchase of a property at twice its market price, as it is located in a sensitive area near the Green Zone and this ‘militia official’ needed to control the area. After he entered into a competition with others to obtain this property, he paid double the original price to prevent someone else from owning it,” Abu Seif said.

Ali Aswad, owner of a real estate agency in the Mansour district, told The Media Line that “Mansour is a high-demand area, with many high-end shops, and therefore all military movements and corrupt officials seek to obtain land or real estate in this area.”

Yarmouk, a neighborhood in the Mansour district of Baghdad which includes the Four Streets, was changed from a residential area to a commercial one. “The houses there are very high-end, they have been converted into restaurants, and one square meter of them sells for $11,000. Such restaurants are used for money laundering, in addition to keeping the money looted from the Iraqi people in real estate, which can be sold at any moment,” he said.

“There are other projects in Baghdad, from real estate developers and international investors, but they are not that expensive, although they are modern and according to the highest specifications, because these projects do not include many commercial properties,” Aswad said.

Khaled al-Zobaie, an Iraqi journalist specializing in real estate, told The Media Line that the exaggerated price hikes are only in Baghdad. “The rest of the provinces are not seeing these exaggerated prices,” he said.

For example, he said, a 100-square-meter apartment in Baghdad costs the equivalent of a 300-square-meter villa in a luxury residential complex in Erbil in the Kurdistan Region], which is the second-most expensive Iraqi city.

“Most business is in Baghdad, but this does not justify all of this increase. We are witnessing a large wave of money laundering which began precisely after the US sanctions imposed by the administration of former President Donald Trump on the money of some politicians and militia leaders, which led to them buying real estate in Baghdad,” Zobaie said. “They’re keeping their money.”

“The Iraqi banking system and supervision is very weak, so it is not possible to put money in banks. Previously, Iraqi politicians used to put their money in Lebanon’s banks, but they lost much of it with the collapse of the lira and Lebanese banking system,” he said.

Zobaie said that there are “hundreds of corrupt politicians who are buying entire areas, and there are also followers of these politicians who are buying in other, more distant, areas.”

In addition, there is an effort to change the city’s demographics.

“Shiite politicians are buying real estate in some Sunni-majority areas to change the demographic structure in Baghdad,” Zobaie said. “The population in Baghdadi districts like Karrada used to be equally Shiite and Sunni, but now it has become completely Shiite. Mansour is a district that was completely Sunni; now it has become equally Shiite and Sunni.”

“Something that has counteracted the Shiite expansion in Baghdad is the exodus of Sunni residents from Anbar Province after the war with ISIS. They bought in Sunni areas and they intend to live in Baghdad and to continue with their lives there,” he added.

During the regime of Iraqi President Saddam Hussein, only residents of Baghdad dating to the 1957 census, as well as their children and grandchildren, were permitted to buy property in the capital. But since the fall of Hussein in 2003, anyone can own property in Baghdad.

Transactions through which cash is transformed into real estate, including money laundering, continue, Zobaie said. “It will not stop. The government wants it, as this is the only avenue through which money is stored or laundered, and the members of the current government will certainly do this as usual. It has become a system,” he said.

“All previous investigative committees, and the Commission of Integrity, failed to arrest the majority of the corrupt. Everyone is involved so no real measures will be taken. There is only the fear of international sanctions that the United States may impose on these politicians,” Zobaie said.

Mohsen al-Hamid, a real estate broker in Baghdad, told The Media Line, that the high prices for real estate are caused by the new politicians. “They have a lot of money that they need to launder, especially after the sanctions that affected many politicians and led to the freezing of their bank balances and remittances abroad,” he said.

“The numbers are unprecedented. Some areas are more expensive than Dubai and London, and they have great purchasing power because they obtained so much money illegally,” he said.

“Most parts of Baghdad have houses of more than 300 square meters. What is happening is that people are selling these large houses at high prices, especially in areas of high demand, and buying newer and smaller houses for less,” he said.

This has resulted in great pressure on the infrastructure in Baghdad, which has not undergone modernization since the 1990s. The new areas inhabited by the poor have become very poor, while the old areas have maintained their status, which further encourages the cash-rich politicians to buy there, Hamid said.

“Every day there are many deals in which Iraqi politicians buy homes and land at very high prices, and it is expected that this will increase after the formation of a new government and the approval of the state’s general budget,” Mohammad Yousif, director of a real estate agency in Baghdad, told The Media Line.

“There will be more projects, which means more corruption, and more shady deals,” he added.

“The government will not stop these practices. In fact, it is part of them. Corrupt politicians are either current or former members of the government, or close to members of the government, in addition to parliamentarians and others. Everyone here is corrupt,” Yousif said.