Boom Before The Bombs

Mahmoud Yassin never thought of himself as a real-estate speculator. But 11 years ago the Baghdad hardware dealer couldn't resist the low prices for property in Karbala. Thousands of inhabitants had fled the city during Desert Storm, and even more had surged out during the subsequent anti-regime revolt and the merciless government crackdown that followed. Yassin (a pseudonym) bought three houses cheap. Two weeks ago he sold one, a spacious bungalow with a garden, for 12 million Iraqi dinars ($5,000)--more than 36 times his initial outlay. In the preceding two weeks alone, the house's market value had jumped nearly 15 percent. "The buyer was in a rush," says Yassin. "He wanted to hand the cash over right away. But it would have taken me two hours to count all the bills."

Iraqi real estate may sound like a terrible investment right now. Yet the market is booming in all but a few places like Safwan, on the Kuwaiti border, where people worry that the soil is dangerously contaminated with depleted-uranium ammunition from Desert Storm. "Prices have doubled in the past three months," says Adnan Abd Al-Ridh, a real-estate agent in Basra. He quit his job as a car salesman six months ago to cash in on the boom. "The prices of both land and houses are rising," says a Western diplomat in Baghdad. "People think they'll be even higher in two months." Even the fear of U.S. firepower doesn't seem to deter buyers, who may be placing their faith in America's smart bombs. "Houses are riskier than land, because of the possibility of heavy bombing," a Baghdad real-estate agent says. "But people are used to bombardment in the no-fly zones. They know that ordinary houses are not normally a target."

Why is the market so hot? Inflation is part of the answer. The dinar was trading at the anemic rate of roughly 2,300 to the dollar last week. Just don't mention the possibility of a collapse if Iraqi secret police might be listening. "It has nothing to do with the dinar," a Karbala real-estate broker insists nervously. "It's because the population is growing rapidly, and Karbala draws so many Islamic pilgrims from Iran." Mohammed Hussein, the buyer of Yassin's house, echoes him: "Everyone wants to be close to Hussein and Abbas." He's talking about two seventh-century Shiite saints buried in a pair of spectacular gilt-domed shrines.

Few people dare to say what the market will do after the war. The prospect of regime change is a risky topic. But watch what Iraqis are doing; their optimism is unmistakable. The Baghdad stock exchange is soaring, and private construction plans are pushing ahead. Sarmad Majeed, 36, whose family runs a coffee shop overhanging the Tigris in Baghdad, says he's investing 180 million dinars in a 14,000-square-foot shopping arcade. Two months ago he paid 60 million to buy land-use rights for the project. "Six months from now it will be worth 70 million," he predicts. An older employee, Naama Isa, recalls when the shop was so quiet that water buffalo liked to hang out in the shade beneath it. Asked why the market is surging now, both men pause a bit too long and then speak a bit too quickly. "The area is a desirable one," says Isa. In the same breath, Majeed answers: "We love our country."