Home | Comment & Analysis    Thursday 10 September 2009

The madness of land and property values in Khartoum (2-2)


By Ahmed Elzobier

September 9, 2009 — Now Sudan’s capital Khartoum is experiencing a construction boom as the country recovers from years of civil war. Today, the average piece of land price in downtown Khartoum (400 sq meters to 1000 sq meters) range from half-million to two million US dollars. In sharp contrast, on the outskirts of the capital (just 40 km away), a similar sized property costs less than one square meter of land in the centre of the city, perhaps less than 1,000 US dollars.

According to the Awab agency in Khartoum, the most sought after areas in the capital are places like Sajana, Al Diem, Al Goz and Rimala, because of their proximity to the city centre and the market. There is a huge demand from companies for areas like Al Sajana, about 3 km south of Khartoum’s centre.

The rents in Khartoum have also increased due to huge demand from the oil companies and UN agencies operating in Sudan who pay in dollars. The two-bedroom apartments that used to cost US$300 to $450 now cost more than US$800 to $1,000 a month. Three-bedroom houses in Khartoum South have reached prices of $65,000. There are many factors affecting the real estate market, according to the Al Safiat Agency, including the government’s policies and the fact that there are too many brokers without experience but with insatiable greediness. But now the prices of strategic areas increase annually by 20 to 25% because of the new class of investors who have entered the market and Sudan’s efforts to become the major East African financial market.

The Abu Saud Agency in Amarat/Khartoum complained that there are too many empty apartments and no one is renting them because the owners are requesting very high prices. In his view the most wanted areas were Amarat, Arkuwit, Altaif, Al Zohor and Ryiad. The influx of international agencies, oil and communication companies has made many local people rent their houses and stay on the periphery of Khartoum.

The monthly rental of the average furnished apartment in Amarat and Raid ranges from $1000 to $1,500, for more luxurious apartments the rents range from $2,700 to $3,000. The property prices in those areas are also very high, ranging from $150,000 to $250,000 for a concrete roof house, and even mud house prices increased to $60,000. In the Al Sahafa district the house prices range from US$100,000 to $175,000.

According to the Nor Aldeen Agency in Khartoum North, the rent in Khartoum North (Bahri) is lower than in Khartoum and higher than in Omdurman, ranging between $300 and $350 in Al Shabia, $600 in Al Mughterbien, and much lower in the peripheral areas such as Dorashab and Samrab, where the price is $50 to $100 a month. In Omdurman the land prices according to the Omdurman agency range between $1,000 to $1,200. In the Omdurman market the prices are very high, ranging from $500 to $750 per square metre. However, rent in Althora is much cheaper and the monthly rental is $250.

In the capital city there is huge interest in the new residential apartment complexes or “gated communities” that are spread around Khartoum. Now, more than ten of these residential complexes are spread through Khartoum, such as Al Yasmien, Nabta, Saria, Ark, Al Nifiedi, Al Ridwan, and Al Mosorat.etc. Most of them are based in Khartoum and they have become gradually popular with the middle-class who are relishing the new oil boom, and because of the introduction of installment payment methods. The three-bedroom houses in these new complexes cost about US$175,000. The Bank of Khartoum recently initiated the first mortgage policy in the history of Sudan and they announced that their customers could buy, through the bank’s policy, a house or an apartment and pay in installments over a period of 15 years.

Undoubtedly, even by international standards, the land and property prices in Khartoum are very high, where the price of an apartment in Khartoum could easily purchase two or three apartments in Cairo, a three-bedroom house in Chicago, or two-bedroom house in the leafy suburbs of Derbyshire in England.

So, why are land and property prices so high in Sudan?

Many specialists in urban planning think that the reason why land prices are very high in Khartoum is due to the way Sudanese houses are designed, the “horizontal expansion”. They observe that with expanding population growth people need to live in multi-story apartments, “vertical expansion”, that will make life much easier in terms of transport, property prices, maintenance and security.

However, many Sudanese newspapers report that the main factor in the high prices in Khartoum is the involvement of the government in selling and buying land and property as part of their privatization strategy and revenue generation. As many land brokers and speculators entered into the property market, corruption and money laundering reached unprecedented levels. Many were tempted by the huge income that could be generated by acting as intermediaries in selling or buying property in Khartoum.

Tysier Osman, a successful real estate developer, thinks the reason behind many people investing in real estate in Khartoum is that they find it the safest form of investment so far in Sudan. It generates high returns, the expected profit is double and sometime triple the actual investment cost and all that is achieved in a short period of time. Many observers agree that land speculation is, at best, a high-risk, high-return investment. At its worst, it is the playground of scam artists and rife with high-level corruption.

Unchecked land speculation, even in developed and sophisticated economies, can be a dangerous practice. In the recent USA real estate market depression Fred E. Foldvary, editor of the on-line Progress Report, noted that “The cause of every major business-cycle depression is land speculation. This fact was discovered by the American economist Henry George 120 years ago. Speculators buy land because they expect the price to go up in the future. While waiting for the price to go up, speculators do different things with land.”

According to UN conference report in 1976, “Land...cannot be treated as an ordinary asset, controlled by individuals and subject to the pressures and inefficiencies of the market. Private land ownership is also a principal instrument of accumulation and concentration of wealth and therefore contributes to social injustice”. The report also noted that if this is not controlled it could be a major obstacle to development, because the provision of decent dwellings and healthy conditions for the people can only be achieved if land is used in the interests of society as a whole. Public control of land use is therefore indispensable according to this report.

In Marxism and other sociological discourse, wealth generated from land and property is described as “rentier capitalism”, which refers to a type of capitalism where a large amount of profit-income generated takes the form of property income, received as interest, rents, or capital gains. The beneficiaries of this income are a property-owning social class who play no productive role in the economy themselves but who monopolize the access to physical assets, financial assets and technologies. They make money not from producing anything new themselves, but purely from their ownership of property.

In his 1879 book Progress and Poverty, Henry George in the USA made the argument that “a sizeable portion of the wealth created by social and technological advances in a free market economy is captured by land owners and monopolists via economic rents, and that this concentration of unearned wealth is the root cause of poverty.” George considered it a great injustice that private profit was being earned from restricting access to natural resources while productive activity was burdened with heavy taxes, and held that such a system was equivalent to slavery – a concept somewhat similar to wage slavery.

In Africa, perhaps we could learn something from Mozambique’s experience. As acknowledged by many observers, Mozambique has the best land policy in Africa. According to the country’s 1997 Land Law, land in Mozambique is still owned by the state and cannot be bought or sold, but the rights of people or communities to use the land, and sell assets on it, are recognized.

The Conciliation Resources (UK based NGOs) observed that Sudan’s conflicts have many causes, but at the root of each conflict are questions over the control and distribution of resources. The most important resource is land, whether exploited for agriculture or cattle-herding, and land ownership is the key to wealth and power.

After the signing of the peace agreement in January 2005 the country should have had a new vision and approach to land and property issues, especially through the Land Commission that was stipulated in the Comprehensive Peace Agreement (CPA) and the Constitution. However, the Commission has not been formed till now. One major task of the Land Commission is to look into the issue of land reform, and the fact that Sudan has no unified legal framework of land tenure.

For sure, some rationale and balance could be brought into the situation in terms of policy and legislation. Some aspects of the Mozambique model could be introduced, and the rationale behind the 1976 UN report’s recommendations might be better understood. The current unstable properties market that has caused recessions in some world economies, indicates the minefield ahead. In essence, land is a finite resource, to leave it to market forces alone is an irresponsible policy and could only lead to the accumulation of wealth in the hands of a few through patronage and corruption, and almost certainly it will increase the inequality that might easily lead to yet more conflict in Sudan.

Ahmed Elzobier, is a Sudan Tribune. journalist He can be reached at ahmed.elzobir@gmail.com.

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