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Last Updated: Friday, 22 June 2007, 04:34 GMT 05:34 UK
Afghans primed for mortgage revolution
By Soutik Biswas
BBC News, Kabul

New apartment blocks outside Kabul
Thousands of new homes have risen from the dust near Kabul

Some 20km north-east of Kabul, a unique experiment in housing and city planning in Afghanistan's history is under way.

The government is building 20,000 homes - a mixture of apartments, row houses and commercial property - which it plans to mortgage to people. The 2,500-acre township will be called New Kabul.

For a country which lost 33% of its homes during a quarter of a century of war, housing millions of local and returnee Afghans from the refugee camps of Pakistan and Iran is one of the biggest challenges facing the government in Kabul.

New Kabul is an ambitious experiment in mortgaging homes - the first time ever in Afghanistan - in a country where an annual $380 per capita income makes it virtually impossible for most people to afford homes.

Banks will buy these homes from the government and then mortgage them to buyers who, officials reckon, will have to pay $100 to $150 every month for 16 years before becoming owners.

The government is pumping in some $200m for these homes, and hopes the country's 14-odd banks will be enthusiastic in picking them up, and offering them to buyers.

Urban Development Minister Mohammad Yousaf Pashthun
I have a list of about 30 people involved in land grabbing. Some are prominent men
Urban Development Minister Mohammad Yousaf Pashthun

"Mortgage is the only way we can make homes affordable to our middle class. New Kabul will prove whether it works," says Urban Development Minister Mohammad Yousaf Pashthun, a trained city planner.

If successful, New Kabul will be still a small step towards solving Afghanistan's chronic housing problem which, in turn, has sent rents spiralling and forced people to encroach and build illegal homes.

Kabul is the worst affected - the capital's population has skyrocketed to 3.6 million, up from 1.9 million in 2002. Some 63% of the homes here are illegal, built on encroached land without any building plans and access to sanitation or water supply.

The situation is so dire that people are building mud homes recklessly on the denuded brown mountains around the city with some of these dwellings perched as high as 500 metres uphill. Residents lug up water from the streets below, and there is no sanitation.

Afghan planners call these homes 'informal houses' - "the solution is to upgrade, not demolish these homes and make more people homeless," says Mr Pashthun.

'Land mafia'

Private real estate agents are still loth to invest in housing even in Kabul, realising that few people can afford homes.

In a pointer to Afghanistan's skewed development, a World Bank study reveals that while local businessmen have poured in a whopping $250m in construction activities in the country since 2001, very little of the money has gone into building homes.

Mud homes on hillsides
Residents recklessly build hillside mud homes without sanitation

Most of it has been invested in luxury commercial buildings, thus assuring returns in a country starved of quality commercial space.

No wonder a two-bedroom apartment in Kabul can cost $200 a month, compared to $7 for a three-bedroom home before the war in 1978.

Making matters worse is a burgeoning land mafia in the country which, according to the minister, is made up of warlords, drug dealers and businessmen.

Mr Pashthun believes that 1.5 million acres of land in the country have been grabbed by these people in the past six years, with Kabul being one of the worst sufferers.

"I have a list of about 30 people who are involved in land grabbing. Some of them are prominent men," he says.

It wasn't like this always - city planners recall that before the Soviet invasion, there was a "good balance" between the supply and demand of housing in the country.

Kabul, for example, had about 10,000 dull, grey Soviet-planned housing blocks - famously called Macroyan - which one could rent for 1,000-1,200 Afs ($20-$25).

Many of these bullet-riddled and frayed apartments still exist and remain in demand.

Mud homes in the Kabul area
A crumbling mud home hints at Kabul's 'dire' housing situation

By 2002, Afghanistan had a shortage of over one million homes which would accommodate five times the number of people - 70% of this shortage was in the rural areas.

"Rural development is the first line of defence for the cities," says Mr Pashthun. The plan is to build mud townships in the villages under the government's housing policy.

But such development is painfully slow in the more peaceful north of the country and nearly non-existent in the violence-wracked south and east.

People keep pouring into the country's half a dozen big cities, with Kabul bearing the brunt.

Homes 'unaffordable'

Officials rue the fact that the government is spending less than 1% of its budget on housing, and the private players are not enthusiastic enough to invest.

Revenue collection by the country's 131 municipalities is so low that there is not even enough money to spend on public housing and civic amenities.

One potentially major source of revenue is property tax, but the rates are archaic and so low that it earns the government next to nothing - Mr Pashthun says he has been paying $8 property tax yearly on his one-acre home in Kandahar for the past 34 years!

"I should be paying $2,000 to $2,500 a year according to the present value of the house. Even if I pay $400 a year, the tax collections will boost the revenues of the municipality 50 times," he says.

The problem is that there are very few people like Mr Pashthun who can even afford to pay a tenth of that amount as tax on property.

And unless the economy grows and the gains trickle down, housing for ordinary Afghans will remain elusive, New Kabul or not.

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