Exclusive: real estate investment favored for money laundering in Iraq

Shafaq News/ In Iraq, real estate investment has become a common method for laundering money, especially after international money transfers faced increased scrutiny from US authorities.

Corruption and Flawed Investment Laws

The shift has led many to clean their funds by buying and investing in property, according to economic researcher Ahmed Eid.

Eid, speaking to Shafaq News Agency, explained that Iraq’s investment law faces significant challenges. It conflicts with other investment regulations and does not adequately protect investors.

“Although Investment Law No. 13 holds legislative priority in principle, it fails to protect investors’ funds—both Iraqi and foreign. The law requires investors to disclose their financial status, meaning those who invest under these conditions often build relationships with influential entities based on mutual interests,” explained Eid.

He also noted that the growing population and urban expansion have driven a surge in housing projects. However, these projects have not resolved the housing crisis. Cities like Baghdad are overcrowded, and there is a pressing need for more housing units.

“The housing projects do not address the growing housing crisis in Iraq,” Eid asserted, “with more than 4 million slums and a need for over 4 million housing units.”

Eid highlighted that corruption taints many housing investments. Some companies involved in these projects have questionable practices and use substandard materials.

“Some residential projects were awarded to companies with ties to influential entities, but the quality of their work and materials falls short of expectations. The minimal construction costs do not align with the exorbitant sale prices,” said Eid.

Ultimately, ordinary citizens do not benefit from these investments, as they are controlled by profit-driven companies and political groups lacking expertise.

Real Estate Investment Surges

Real estate investment now makes up 80% of all investments in Iraq, overshadowing other important sectors like industry, agriculture, and tourism. These sectors traditionally provide jobs and help reduce the budget deficit.

Despite this, real estate remains the primary focus, affirmed economic expert Mustafa Al-Faraj.

Al-Faraj told Shafaq News Agency that while there is a critical need for new housing due to Iraq’s fast-growing population, real estate projects mainly benefit wealthy individuals, leaving ordinary citizens and low-income workers out.

“This does not solve the housing problem but rather deepens it.”

He attributed the heavy investment in real estate to widespread corruption, weak enforcement of laws, and lack of accountability. Real estate offers high commissions and low costs for investors, who receive generous government support, often ignoring the needs of poorer people.

Residential investment drives up housing prices

In Iraq, most investment is focused on residential properties due to their high returns, leading to price manipulation by investors, according to Suzan Mansour, a member of the parliamentary investment committee.

Mansour told Shafaq News Agency that apartments in Baghdad cost between $300,000 and $500,000, making them unaffordable for average workers. Even with a mortgage limited to 120 million dinars, many cannot buy these homes.

She recommended that instead of offering exemptions for residential projects, the government “should support local industries and revive agriculture to create jobs and boost the economy, especially with oil prices dropping.”

As per an informed source, rising property prices are due to two main factors: the Central Bank's increase in mortgage limits, which has led sellers to raise prices, and increased domestic property purchases as a method for laundering money.

“This shift from international money transfers to local real estate is partly due to pressures from the US to combat money laundering.” The source said.

The source also noted that money launderers mistakenly believe that buying property will clean their illicit funds. However, the funds remain tainted because they originate from illegal activities, contributing to the high property prices in Iraq.