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. Last Updated: 07/27/2016

Real Estate in a War Zone Is Hot! Hot! Hot!

SUKHUMI, Georgia -- For sale: Large two-story house w/ garden, Black Sea view and beach access -- all for under $50,000.

The ideal summer getaway for sun-starved Muscovites? Maybe, but there's a catch. This property is located in a country that doesn't officially exist.

This detail has done little to slow the growth of the real estate market in Abkhazia, which has enjoyed de facto independence from Georgia since the end of a bitter civil war in 1993. The self-proclaimed country's lack of international recognition has not deterred many Russians from snatching up its undervalued beachfront property.

In the Soviet era, Abkhazia was one of the country's most popular tourist destinations. With its 220 days of sunshine each year and an average temperature of 22 degrees Celsius, the region was the favorite getaway of the nomenklatura. Stalin alone had five dachas there.

"You can't get anything for these prices elsewhere on the Black Sea coast," said Sergei Mikheyev, an analyst at the Center for Political Technologies.

Mikheyev said Russians had been scooping up property in Abkhazia for years. "They have money now, they want to invest it and real estate is too expensive in other places," he said.

Eduard, an ethnic Abkhaz, is offering a two-story house with a large garden near the sea in the capital, Sukhumi, for 2 million rubles (just under $75,000). He has advertised the property in the popular Russian newspaper Iz Ruk v Ruki.

"Prices are doubling each year," said Eduard, who declined to give his last name.

The house once belonged to ethnic Georgians, who fled Abkhazia during the war. For this reason it is known as a "trophy house."

An estimated 250,000 Georgians fled Abkhazia after the war, abandoning 90,000 houses, according to statistics compiled by Georgian authorities. Many of the houses in Sukhumi still stand gutted, their walls riddled with bullet holes. On the east side of Sukhumi, where the fighting was heaviest, many houses still stand empty.

The Abkhaz government says it has "nationalized" these buildings and allocated them to local residents.

The federal government in Tbilisi and most refugees maintain that the houses were seized and their owners expelled.

"People who didn't fight in the war are welcome to return," said Konstantin Katsiya, deputy head of the Abkhaz State Property Department, who is himself a veteran of the war.

Katsiya insists that the Georgians left of their own free will.

Yury Turkiya, who fled Abkhazia in 1993 with his family, disagrees. "My sister was shot in my house," he said.

Turkiya left behind three homes. "They were worth millions [of rubles], and now I live in a six-square-meter room in a hostel," he said.

Last month, the Georgian government launched a program called My House, which will use satellite images to document every dwelling and parcel of land that once belonged to the Georgians who fled Abkhazia during and after the war.

"These people will definitely get their property back," said Lasha Bregadze, head of the federal ministry that deals with refugees. "The Georgian government guarantees this."

Some 100,000 refugees have already signed up for the program and submitted the titles to and photographs of their former homes. It is illegal to sell property that belongs to refugees from the war, Bregadze said.

With no progress in sight on the conflict between Sukhumi and Tbilisi, however, the real estate market in Abkhazia is thriving.

"It's all legal," said Eduard, who has offered the $75,000 beachfront "trophy house" for sale. The property works out to less than 10,000 rubles ($380) per square meter.

A few hours' drive away, in the Russian Black Sea resort of Sochi, residential real estate runs $2,000 per square meter -- without the sea view.

Prices have shot up by 50 percent in Sochi in the last two years as investment has flooded in on hopes that the city will be successful in its bid to host the 2014 Winter Olympics.

"There's very little left," said Maxim Grebinyukov, an agent from Sochi's City Realtor Center, adding that some customers were beginning to shop in Abkhazia despite the uncertainties.

"There are people who like to take risks," said Mikheyev of the Center for Political Technologies. "They buy properties and rent them out. Even if the Georgians come back in 10 years, the speculators will have made a profit."

Since Russia reopened the border with Abkhazia in 2002, tourists have flooded to the beach, taking advantage of cheap accommodation and the absence of a visa requirement. Some 300,000 Russian tourists visited the region last year, said Katsiya of the State Property Department.

Abkhazia enjoyed a similar real estate boom when the war ended in 1993. "People came and bought everything for peanuts after the war," said one real estate dealer in Sukhumi, who declined to give his name. "Things are more expensive now."

The Abkhaz government became so worried that three years ago it introduced new rules that barred non-citizens from purchasing property, Katsiya said.

Property buyers from outside Abkhazia have found ways around this restriction, such as having a local middleman handle the purchase or even buying an Abkhaz passport. "We can get you an Abkhaz passport," said Tanya, a real estate agent in the center of Sukhumi. She said it would cost around $2500.

Bregadze warned that the Georgian government was preparing to sue all new owners and that they would go to the Court of Human Rights in Strasbourg, France, to protect the property rights of refugees.

"In the future they will not be able to say they did not know these properties belonged to refugees," he said.