As development booms, trendy restaurants and hotels are encroaching on life amid ancient sites and alleys.

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DAMASCUS, Syria — Scenes from the old, walled city of Damascus: A carpet dealer skilled at multilingual bargaining is cajoling a tourist into his showroom. A rhythmic tap-tap-tap resonates from a doorway as an artisan hammers silver strips into a richly decorated brass tray. A Syrian woman does the day’s shopping, visiting one stall for meat, another for olives, a third for flat bread.

The charm of the ancient part of the Syrian capital has always been the easygoing harmony with which tourists and Damascenes share the narrow alleys and covered markets. But this crowded district — at the center of what’s believed to be the world’s oldest continuously inhabited city — is in danger of losing its endearing character.

Aggressive investors flush with cash have pushed property prices so high that homeowners increasingly are selling longtime family properties and moving away. Others are fleeing the pollution and congestion generated by dozens of new trendy restaurants and boutique hotels catering to wealthy visitors and Damascus’ expanding crowd of the hip and rich.

The threat to the old quarter — by one estimate, its population has dropped by about half, from some 60,000 in about 15 years — is a byproduct of Syria’s disorderly shift from socialism to a free-market economy, which began in the early 1990s and accelerated after President Bashar Assad took office in 2000.

The ideological shift created a virtual free-for-all climate for ambitious businessmen linked to the Syrian political elite, even as it deepened the potentially dangerous division between the city’s rich and poor.

The debate on how much latitude to give private enterprise is gathering steam as authorities try to balance revitalizing the 316-acre old city with preservationist goals. Already, some 50 hotels and 120 restaurants and cafes have been licensed, and among the many up and running are some shoddy imitations of traditional Arab architecture.

“I am ashamed”

“This city is being turned into an amusement park,” complained Hikmat Shatta, a French-educated architect, describing the changes overtaking the neighborhood where he grew up and lives.

“In some parts, I walk with my eyes fixed on the ground,” Shatta said. “I am ashamed to look up and see what is happening. We are moving from the authentic to the bizarre and ridiculous.”

Shatta’s two-story home dates to the 19th century, and it’s such old Arab houses that are the primary victims of the entrepreneurial onslaught. These are spacious dwellings whose splendor — richly tiled floors and intricately inlaid wooden ceilings — is revealed only as a visitor steps through the entryway, typically an unpretentious iron door set into plain brick walls.

In the maze of alleys, cobblestone streets, Turkish baths, coffeehouses and historical sites that form the old city, the prospect of most residents disappearing is especially troubling because the area once exemplified Syria’s religious and ethnic harmony. Most of the Jewish inhabitants are gone, but the Muslims and Christians who remain live in peace, their places of worship sometimes just steps apart.

The human diversity is reflected in the historic sites. The Omayyad Mosque, built in the 8th century, is on a site that earlier held a temple dedicated to the Roman god Jupiter and a Christian church. Today the mosque has shrines housing what are said to be the heads of John the Baptist and Hussein, the grandson of Muhammad.

Nearby is the tomb of Saladin, the 12th-century Muslim warrior who fought the Christian crusaders. The old city also is home to storied Straight Street, where, as the Bible recounts, St. Paul regained his sight and was baptized.

The area, believed to have been continuously inhabited from as early as 5,000 B.C., also has hundreds of small, vibrant businesses trading in everything from spices and gold jewelry to brass trays, Persian rugs and Damascene furniture with mother-of-pearl and woods of different hues inlaid into geometric designs.

“Better of two evils”?

The old city was long shielded from development because Syria’s radical politics isolated the country, but it is attracting European tourists, and this poses complex changes, said Nazir Awad of the state’s Antiquities Authority. He said authorities must simultaneously try to curb pollution, protect existing homes, attract new residents and revitalize the area without changing its character.

“It is not easy, for example, to turn the old city into a no-traffic zone to reduce pollution levels, but we are curbing industrial activity and looking to move some of it out,” he said. “We also need investment, but of the kind that protects the area and creates jobs. The old city cannot remain strictly residential.”

Not everyone opposes the developers’ invasion. Some longtime residents said the area was slowly dying, with many inhabitants leaving for modern neighborhoods to escape the high cost of maintaining old homes built of mud bricks and plaster.

As a result, poor migrants from rural Syria moved in, lured by spacious homes and low rents, and the area went downhill. Some old-timers said that until the old city attracted investors’ attention in the mid-1990s, many of its streets were deserted once stores closed shortly after nightfall.

“What we have now is the better of two evils,” said Samer Antoine Kozah, an art dealer who lives in an eight-room house that has been in his family for about 150 years.

“Yes, the old city is threatened, but let us be realistic; it was dying. The restaurants and hotels have changed my life and disturbed me, but I thank their owners for doing business here,” said Kozah, 51.

Not far away, architect Hakam Roukbi was overseeing the final stages of a two-year, multimillion-dollar project to restore a large Arab-style house once owned by a prominent Jewish family. He chuckled politely when asked whether the house would be turned into a museum.

The Farhi family home, he said, would be a hotel of 22 opulent rooms and suites catering to VIP guests of the government. Roukbi, the point man for a group of wealthy investors, suggested the hotel’s guests would be people who appreciate the strict attention to detail in the restoration.

“We spent six months just clearing up the rubble from the house,” he said as workers sandpapered walls nearby. “And we did all the work with the same material used when the house was first built.”