Small lake was formed near eastern walls of Ichan-kala in 1831. In line with the order of the ruler, it was completely filled with soil and large market square was created.
Traders traded wheat, fruits, soaps and candles. Barber shops and small trade houses, as well as slave market operated here. At that time, slave trade was profitable and people were kidnapped from everywhere. Some slaves were from the foothills of the Caucasus.
After construction of the harem, Alla Kuli-khan started construction of two-storey caravanserai. It was 1833, when Khiva actively traded with Bukhara, Iran and especially Russia. So, he considered this profitable business.
One more market square was created after construction of caravan-serai. Afterwards, Alla Kuli-khan ordered to build multi-dome tim – trade passage. External appearance of the caravan-serai looked like bazaar of Abdullakhan in Bukhara. In 1835, Alla Kuli-khan madrasah was constructed near it, which slightly damaged appearance of the square.
Caravan-serai of Khiva can receive foreign caravans. Western and eastern gates worked uninterruptedly. Camels with goods arrive and depart the city regularly. From the southern gate, there was entrance to two-storey trade house. It consisted of 105 hudjras and was the center for trade.
The divanhana (state services) also located in the caravanserai. The officials determined the prices of goods. They put seals to documents, issued permission to import, export and sale of goods. These were paid services and earned huge money. However, all income was directed to keeping and developing of library near under-construction madrasah. The currency exchange points were also here and sarrafs (moneychangers) worked here.
The building is preserved and modern trade center “Caravan-serai” is operating here.