Construction Input Price Index in Israel: Calculating Apartment Prices

Construction Input Price Index: How It Affects the Final Cost of Your Apartment

The Construction Input Price Index in Israel (Madad Tashumot HaBniya) increases the final cost of an apartment by an average of 2–5% of the remaining balance to the developer per year. In practice, if your unpaid debt to the developer (kablan) is ₪1,500,000, a 3% index increase will add ₪45,000 to the property price. According to the 2022 reform, linkage to the "madad" is now only applied to 40% of the total apartment price in the contract.

What is the Construction Input Price Index and why does it grow?

This is an economic indicator reflecting changes in the developer's costs for materials, logistics, and labor. It is published by the Israel Central Bureau of Statistics on the 15th of every month.

When you buy a property under construction, you are not just fixing the price in shekels; you are agreeing to "linkage" (atsmada). The main growth factors include:

• Rising prices for building materials (cement, steel, concrete).
• Wage growth in the construction sector.
• Changes in rental rates for heavy machinery.

In our experience, many buyers ignore this clause, focusing only on the figure in the contract. However, by the time keys are handed over 3-4 years later, the "surprise" in the form of extra payments can reach ₪150,000–200,000.

How to calculate the remaining balance to the developer considering the index?

Since July 2022, a law has been in effect in Israel limiting index linkage: the developer is entitled to index only 40% of the apartment price. The remaining 60% of the price (representing land cost and developer profit) remains fixed.

Example of indexation calculation for an apartment worth ₪2,500,000

Parameter	Before the 2022 Reform	After the Reform (Current Rules)
Amount subject to indexation	100% of the balance	40% of the total price
Estimated index growth (e.g., 4%)	₪100,000	₪40,000
Final overpayment for the period	₪100,000	₪40,000

It is important to understand: the index is charged on the remaining debt. The faster you pay the developer, the lower the overpayment will be. You can check current data on the official Israel Central Bureau of Statistics (CBS) website.

Case Studies from IsraRealty Practice

Case 1: Netanya, 4-room apartment in Ir Yamim. A family of repatriates (Olim) planned to pay the remaining ₪1,200,000 in stages until 2026. Our specialists calculated the index growth forecast and recommended paying 70% of the amount immediately using a subsidized mortgage (mashkanta). Result: ₪85,000 saved on indexation.

Case 2: Bat Yam, frontline project. The developer mistakenly charged the index on 100% of the apartment price after the 40% law came into force. IsraRealty lawyers identified the error during the reconciliation statement review. The client saved ₪112,000.

"The Construction Input Price Index is a hidden tax on waiting. Given current market volatility, buying a new property requires not just choosing a neighborhood, but a mathematically sound payment schedule." — Mikhail G., Lead Mortgage Broker at IsraRealty

IsraRealty clients don't waste time on complex math and bureaucracy. Our experts conduct a full audit of the contract, including Tabu entry verification and calculation of a payment schedule that minimizes the index's impact. Check out our new construction offers with favorable payment terms.

How to minimize index payments?

The most effective way is early repayment of the debt to the developer (kablan) in the first months after signing the contract. However, this requires having the full amount or an approved mortgage.

1. Negotiating a "freeze": In some projects, it is possible to negotiate a freeze on the index for a certain period (madad chafushi).
2. Taking a mortgage early: Even if the building is not finished, the bank can transfer the money to the developer immediately, "unlinking" you from the index.
3. Verifying calculations: Developers often make mistakes in the company's favor. Having each payment checked by an accountant is a necessity.

To understand market rates and trends, we recommend following reports from the Bank of Israel.

Frequently Asked Questions