Buying an apartment in Israel at the off-plan stage: tips for investor

Projects under construction in Israel: buying an off-plan apartment

Buying real estate at the off-plan stage in Israel (often referred to as buying "on paper" or al ha-niyar) is a strategy that allows you to enter a project at a minimum price and realize potential capital gains by the time construction is completed. Given the housing shortage and the high cost of finished properties, new developments remain the most sought-after instrument for both personal residence and investment. To give a direct answer to the main question: buying off-plan is profitable due to developer discounts and flexible payment schedules, while the security of the transaction in Israel is guaranteed by the state "Sale Law" (Hok HaMecher).

Advantages of buying an apartment in Israel directly from a developer

Choosing a property under construction gives the buyer a number of advantages that are unavailable in the secondary market. First and foremost, this is the opportunity for customization: at early stages, the developer allows for layout changes and the selection of finishing materials, plumbing, and kitchen design.

Key arguments in favor of new construction:

• Modern standards: Presence of a reinforced safe room (MAMAD), underground parking, elevators, and energy-efficient systems.
• Warranty period: According to the law, the developer is responsible for structural defects in the building for several years after handover (the "Berek" period).
• Investment potential: Areas with new projects are often accompanied by infrastructure development, which further increases the value of the property by the time it is ready.
• Zero brokerage commissions: When buying directly from a developer, the buyer pays no agency commission (0%), saving a significant budget.

Transaction security: Sale Law and bank guarantees

Israel is one of the safest countries for purchasing housing under construction. Regulation is carried out through the Sale (Apartments) Law (Assurance of Investment). This law mandates the developer to provide the buyer with one of several types of assurance, the most common being a bank guarantee.

How it works in practice:

1. The project is supported by a guarantor bank (Bank Melave).
2. The buyer does not deposit money directly to the developer, but into a special closed project account using a voucher system.
3. For every payment made, the bank issues a guarantee letter. If the developer fails to complete the project, the bank is obligated to return the money to the buyer or ensure completion.
4. Until registration in the Tabu (Land Registry), the buyer's rights are recorded in the "Hevra Meshakenet" system (management company) or through an "Aarat Azara" (cautionary note).

Financial aspects: Mortgage (Mashkanta) and installments

When buying off-plan, the financial burden is distributed over time. Most developers offer subsidized payment terms.

Popular payment schemes

The standard scheme in recent years is 20/80. The buyer pays 20% upon signing the contract, and the remaining 80% before receiving the keys (Tayset). There are also 15/85 or even 10/90 options in large projects in cities like Netanya or Ashkelon.

Mortgage for a new property

A mortgage loan (mashkanta) for an under-construction property is issued in parts, in accordance with construction stages. It is important to obtain an "Ishur Ekroni" (principal approval) before signing the contract to ensure your solvency.

Comparison: Off-plan vs. Finished housing

Criterion	Off-plan stage	Finished housing (Secondary)
Price	10-15% below market	Market price, no discount
Condition	New, modern	Depends on wear and tear
0% Commission	Yes (from developer)	Usually 2% + VAT
Payment schedule	Installments over 3-5 years	Full payment in 3-6 months
Indexation risks	Yes (Construction Input Index)	No

Taxes and additional expenses

The main tax when purchasing is Mas Rechisha (Purchase Tax). Its size depends on whether this apartment is the buyer's only residence in Israel or an investment property.

• Primary residence: There is a tax-free threshold (up to ~1.98 million shekels in 2024, 0% tax), above which the rate is progressive.
• Investment (second apartment): Tax is applied from the very first shekel, the standard rate is 8% (subject to legislative changes).

It is also necessary to consider the Construction Input Index (Madad Tesumot ha-Bniya). According to the 2022 reform, a developer can only link 40% of the apartment's cost to the index. This protects the buyer from excessive price increases due to rising material costs.

Stages of buying an apartment in a new development

1. Selection and booking: Signing an order form (Tofes Harshama) and paying a small deposit.
2. Legal check: A lawyer checks the building permit, the developer's land rights, and the bank support agreement.
3. Contract signing: Fixing the payment schedule, technical specifications (Mifrat Tchni), and delivery date.
4. Payment and receipt of guarantees: Transfer of funds through guarantor bank vouchers.
5. Right registration: Initial recording in the registry and subsequent formalization in the Tabu after project completion.

Frequently Asked Questions

Conclusion

Buying an apartment off-plan in Israel is a transparent and protected process provided there is competent legal support. The use of installments and bank guarantees makes this tool accessible to a wide range of buyers. The key is to correctly assess the impact of the construction index on the final cost and to choose a reliable project in a promising area.

Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Tax rates and mortgage lending rules are subject to change. A specialist consultation is recommended.

Last updated: 2026-04-28