Buying Property in Israel for Foreigners: Guide and Taxes 2024

Buying Property in Israel for Foreigners: Options and Restrictions

Foreign citizens have the right to purchase real estate in Israel, but the procedure differs significantly from that for residents or new immigrants. The main differences lie in taxation, access to the land fund, and bank compliance requirements. A foreigner can buy an apartment in both the primary and secondary markets, but must take into account restrictions on owning state-owned land and the increased Purchase Tax (Mas Rechisha) rate.

Legal Framework: Who Can Buy Property in Israel?

Israeli legislation is generally liberal regarding foreign capital, but it strictly protects the country's land fund. About 93% of land in Israel belongs to the state or the Jewish National Fund (KKL) and is managed by the Israel Land Authority (Rami / ILA). The remaining 7% is private land (Karka Pratit).

Private Land vs. State Land

Purchasing an apartment on private land (registered in the "Tabu" registry) for a foreigner is almost unrestricted. However, when buying a property on state-owned land, the situation is different: the foreigner is effectively purchasing a long-term lease right (usually for 49 or 99 years). In some cases, a non-resident may need to obtain permission from the Israel Land Authority confirming that the purchase does not contradict security interests or demographic policy.

• Private Land: Full ownership, unlimited ownership period, free resale.
• ILA Land (Israel Land Authority): Long-term lease, potential need to pay a transfer fee in some older contracts, risk of restrictions for citizens of certain countries.

Purchase Taxes (Mas Rechisha) for Non-Residents

Purchase tax is the main expense item above the cost of the property itself. For foreign citizens and non-residents of Israel, the tax scale is significantly less favorable than for Israelis buying their only apartment.

While a resident may receive a tax exemption up to a certain amount (provided it is their only home), a foreigner is classified as an "additional home owner" regardless of how many properties they own in other countries. Tax is calculated starting from the first shekel of the transaction price. Rates are regularly indexed and depend on the current policy of the Ministry of Finance.

It is important to remember that tax residency status is determined not only by citizenship but also by the "center of life" (number of days spent in the country). If a foreigner plans to make Aliyah (repatriation) within a year of purchase, they may submit a request for a partial tax refund or a recalculation based on the preferential scale.

Transaction Stages and the Role of the Lawyer

In Israel, the burden of transaction support rests with lawyers. Each party (buyer and seller) usually hires their own representative. The buyer's lawyer is required to conduct comprehensive Due Diligence on the property.

Main Process Steps:

1. Title Verification: Obtaining an extract from the "Tabu" (Nansach Tabu) or a rights certificate (Ishur Zchuyot) from the Land Authority or a housing company (Chevra Meshakenet).
2. Legal Integrity Check: Ensuring the absence of liens (Mashkon), foreclosures, or third-party claims.
3. Signing the Contract: The contract fixes the payment schedule, the handover date, and penalty clauses.
4. Registration of Cautionary Note (He'arat Azhara): Immediately after the first payment, a record is entered into the registry, blocking the possibility of selling the property to another party.
5. Tax Payment and Permits: Submitting a declaration to the tax authority (Misui Mekarke'in).
6. Final Registration: Transferring ownership rights to the buyer's name after full payment and receiving certificates of no municipal tax (Arnona) arrears.

Remote Document Execution

If a foreigner cannot be present in person, they can issue a Power of Attorney. The signature on the power of attorney must be certified either at an Israeli consulate or by a local notary with an apostille. It is also possible to have the signature certified by an Israeli lawyer if they are in the same country as the buyer.

Mashkanta: Mortgages for Foreign Citizens

Israeli banks provide loans to non-residents, but the terms are significantly stricter than for citizens. The main difficulty lies in verifying income earned outside of Israel and assessing credit risks.

Key conditions for a Mashkanta for foreigners:

• Financing Amount (LTV): Banks typically provide up to 50% of the property value (assessed by an independent appraiser — shama'im).
• Loan Currency: Linking to the shekel, dollar, or euro is possible.
• Documentation: Tax returns, bank statements for the last 6–12 months, and proof of income translated into Hebrew or English and properly certified are required.
• Insurance: Mandatory life insurance (from an Israeli company) and property insurance.

The approval process can take from 3 weeks to 2 months, so it is recommended to start negotiations with the bank before signing a legally binding contract.

Investment Attractiveness and Risks

Buying an apartment in Israel as a foreigner is often viewed as a way to preserve capital. However, the investment profile depends on the city and the type of development.

Popular Locations for Foreign Buyers:

• Tel Aviv: High liquidity, stable price growth, but very low current rental yield (about 2%).
• Netanya and Ashdod: Traditional "French" and "Russian" seaside cities, popular among non-residents for buying vacation homes.
• Jerusalem: High demand for luxury housing in the historic center and religious neighborhoods.
• Bat Yam: A developing market due to the extension of the light rail line and seafront renovation.

Main Risks:

In addition to market fluctuations, foreigners face currency risks. Rental income is received in shekels, while maintenance and tax expenses are also tied to the local currency. Also, consider the "cash usage reduction" law, which makes it impossible to pay for transactions in cash — all transactions must be transparent and verified by the banking system.

Frequently Asked Questions

In concluding this review, we note that the Israeli market remains attractive to conservative investors due to a housing shortage and high demand. However, for a successful transaction, it is critically important for a foreigner to have a team of professionals—a lawyer, tax consultant, and mortgage broker—who understand the specifics of working with non-residents.

Disclaimer: This material is for informational purposes only and does not constitute legal or financial advice. Laws and tax rates in Israel may change. It is recommended to consult with specialists for decision-making.

Update date: 2026-03-12