Jerusalem Bank Launches Construction Cost-Linked Deposit for Homebuyers

Bank Jerusalem has introduced a new savings product called "Construction Costs," which is directly linked to the construction input index. This appears to be the only such deposit available to private customers in Israel, designed primarily for individuals who have purchased a new apartment and are holding funds for upcoming payments to the developer. The construction input index, published monthly by the Central Bureau of Statistics, reflects changes in residential building costs, including materials, labor, equipment, and contractor services. Payments in new apartment purchase agreements are typically tied to this index, exposing buyers to its fluctuations from the signing of the contract until the apartment's handover.

This new deposit aims to bridge the gap between the rising cost of construction and the funds buyers hold, which are often kept in regular checking or savings accounts. The deposited amount will fluctuate with the index, both upwards and downwards. Upon withdrawal, customers receive their principal plus any accumulated index-linked adjustments based on the latest published index figure compared to the one at the time of deposit. The deposit has a one-year term, but funds can be withdrawn at any time with 35 days' notice, allowing alignment with developer payment schedules. The linkage is full in both directions, meaning a drop in the index will reduce the principal amount. A 15% withholding tax will be applied to profits, including the indexation component, for resident individuals.

Specific details regarding the minimum deposit amount and any interest beyond the indexation have not yet been released. The construction input index for residences rose by 5.1% in 2025, compared to an overall inflation rate of 2.6%, and increased by an additional 2.3% from the start of 2026 until July, while inflation was 1.4%. For example, on a 3 million shekel apartment where 40% of the price is index-linked, a cumulative increase of approximately 7.4% over 18 months would add about 89,000 shekels to the debt owed to the contractor. A regular shekel deposit earning around 4% interest on the same 1.2 million shekel amount would yield approximately 72,000 shekels over the same period, indicating the indexation's advantage in such a market.

Bank Jerusalem, established in 1963 and traded on the Tel Aviv Stock Exchange, positions itself as a complementary bank offering services to customers who also bank elsewhere. Its primary focus includes mortgages, consumer credit, deposits, and financing for residential construction projects, as well as project accompaniment and urban renewal. The bank's board is chaired by Zeev Nahari, and its CEO is Yair Kaplan. This new deposit aligns with the bank's model and is accessible even to those whose primary mortgage and current accounts are held with other institutions.