Jerusalem Bank Launches Novel Deposit Tied to Construction Costs Index

Jerusalem Bank has introduced a new one-year deposit account, "Construction Costs," designed to hedge against fluctuations in the construction input index. This unique product, believed to be the only one of its kind for private customers in Israel, fully links the principal amount to the construction input index, meaning it can increase or decrease with the index's movement. The deposit allows for withdrawals with 35 days' notice, enabling account holders to time their access to funds for upcoming payments to contractors.

The construction input index, published monthly by the Central Bureau of Statistics, reflects changes in the cost of residential construction, including materials, labor, equipment, and contractor services. Payments for new apartments are often tied to this index, exposing buyers to its volatility from the contract signing until key handover. Typically, funds saved for these payments are held in regular bank accounts, while the debt to the contractor adjusts with the index, creating a potential gap.

This new deposit mechanism aims to close that gap by adjusting the deposited sum according to the index's changes. Upon withdrawal, the customer receives the principal plus any accumulated index-linked adjustments based on the latest published index figure relative to the deposit date. A 15% tax will be deducted from any profits, including the indexation component, for Israeli resident individuals.

While the minimum deposit amount and any additional interest rates are yet to be disclosed, the bank positions this product as a hedging tool. For instance, a 3 million shekel apartment with 40% of its price linked to the index could see an additional 89,000 shekel cost over 18 months due to a 7.4% index increase. A standard shekel deposit at 4% interest would yield approximately 72,000 shekels on the same principal amount during that period. The new deposit is particularly beneficial when the construction input index rises more than the interest rate on a regular deposit, which occurred in 2025 with a 5.1% rise versus 2.6% inflation, and early 2026 with a 2.3% rise versus 1.4% inflation.