Real Estate Firms Boost Bond Issuance Amid Market Slowdown

Israeli real estate and construction companies are increasingly turning to the capital markets to raise debt through bond issuances, driven by high interest rates and a persistent slowdown in the property market. This trend allows companies to diversify funding sources, secure longer-term debt, and reduce reliance on the banking system.

In 2025, the number of real estate companies issuing bonds surged to 30, a significant jump from the seven to eight companies annually observed between 2022 and 2024. This momentum continued into 2026, with 17 companies issuing bonds so far. The total volume of debt raised also increased, reaching approximately NIS 34.5 billion in nominal value from January to July 2026, a 3% rise compared to the same period in 2025 and a 37% increase over two years. The real estate sector now accounts for about 27% of all bond issuances.

New entrants to the bond market are primarily from the construction and entrepreneurship sectors, making up 44% of new issuers. Additionally, companies involved in overseas income-generating real estate, including those registered in the British Virgin Islands, represent a substantial portion, accounting for 31% of new issuers and 51.5% of the total issuance volume. The remaining issuers are from Israel's income-generating real estate sector.

Experts note that income-generating real estate companies have historically favored the bond market due to their long-term asset holding and stable rental income streams, which align well with bond characteristics. For residential development firms, the increased bond issuance is attributed to market growth, rising property prices, and evolving financing needs, especially during periods of low interest rates. However, the current high-interest rate environment has significantly increased financing costs and credit needs for developers, exacerbated by slower apartment sales and favorable payment terms for buyers.

Despite the increased issuance, significant disparities exist in debt quality and financing costs among new issuers. Some companies struggle to complete their offerings or face higher borrowing costs, with interest rates ranging from 3.5% to nearly 8%. Analysts advise investors to meticulously examine individual issuers, focusing on management quality, leverage ratios, equity, cash flow generation, and project execution. Particular caution is advised for highly leveraged companies, those with expensive non-bank credit, and projects with slow sales or insufficient collateral.