Israeli Developers Sell Credit, Not Discounts, Amidst Housing Market Shifts
In 2025, approximately 34,000 new apartments were sold in Israel, a 25% decrease from 2024. Of these, about 10,000 were part of the "Price for the Resident" program, leaving roughly 24,000 sales in the free market. Developers are struggling to lower prices due to loan requirements from banks, leading them to offer credit incentives instead. These include the "20/80" payment plan, exemption from construction input indexation, and developer loans covering interest until delivery.
New regulations, specifically Amendment 9 to the Sales Law effective July 7, 2022, exempt the first 20% of a home's price from indexation and cap the indexed portion at 40%. The construction input index rose approximately 3.7% in the 12 months ending June 2026. For a 2.4 million shekel apartment, a 40% indexed portion of 960,000 shekels could increase by about 86,000 shekels due to a cumulative 9% index rise over 30 months.
Buyers considering these deals should ask four key questions: whether the approval applies to the down payment or the full balance, who covers indexation differences until delivery and up to what limit, if the developer's loan is tied to the project's lender and its interest rate post-delivery, and the apartment's price without the incentive. The difference reveals the credit cost, which is the true comparison point.
The "20/80" plan, where buyers pay 20% upfront and the remaining 80% typically via mortgage at handover, appears attractive with a low initial payment. However, buyers face the challenge of securing a mortgage for the larger sum based on future income and interest rates. Bank of Israel regulations, implemented in April 2025, limit balloon and subsidized developer loans to 10% of a bank's monthly mortgage performance, making such offers less common and increasing the capital banks must allocate.
While index exemptions offer price certainty on the indexed portion, the "20/80" model shifts risk to the buyer regarding the final mortgage amount and interest rates. Buyers using this plan are advised to secure pre-approval for the full mortgage amount or consider early partial withdrawal. The article suggests that the perceived value of upgrades like kitchens or tiles is often less significant than the financial implications of indexation exemptions, which can save considerably more over the construction period.
