Buying Groups Resurge in Israel, Offering Savings Amidst Significant Risks

High housing prices in Israel are driving a resurgence of group purchasing models, including classic "acquiring groups" and newer "building groups" or land purchase collectives, which promise potential savings of hundreds of thousands of shekels. However, real estate developer Dvir Dimri warns that these complex arrangements shift significant risk from the developer to the buyer.

Dimri explains that unlike purchasing a finished apartment from a developer, where the developer handles planning, permits, and construction risks, or buying a second-hand property, group purchases require buyers to become, to some extent, their own developers. This can lead to potential savings of 15-20%, representing the developer's profit margin, but also exposes buyers to risks such as fluctuating construction costs, project delays, and unforeseen expenses.

While the "acquiring group" model has evolved with more sophisticated financing and management companies, Dimri stresses that terms like "building group" or "buyer group" are often marketing labels, not distinct legal categories. The actual legal and tax implications depend on the transaction's structure, not its name. He cautions that tax authorities may not accept the classification presented by organizers, and the primary risk lies in the project itself, not just taxation.

Dimri advises potential buyers to meticulously examine the property, planning, expected costs, and potential overruns. Crucially, they must assess the management team, including the project managers, engineers, architects, and contractors, and verify the budget with an independent professional. The ultimate decision should weigh the potential savings against the increased risk and uncertainty, considering whether a saving of, for example, 100,000 shekels justifies taking on the developer's responsibilities.

Ultimately, Dimri emphasizes that no real estate product suits everyone. Participants must be prepared for potential demands for additional funds, project delays, or different tax classifications than initially presented. The decision to join such a group should hinge on whether the potential savings are substantial enough to warrant the inherent risks and the buyer's capacity to handle them.