Real Estate Funds Buy Hundreds of Apartments at 20% Discount Amid Market Slump
Translated & summarized from Mako by baba
Housing rental funds are purchasing hundreds of apartments, including entire buildings, from distressed developers in Israel at discounts of up to 20%. This strategy helps developers manage cash flow and reduce debt in a stagnant market. While these bulk purchases offer developers financial relief, the cost savings are not consistently passed on to renters, who still face high demand and market-rate prices. However, tenants may benefit from longer lease agreements and improved maintenance services offered by these funds.
The story in 6 lines · by baba
- Housing rental funds are acquiring hundreds of apartments at discounts of up to 20% from developers.
- Developers are selling blocks of apartments to rental funds due to a frozen real estate market.
- Recent deals include hundreds of apartments purchased in Netanya, Tel Aviv, Ashdod, Jerusalem, and Hadera.
- Selling apartment blocks helps developers reduce unsold inventory and manage debt burdens.
- Rental funds are not always passing discounts onto renters, as demand remains high.
- Tenants may benefit from longer contracts and maintenance services offered by rental funds.
Amid a frozen real estate market and developers facing distress, housing rental funds are acquiring hundreds of apartments, sometimes entire buildings, at significant discounts of up to 20%. This trend sees developers selling blocks of apartments to funds specializing in long-term rentals rather than waiting for individual buyers who are scarce. The unsold inventory of new apartments stood at 86,000 units at the end of August.
Recent transactions illustrate this shift. Abu Family Living purchased 50 apartments in Netanya from Azorim for approximately NIS 120 million. In March 2025, Megurit acquired 47 apartments in Tel Aviv for about NIS 191 million. Rent It and Migdal bought 75% of a 341-unit rental project in Ashdod for roughly NIS 437.5 million. Abu Family also bought 50 apartments in Jerusalem for NIS 156 million, and Rent It acquired 52 apartments in Hadera for NIS 108.5 million. Azorim Living itself purchased 50 apartments in Ashdod for NIS 107.5 million and later 26 apartments in Jerusalem for NIS 76.5 million.
Industry sources indicate that selling apartment blocks, even at a discount, is often beneficial for developers. It reduces the number of unsold units, potentially lowers sales expenses, and provides a defined cash flow. This is particularly attractive when developers are burdened by high debt and interest payments, with annual interest rates ranging from 8% to 10%.
However, selling a significant portion of a building to rental funds can impact its perceived prestige and market positioning for remaining units. An analysis of a transaction in Jerusalem showed that Azorim Living's purchase of 26 apartments was about 20% below their estimated value without rental restrictions and 6% below their value with such limitations.
Despite the discounts received by rental funds, these savings are not always passed on to renters. The demand for rental apartments currently outstrips supply. For instance, in a Jerusalem project with 204 rental units, a three-room apartment starts at NIS 6,800 and a four-room at NIS 7,400, comparable to market rates for similar apartments rented under standard contracts.
Rental funds emphasize benefits for tenants such as long-term contracts, which avoid annual renegotiations and price adjustments, and centralized maintenance services. Eran Anav, CEO of Azorim Living, noted that tenants renewing contracts after five years in their Rishon Lezion project pay an average of NIS 7,500-7,600 for a five-room apartment, compared to over NIS 8,500 for new contracts.
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