Gindi Holdings' Decade-Long Payment Plan Offers 8-12% Discount
Translated & summarized from Ice by baba
Gindi Holdings is offering a new payment plan where buyers pay 20% upfront and the remaining 80% ten years after occupancy. Real estate appraiser Assaf Gastfreund estimates the effective discount to be 8-12%, similar to standard market offers. Developers prefer these plans to maintain official property values while providing a de facto discount, though the model shifts financial risk to the buyer.
The story in 6 lines · by baba
- Gindi Holdings' new plan defers 80% of apartment payments for ten years post-occupancy.
- An expert estimates the effective discount from Gindi's plan is 8-12%.
- The company claims the benefit is worth up to 700,000 shekels.
- Developers use such plans to maintain reference prices while offering discounts.
- The model shifts significant financial risk to the apartment buyer.
- Gindi offered a similar deferred payment structure in 2012.
Gindi Holdings has launched a new sales initiative where buyers pay 20% of the apartment's value upon signing, 50% upon occupancy, and the remaining balance a decade later. This deferred payment plan, which allows buyers to delay up to 900,000 shekels for ten years post-occupancy without interest or linkage, appears to offer significant financial benefits. The company claims the benefit is worth 600,000 to 700,000 shekels, but an analysis by real estate appraiser and lawyer Dr. Assaf Gastfreund suggests the true value is closer to 350,000 shekels.
Gastfreund calculated the present value of the 900,000 shekel payment due in ten years, using a typical mortgage interest rate of 5%, to be approximately 550,000 shekels. This difference, he states, equates to an effective discount of about 8% on a 4.2 million shekel apartment, and up to 12% on smaller units. Gindi's higher valuation reportedly includes the full mortgage repayments over a decade, not just the interest savings, which is the actual benefit to the buyer.
Compared to standard market practices, Gastfreund noted that a typical 20/80 payment plan over a 2.5-year construction period offers a similar benefit of 370,000 to 390,000 shekels on a 4.2 million shekel apartment. He pointed out that such financing benefits were common in about 30% of new apartment deals in August, according to Ministry of Finance data, making Gindi's offer a variation on an established market trend rather than a revolution.
Gastfreund also revealed that Gindi offered a similar deferred payment structure in October 2012, delaying 30% of the price up to 900,000 shekels for ten years. The key difference then was that the principal was linked to the index, whereas the current offer is not, making it more generous. He explained that developers prefer these deferred payment mechanisms to maintain the project's reference price for banks, appraisers, and future buyers, while still offering a de facto discount. This practice allows the contract price to remain high for tax reporting purposes, even though the economic value of the transaction is lower.
Furthermore, Gastfreund highlighted that this model shifts risk to the buyer, who will need to pay the 900,000 shekel balance in a lump sum or refinance it at prevailing rates in ten years, potentially facing less favorable terms. This is compounded by Bank of Israel regulations limiting such loans to 10% of a bank's total mortgage portfolio.
