Hagag Faces Bank Credit Restrictions on Bavli 3 Project Amid Sales Challenges

Hagag, a real estate development company, reported to the Tel Aviv Stock Exchange that it failed to meet the preliminary conditions set by its bank for the Bavli 3 project, leading to revised credit terms. The bank had initially provided financing of 270 million shekels out of a potential credit line between 335 and 388 million shekels, depending on Hagag’s equity investment and sales progress. To fully unlock the remaining credit, sales agreements worth 434 million shekels were required by July 19, but despite Hagag reporting agreements totaling 549 million shekels, 69% of these sales are either cancellable or have buyers who paid less than 15% of the purchase price due to technical issues with a building permit amendment.

The permit delay, related to added protected space requirements, has given buyers the right to cancel, and the bank has extended Hagag until the end of 2026 to secure the permit. While the bank has not cut off credit, it granted an additional 30 million shekels, raising total financing to about 300 million shekels, contingent on Hagag injecting an extra 5 million shekels in equity. To fully access the credit line, Hagag must present non-cancellable agreements or agreements with over 15% deposits totaling at least 483 million shekels by year-end; currently, this figure stands at approximately 332 million shekels.

The bank’s cautious stance signals a warning to Hagag amid weak real estate sales and aggressive financing offers in the market. The bank emphasized that failure to meet sales conditions could lead to credit cancellation and immediate repayment demands. This development highlights increased banking prudence, particularly for luxury projects in Tel Aviv facing sluggish sales.