Real Estate Developers Must Plan Financing Carefully Amid Market Challenges, Expert Advises
Ruth Levi, CEO of Addit Finance, highlights the difficulties small and medium real estate developers face in securing appropriate financing in Israel's current challenging market. Factors such as heightened security tensions, rising interest rates, increasing construction costs, and uncertain sales rates have complicated traditional bank financing, often leaving developers with funding that does not match their project realities. Many developers find themselves committed to land purchases or licensing processes without adequate financial backing, turning financing from a solution into a problem.
Levi stresses the importance of thorough financial planning before submitting funding requests. She advises developers to invest in selecting a reliable appraiser and preparing a realistic zero-based report, while also planning for extreme scenarios to ensure a comprehensive financing framework. A well-prepared funding application should demonstrate deep project knowledge, including potential risks and mitigation strategies, fostering trust through transparency.
Once financing is approved, ongoing project support is crucial. Addit Finance assigns a credit manager to monitor project progress and assist developers with emerging issues throughout the project lifecycle. Levi contrasts flexible financing frameworks, which accommodate future uncertainties without requiring repeated approvals, with rigid ones that can cause delays and pressure.
Levi recommends approaching financiers as early as possible to identify risks and adjust deal structures, as late-stage involvement limits corrective options. She shares an example where Addit Finance advised increasing a developer’s credit line to cover project needs amid slower sales, allowing the project to continue smoothly without additional approvals or delays.
This approach underscores the need for proactive, flexible financial management to navigate Israel’s complex real estate financing environment effectively.
