Buying off-plan in Israel: what the law gives you
Before you buy · Off-plan
Buying off-plan in Israel: what the law gives you, and what the contract takes back
You are not inspecting a property. You are buying a set of promises, secured by two statutes, priced by a formula, and delivered on a date that is almost never the date on the brochure.
Buying an apartment that does not exist yet is a different transaction from buying one that does. Everything that will go right or wrong about it is decided in the weeks before you sign — and almost none of it is decided in the sales suite.
This is written for buyers who are not in the country: people making aliyah, people buying ahead of a move, and people buying an apartment in Israel while living somewhere else. It sets out what Israeli law gives you as of right, what a developer's standard contract typically does to narrow it, and the specific numbers you should be able to state out loud before you commit.
Two statutes, not one
People say "the Sale Law" as though there were one. There are two, and they do different jobs.
Your money before the keys
A 7% ceiling, five permitted securities, and an escrow account you must pay into.
The price is not the price
Index linkage is capped since July 2022 — but only if your contract is drafted to match.
The date is the negotiation
Compensation for delay is worthless if the contract never fixes a delivery date.
There is no such thing as "the Sale Law"
Almost every English-language article on this subject gets it wrong in the first sentence. There are two statutes, passed a year apart, doing completely different jobs.
The Sale (Apartments) Law 5733-1973 is the disclosure and quality statute. It requires a specification in a prescribed form, governs late delivery and the compensation payable for it (s.5A), sets the periods during which the seller remains liable for defects (s.4 and the Appendix), and caps what a developer may charge you towards its own lawyer's registration costs (s.6C). It is about what you are getting.
The Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law 5735-1974 is the money statute. It stops the developer holding your payments without security, and it sits behind the escrow account and voucher system that governs every shekel you pay. It is the law that gets your money back if the project fails.
Both are cognate legislation
Israeli contract law generally lets parties agree whatever they like. These two statutes are an exception: their provisions may only be varied in the buyer's favour.
A clause in a developer's contract that gives you less than the statute does is not a term you failed to negotiate. It is void, and it does not matter that you signed it. The questions worth spending your negotiating capital on are the ones the statutes leave open — not the ones they have already answered.
Whose lawyer is in the room
The developer instructs a law firm to draft the contract, run the sales process and, later, register title. Buyers deal with that firm directly and conclude, reasonably enough, that a lawyer is involved. A lawyer is involved. Not yours. That firm owes its duties to the developer, drafted the document you are being asked to sign, and has no obligation to point out which of its clauses are unusually one-sided. Expect to pay roughly 0.5% to 1.5% of the price plus VAT for independent representation.
Your money before the keys
An off-plan buyer typically pays out most of the purchase price over two to four years before receiving anything at all. Section 2 of the 1974 Law exists because that is an obviously dangerous position, and because Israeli buyers have historically lost everything when developers failed.
The rule is simple: a seller may not receive more than 7% of the price without providing one of the securities the section prescribes. The first tranche — usually the deposit at signature — can be taken unsecured up to that ceiling. Everything afterwards must be secured as it is paid.
| Security | What it is | In practice |
|---|---|---|
| Bank guarantee | Issued in the form prescribed by the Bank Guarantee Regulations 5771-2010, repaying you if the developer fails to transfer the apartment. | The normal arrangement on any bank-accompanied project. This is what you want. |
| Insurance policy | A policy in your favour covering the same risk. | Occasionally used where the project is not bank-accompanied. Read the exclusions. |
| First-ranking charge | A mortgage in your favour over the land or a proportionate part. | Uncommon on multi-unit schemes. |
| Cautionary note | A he'arat azhara registered against the land, subject to prior charges. | Usually a supplement, not a substitute. Check what ranks ahead of you. |
| Transfer of title | Registration of the apartment, or a share, in your name. | Rare before completion. |
How the mechanics actually run
On a bank-accompanied project the accompanying bank opens a dedicated escrow account for the scheme. Every payment must go into that account using a payment voucher issued for that specific payment. The voucher is the trigger. Where a financing corporation is involved, it must issue the corresponding guarantee within 14 business days of the payment being made against the voucher.
Three things go wrong here, and all three are avoidable. Paying outside the voucher system — money paid direct to the developer, or into a lawyer's client account, may simply not be secured. Not chasing the guarantee, which is a document that should arrive after every payment and be checked against what you actually sent; buyers abroad regularly discover at month eighteen that three were never issued. And the VAT component, which the 2017 amendment treats separately for guarantee purposes.
One change worth knowing: from 30 September 2026, approved non-bank guarantors may issue these guarantees alongside banks. If you are signing around or after that date, the identity and standing of your guarantor becomes a question worth asking rather than assuming.
The price is not the price
The headline figure in an Israeli off-plan contract is a base price. What you actually pay is that figure plus linkage to the construction inputs index, applied to each instalment between signature and payment. On a three-year build in an inflationary period this has historically added tens of thousands of shekels that nobody budgeted for.
Until 2022, developers routinely linked the entire unpaid balance. Amendment 9 to the Sale (Apartments) Law changed that for every contract signed on or after 7 July 2022. It is not retroactive.
- The first 20% of the consideration may not be linked at all.
- Of each subsequent payment, no more than half may be linked.
- Linkage runs only to the contractual delivery date — a late developer stops earning it.
Together those three limbs mean a maximum of 40% of the total price is ever exposed to the index. Not 50%, not 100%. Forty.
What the cap is worth
Take an apartment at ₪2,500,000 with 20% paid at signature, and a construction inputs index that rises 6% across the build. Under the old regime, ₪2,000,000 was exposed and the uplift was ₪120,000. Under the cap, ₪1,000,000 is exposed, and it is ₪60,000. Sixty thousand shekels of difference on one apartment, at a modest index movement — which is why the industry fought the amendment so hard.
So check three things in your own contract: which index is named and what its base date is; whether the schedule expresses each payment as a linked and an unlinked half rather than applying one rate to the whole balance; and whether linkage is stated to stop at the contractual delivery date.
Delivery dates and delay compensation
Israeli developments run late. Assume it. Section 5A provides compensation calculated by reference to the rent a comparable apartment would command, and the ladder that applies depends on when you signed, because Amendment 9 rewrote it.
| Period of delay | Signed on or after 7 July 2022 | Signed before |
|---|---|---|
| First month | Nil — a grace month | Nothing for 60 days. Beyond that, compensation is payable retroactively from the original delivery date, at 1.5× comparable rent for the first eight months and 1.25× thereafter. |
| Months 2 to 4 | 1.0 × comparable market rent | |
| Months 5 to 10 | 1.25 × comparable market rent | |
| Month 11 onwards | 1.5 × comparable market rent |
The clause that does the real damage is not the delay clause. It is the delivery-date clause.
A great many contracts do not commit to a date at all. They commit to a period running from an event the developer controls — the issue of a building permit, the commencement of works, the completion of a prior stage — or reserve extensions for a list of causes broad enough to cover most of what actually delays a site. If there is no fixed contractual delivery date, s.5A has nothing to bite on, and the linkage cut-off in Amendment 9 has nothing to cut off against.
Expect a force majeure clause on top, drafted expansively. Since 2023 it is common to see security situations, reserve mobilisation and labour shortages listed. Some of that is legitimate; some of it is a general excuse clause wearing a topical coat. Ask what the clause requires the developer to prove, whether it caps the extension it buys them, and whether they must notify you within a period. An uncapped, unnotified force majeure clause converts a fixed delivery date back into an aspiration.
The specification is the apartment
The specification (mifrat) is the contractual definition of your apartment. The brochure, the render, the show apartment and the conversation in the sales suite are marketing. If a feature is not in the specification or an agreed amendment to it, you have not bought it.
Two separate jobs need doing on that document, and they are different skills. Someone has to assess whether what is written represents adequate quality and value. And someone has to assess whether it is enforceable — whether the descriptions are specific enough to hold the developer to, and whether the discretion to substitute equivalents is bounded. Buyers who are told the specification is not their lawyer's problem should push back: it is a contractual appendix, and a clause permitting substitution "of equivalent quality at the developer's discretion" is a legal problem before it is an aesthetic one.
Where the money and the arguments are: how the area is measured and what tolerance triggers a price adjustment; where the mamad sits and how much of the stated area it consumes; who decides what counts as an equivalent substitute; lift specification and Shabbat operation, storage and parking allocation; and the infrastructure decisions — electrical routing, plumbing positions, structural change — that must be made before the walls close.
Purchase tax, and when it actually falls due
Purchase tax is the largest single cost after the price, and the one where olim are most often given the wrong answer. The 2026 bands below are frozen until 15 January 2028.
| Band | Oleh (Reg. 12A) | Resident, single home | Additional / foreign |
|---|---|---|---|
| Up to ₪1,978,745 | 0% | 0% | 8% from the first shekel to ₪6,055,070, then 10% |
| To ₪2,347,040 | 0.5% | 3.5% | |
| To ₪6,055,070 | 0.5% | 5% | |
| Above ₪6,055,070 | 8% | 8–10% |
On the same ₪2,500,000 apartment that produces four very different bills: ₪2,606 for an oleh, ₪20,538 for a resident buying a single home, and ₪200,000 for an additional dwelling or a foreign resident. The oleh rate is not a modest concession — it is a different order of number. And one detail is repeatedly misstated: the relief requires the apartment to be the oleh's only apartment in Israel, but it does not require the oleh to live in it.
The off-plan timing trap
Purchase tax is triggered by the transaction, not by the keys. In an off-plan purchase the transaction date is the date of the sale contract, and the declaration to the Israel Tax Authority is due within 30 days of it — so you pay tax on an apartment you will not occupy for another two or three years.
Budget it as a signature-date cost. Buyers financing the deposit from a property sale abroad are the ones most often caught. And if you are buying in the run-up to aliyah, the interaction between the 12A window, the two-year rescue rule for non-residents and the delivery date needs modelling before signature. The order in which you buy, arrive and complete can be worth six figures.
Buying from abroad
Bank of Israel Directive 329 sets the loan-to-value ceilings: 75% for a single dwelling, 70% where the borrower is replacing a home, and 50% for an additional dwelling. At least a third of the loan must be at a fixed rate, no more than two-thirds may sit on variable tracks, the maximum term is 30 years, and a payment-to-income cap applies.
The 50% figure quoted to foreign buyers deserves precision. Directive 329 does not impose a 50% ceiling on foreign buyers. It imposes 50% on an additional dwelling. Israeli banks have adopted an internal 50% ceiling for non-residents as a credit policy, and front-line staff often present it as a legal requirement. It is not. Israeli citizens living abroad, and buyers who will complete aliyah within roughly two years, are regularly financed at up to 75%. If the first answer is 50%, ask on what basis — then ask a second bank.
You also cannot mortgage a property that does not yet exist as a registered parcel. The bank instead takes a cautionary note plus the developer's undertaking to register a mortgage on completion, and the loan is drawn down in stages against the payment vouchers. An approval in principle has a limited validity period, typically far shorter than an off-plan build; it will need renewing, on that day's terms.
Two practical points. The contract and the schedule are in shekels, so if your funds are elsewhere you carry exchange risk across the whole build — decide deliberately whether to convert early, convert per tranche, or hedge. And get a narrowly drafted power of attorney in place early, because opening an Israeli bank account as a non-resident is slow, compliance-heavy, and very often the item on the critical path that nobody scheduled.
Registration, title, and the fee cap nobody invokes
There is a long gap between owning the contractual right to an apartment and owning the apartment. The land must be sub-divided so the project's parcel exists as a registered entity, and the building then registered as a condominium so individual apartments exist as registrable units. Both are the developer's responsibility and both routinely take years after occupation. In the interim you hold a cautionary note and, on an accompanied project, your guarantees — a real position, but not registered title.
Require a defined long-stop period for condominium registration, running from delivery, with a stated consequence if it is missed. Confirm the tenure: most new schemes sit on Israel Land Authority land under a long lease rather than freehold, which is normal and financeable, but the terms should be explained to you in writing. And check that the machsan and parking space are registered as attached to your apartment rather than allocated informally.
Section 6C caps the developer's legal fee — and hardly anyone says so
Section 6C of the Sale (Apartments) Law, with the Sale (Apartments) (Limitation on Legal Expenses) Regulations 5775-2014, caps what a developer may require a buyer to contribute towards the developer's lawyer's costs of registration. The cap is the lower of ₪5,000 or 0.5% of the price, index-linked — which puts it in the region of ₪5,800 plus VAT at present.
Three qualifications. It covers registration services only, not the drafting of the contract. It does not apply to apartments above the luxury threshold in the regulations (in the region of ₪4.6m). And it says nothing about your own lawyer's fee. If you are quoted a percentage-based figure on a sub-threshold apartment, that is a conversation worth having before signature rather than after.
Defects, and handover
Israeli law gives new-build buyers a structured period of seller liability. The inspection period (bedek) runs from delivery for between one and seven years depending on the type of defect — shorter for finishes, longest for insulation and serious structural items — and during it the burden of showing the defect arose from something you did rests on the seller. A further three-year warranty period follows, in which the seller remains liable but the burden reverses onto you.
It is one of the strongest protections in the statute and one of the least used, because it runs on notice. Notify defects in writing, dated, with photographs. Give the developer the opportunity to repair before instructing your own contractor. And if you are letting the apartment out, put a reporting obligation on the tenant and the managing agent — a remote owner with a tenant in place is the classic way a seven-year protection quietly runs out.
Handover itself is a legal event, not a celebration. The delivery protocol records the condition of the apartment as accepted, and it is the reference point for everything that follows. Confirm the occupancy approval is in place, instruct an independent surveyor (mandatory if you are buying remotely), record every discrepancy in the protocol itself and photograph it, and never sign a general acknowledgement that the apartment conforms when it does not — sign subject to the annexed list. If you cannot attend, send someone with authority. A video call cannot sign a protocol, and cannot refuse to.
Before you sign
Six things to settle before signature
Who is selling
Is the legal entity selling the same one that owns the land? Is there a building permit covering your phase? Is the project bank-accompanied, and by which bank?
How your money is secured
Every payment against a numbered voucher into the escrow account, with the matching guarantee issued and checked. Nothing paid outside that system.
How the price moves
Which index, what base date, each payment split into a linked and an unlinked half, and linkage stopping at the contractual delivery date.
Whether the date is real
A fixed contractual delivery date, not a period running from an event the developer controls — and a force majeure clause that is capped and notified.
What you are actually buying
Area and tolerance, the mamad, bounded substitution rights, machsan and parking registered to your unit, and any infrastructure change agreed in writing.
Who acts for you
Your own lawyer, acting for you alone, who has read this contract. Not the firm that drafted it.
The honest note
None of this makes off-plan a bad way to buy. It is often the best way, particularly from abroad, because there is no chain, no vendor to manage, and the payment schedule is known in advance.
It simply rewards preparation more than any other transaction in this market, and punishes its absence more heavily. The protections above exist whether or not anyone mentions them to you — but nobody in the sales suite is paid to raise them on your behalf.
Questions
Frequently asked
Can a developer take more than 7% before giving me security?
No. Section 2 of the Assurance of Investments Law 5735-1974 prohibits it. The first tranche may be taken unsecured up to that ceiling; everything after must be secured as it is paid, using one of the five permitted securities.
How much of the price can be linked to the construction index?
A maximum of 40% of the total price, for contracts signed on or after 7 July 2022. The first 20% of the consideration cannot be linked at all, and no more than half of each subsequent payment may be linked. Linkage also stops at the contractual delivery date.
What compensation do I get if the developer delivers late?
It depends on when you signed. From 7 July 2022: a one-month grace period, then 1.0× comparable rent for months 2–4, 1.25× for months 5–10, and 1.5× from month 11. On an earlier contract: nothing for 60 days, then compensation retroactively from the original delivery date at 1.5× for eight months and 1.25× thereafter. Section 5A is cognate, so a contract term offering less is void.
Does the oleh purchase tax rate require me to live in the apartment?
No. Regulation 12A requires the apartment to be your only apartment in Israel, but it does not require occupancy. The relief runs from one year before aliyah to seven years after.
When is purchase tax due on an off-plan purchase?
Within 30 days of the transaction date, which is the date of the sale contract — not the date you receive keys. You will therefore pay it two or three years before occupying the apartment.
Can a non-resident borrow more than 50%?
Often, yes. Directive 329 imposes 50% on an additional dwelling, not on foreign buyers; the non-resident ceiling is internal bank credit policy. Israeli citizens abroad, and buyers completing aliyah within roughly two years, are regularly financed at up to 75%. Ask on what basis the figure is being quoted, and ask more than one bank.
How much can the developer charge me for its own lawyer?
For registration services, the lower of ₪5,000 or 0.5% of the price, index-linked — currently around ₪5,800 plus VAT. The cap does not cover contract drafting and does not apply above the luxury threshold in the regulations.
How long am I protected against defects?
The inspection period runs from delivery for one to seven years depending on the type of defect, with the burden on the seller. A further three-year warranty period follows, during which the burden shifts to you.
Sources
- Sale (Apartments) Law 5733-1973 — specification and disclosure duties; defect liability (s.4 and the Appendix); late delivery compensation (s.5A); limitation on legal expenses (s.6C)
- Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law 5735-1974 — the 7% ceiling and five permitted securities (s.2); treatment of the VAT component (s.3C1); extension to approved non-bank guarantors from 30 September 2026
- Sale (Apartments) (Assurance of Investments) (Form of Bank Guarantee) Regulations 5771-2010
- Amendment 9 to the Sale (Apartments) Law, in force 7 July 2022 — index linkage limits and the revised s.5A ladder; not retroactive
- Sale (Apartments) (Limitation on Legal Expenses) Regulations 5775-2014
- Land Taxation (Appreciation and Purchase) Law 5723-1963 and the purchase tax regulations; Regulation 12A for olim. 2026 bands frozen to 15 January 2028
- Bank of Israel, Proper Conduct of Banking Business Directive 329
General information about Israeli law and practice as at August 2026. Not legal, tax or financial advice, and reading it does not create a lawyer-client relationship. Statutory thresholds, tax bands and interest rates change. Take independent professional advice before entering into or relying on any transaction.
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