Buying a new-build apartment (dira chadasha) in Israel has become increasingly popular among both local and international buyers. New constructions offer modern design, energy efficiency, mandatory warranties, and in some cases the ability to customize finishes. But the process differs significantly from buying a second-hand (yad shnia) property — and the risks are different too.
How New Construction Sales Work in Israel
Most new construction is sold "off-plan" — meaning you sign a purchase contract and pay deposits before the building is complete, sometimes 2–4 years before receiving your keys. This means you are essentially buying from blueprints, which requires careful due diligence on the developer's financial standing and track record.
The Sales Law (Chok Mechira) Protections
Israel's Sale Law (Residential Apartments) provides buyers with important protections when purchasing from a developer. These include mandatory bank guarantees (that protect your payments if the developer goes bankrupt), delivery deadlines, and a statutory defects warranty period.
Bank guarantee (hipaton/achiziut): The developer must provide a bank guarantee protecting every payment you make. Never pay a developer without confirming the bank guarantee mechanism is in place. This is non-negotiable.
TAMA 38 and Urban Renewal
TAMA 38 is a national urban renewal plan that incentivizes earthquake-retrofitting and reconstruction of older buildings. Under TAMA 38/2 (pinui-binui), entire blocks can be demolished and rebuilt, with existing tenants receiving new, larger apartments and developers receiving additional units to sell. Many "new" apartments in central cities are actually TAMA 38 or pinui-binui projects. Understanding which type of new construction you are buying is important, as the timelines and risks differ.
VAT and Purchase Tax on New Construction
When buying from a developer, VAT (17%) is included in the listed price. The purchase tax (Mas Rechisha) rates remain the same as for second-hand properties — the oleh discount applies equally. Check whether the advertised price is VAT-inclusive or exclusive.
The New Build Purchase Timeline
1. Sign reservation agreement and pay token deposit (usually ₪20,000–₪50,000)
2. Sign formal purchase contract (heskem rechisha) within 21–30 days
3. Staged payments during construction (typically 10–20% milestones)
4. Final payment on key handover (mesirat mafteachot)
5. Snagging period — report defects within 30 days of handover
Key Questions to Ask the Developer
Before committing: What is the developer's track record on delivery timelines? Is the bank guarantee in place from first payment? What is the specification (mifrat techni) — finishes, appliances, parking? Are there management fees (vaad bayit) and at what level? What is the delivery date and penalty for late delivery?
Frequently Asked Questions
What is the defects warranty period for new construction in Israel?
Israeli law mandates a statutory defects warranty: 1 year for minor finishes, 2 years for plumbing and electrical, 7 years for structural elements. The developer is legally required to repair defects reported within these periods.
Can I get a mortgage for an off-plan new build?
Yes. Israeli banks provide construction-stage mortgages (mashkanta al hashlav) that release funds in stages aligned with the developer's payment schedule. The mortgage is secured against the bank guarantee.
Is VAT included in new construction prices?
By law, advertised prices for new construction must be VAT-inclusive. However, always confirm this with the developer's attorney, as commercial properties may be quoted excluding VAT.
What is pinui-binui?
Pinui-binui (evacuation-construction) is an urban renewal program where an entire residential building is demolished and rebuilt. Existing tenants receive a new apartment (typically larger) and the developer sells additional units. These projects can take 5–10 years from signing to key handover.