Mechir Lemishtaken — good news for first-time home buyers in Israel

In light of the high cost of housing in Israel and the near impossibility for many people – mostly young couples – to buy their own homes, Israel’s Finance Minister Moshe Kahlon, together with the Ministry of Construction & Housing, has introduced a new formula for the affordable housing program “Mechir Lemishtaken” (Buyer’s Price). Within the framework of the government’s new plan, approximately 70,000 housing units will be built across the country during 2016 and sold at discounts of 200,000 to 400,000 Shekels.

This program includes both the peripheral areas in the country and high-demand areas in central Israel including Tel Aviv, Rishon Lezion, Ramat Gan, Modi’in and others. Included in the program are plans for the construction of buildings which will showcase apartments of various sizes.  The plan does not include the construction of private houses.

How does Mechir Lemishtaken work?

The government initiates an auction for contractors for the acquisition of land at a price that is discounted by up to 80% of its value. Participating contractors must commit to developing housing projects and selling the new apartments at a lower price than the market value.   After a contractor has received building permits and demonstrated compliance with the terms of the program, the Ministry of Construction and Housing opens registration for the project. Eligible participants may enter a lottery to win the right to buy an apartment in the project.

Duration of construction is estimated to be up to two years from receiving the building permit.

How do buyers benefit?

Buyers receive a discount off of the market value of the apartment.  The discount is usually between 200 to 400 thousand NIS  depending on the area in which the project is located.

In peripheral areas, where land values ​​are already low and it is difficult for contractors to offer the maximum reduction, the Ministry gives apartment buyers additional grants of between forty and sixty thousand NIS. Further, the state subsidizes the cost of infrastructure development and pays 40,000 shekels to the local authority on behalf of each buyer. A list of peripheral locations eligible for these incentives is determined in conjunction with the chief governmental land assessor of the Ministry of Justice. To date, the following settlements have been selected: Dimona, Yerucham, Harish and Ofakim.

How to participate in the program

To begin with, buyers should check their eligibility to participate in the program at one of the Mechir Lemishtaken registration companies such as Mercaz Alonim, Milgam or Amidar (see the Ministry of Construction & Housing website for the details of these companies). After buyers select a company they would like to work with, they set up an appointment with the company in order to receive a Certificate of Eligibility which is valid for one year from the date of issue. In the case of a couple, both individuals must attend the meeting. The cost of issuing a certificate is 240 NIS.

Next, eligible buyers should visit the Ministry of Construction and Housing website to find out where Mechir Lemishtaken projects will be developed and who the participating contractors are.  To learn more about any specific project, buyers should contact the relevant construction company — each company markets their own projects and publishes the relevant lottery deadlines on their website and in local newspapers.

After researching the various projects, buyers can register online, free of charge, for an unlimited number of project lotteries on the website of the Ministry of Construction and Housing (see here). Registration for each project lottery lasts for 28 days from date of opening.  After that, the Ministry conducts a computer-generated lottery for each project and winners are invited to select an apartment and proceed to sign a contract.

It should be noted that once a buyer wins the right to buy an apartment in a project, he is immediately disqualified from any other lottery in which he registered.

MECHIR LEMISHTAKEN
Source: Ministry of Construction & Housing website

Who is eligible to participate in the Mechir Lemishtaken program?

Contrary to a previous Mechir Lemishtaken program, there is no requirement to meet a threshold of earnings, or to have completed military service in Israel. According to The Ministry of Housing, in order to purchase a home under the Mechir Lemishtaken program, qualified participants must have an Israeli identity card and fulfill the following criteria:

  • individuals (single, divorced or widowed) aged 35 and older, or married couples of any age (unmarried couples may also qualify under certain conditions);
  • has not owned an apartment, or a portion of an apartment, in the last 6 years, in Israel or anywhere else in the world;
  • has not rented an apartment under the Tenant Protection Law (demei mafteach) in the last 6 years;
  • does not own any right to a housing unit on a farm, an agricultural piece of land or in a communal settlement.
  • does not own rights to an apartment under construction.

Single parents with at least one child under the age of 21 – who lives with the parent on a regular basis – may also qualify.  This includes a single parent who owned the rights of up to 50% of an apartment that was sold following a divorce, or who is still married but sold the rights prior to a divorce and had no additional rights in accordance with the definitions above 6 years prior to the date of application.

Disabled people aged 21 and above who are registered with the Ministry of Health as wheelchair-bound or with a permanent disability rate of 75% or more are also eligible to participate.

Preference is given to those who have lived in the area where the project is being built either for last 3 years or for 4 years out of the last 10 years.

What happens if not all of the apartments are sold?

If 12 months pass from the date of the lottery for a project and not all of the apartments were purchased by eligible buyers, the remaining apartments may be sold to non-eligible buyers at the discounted price, however certain terms and conditions may apply.

Can foreign buyers participate in Mechir Lemishtaken?

Overseas buyers who hold an Israeli ID card can buy apartments under the Mechir Lemishtaken program if they fulfill the required criteria (see above).

Restrictions on an apartment purchased under the Mechir Lemishtaken program

Mechir Lemishtaken apartments may be rented out from the date of receiving Tofes 4 (i.e. when the apartment is ready to be lived).  However, they may not be sold or transferred to a third-party for five years from the date of Tofes 4. After that time, they may be sold at market price.

Are the apartment specifications and/or construction quality affected by the discounted price?

Since contractors receive a reasonable profit from the sale of apartments, the Ministry ensure that the quality of construction is not influenced by the low price, and that the contractors meet the standards set by law. You can see the specifications of the projects in the registration booklet for the project or on the Ministry’s website. The specification and finish of the apartments fulfill the standard market requirements and generally buyers may not make any changes during the construction phase.

If you, or someone you know, fulfills the criteria for eligible buyers within the framework of the Mechir Lemishtaken program, it is worth “playing the lotto” to win the rights to buy a new apartment in Israel at a reduced price! Every few days, new Mechir Lemishtaken projects are publicized on the Ministry’s website and interested buyers are advised to keep a close watch on these notices.

The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals before entering into any transaction.

© Copyright 2016.

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