Delivery of Apartments: Contractors estimate a delay of six to eight months in most projects

In a letter to Prime Minister Netanyahu, Contractors Association President Raul Srugo attacked the government’s handling of the crisis in the construction industry until now, “negligently, detached from reality and without proper management and coordination between the ministries… at times to the point of sabotage”. In his letter, Srugo demanded immediate approval to enter 40,000 Palestinian workers in light of the failure to bring in foreign workers.

By Nimrod Bosu, Nadlan Center


The President of the Contractors Association, Raul Srugo, sent a strongly-worded letter to Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich on Wednesday, warning them of the “collapse of Israel’s construction and infrastructure industry.” Srugo said this in light of the government’s failure thus far to bring in foreign workers and the continued sweeping ban on the employment of Palestinian workers. In his letter, Srugo called for direct intervention by the prime minister on this issue, urging immediate approval for the entry of 40,000 Palestinian workers to work in Israel, following the recommendation of the defense system.

In his letter, Srugo strongly criticized the handling of various government ministries thus far. He claimed that the collapse of the industry would “prolong if the Israeli government continued to act negligently, detached from reality and without proper management and coordination between the ministries. He emphasized that since October 7, 2023, there has been a significant downturn in cooperation between the governmental ministries, particularly in the construction and infrastructure fields, sometimes to the point of sabotage.

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“Despite the repeated warnings to all senior government officials by the Contractors Association Builders of the Land, issuing numerous proposals for solutions, and sometimes even gaining responsibility for the role of some government ministries, as is customary, the industry on which the Israeli economy relies, is crumbling before our eyes. It is alarming that no one in the government appears to be reacting or acknowledging this collapse’s profound social and economic consequences.”

— Raul, Srugo, President of the Contractors’ Association

He continued stating, “With seven months having passed without formulating a real strategic plan to resolve the crisis in the construction and infrastructure industry, a crisis that will inevitably lead the State of Israel into a housing and national infrastructure crisis, I am reaching out to you, as the President of the Association of Contractors and Builders of the Land, with a personal request to schedule an urgent meeting with the heads of the construction and infrastructure industry in Israel and the Minister of Finance. This meeting aims to lay out the severity of the situation directly and find immediate solutions for ending the crisis.

“As the Israeli government continues to drag its feet, displaying a lack of crisis management, professionalism, cooperation, and synchronization between its ministries and those involved in the industry, the collapse of this vital sector becomes increasingly inevitable. If they don’t act immediately to correct these problems, the economy is expected to plunge, leading Israeli society into a social and economic crisis unlike any it has known before.”

Paying the fines will cause many contractors to collapse

In his letter, Srugo listed the many issues confronting the industry today, highlighting the shortage of manpower primarily caused by the prohibition on around 100,000 Palestinian workers who were employed in the industry before October 7th and have been banned from entering Israeli territory since then. Another pressing issue is the emerging shortage of raw materials, as many of them are imported from China and Turkey, with whom relations have deteriorated following the war. Srugo also criticized the Treasury officials’ policy, accusing them of “deliberately,  arbitrarily detached from reality, excluding the construction industry from the compensation plan for businesses for fixed expenses and wage expenditure for the months of October-December 2023. He emphasized that these compensations could have served as a lifeline for the survival of many contractors during this difficult period, but the lack of transparency from the Finance Ministry prevented it.”

Due to the manpower crisis, Srugo estimated that “most apartments will be delivered about 6-8 months late by the contractors”. He added that “according to the Sales Law, contractors must pay the home buyers billions of shekels in fines due to the delayed delivery of their homes. It is inconceivable to expect contractors and developers to bear the burden caused by the war and government negligence in bringing in foreign workers… The payment of these fines by the contractors will add financial strain, constituting the ‘straw that broke the camel’s back’ and may lead to their collapse.”

Srugo also pointed out that most infrastructure projects and public buildings will not be completed by scheduled dates. “Roads, bridges, railways, schools, kindergartens, and other structures will face delays and won’t meet their original deadlines. Some infrastructure construction sites will be abandoned by collapsed contractors, while the vast majority will experience considerable delays.” In his letter, Srugo called for recognition of these expected delays and urged compensation to be provided to infrastructure contractors for the damage they endured.

In the conclusion of his letter, Srugo listed a series of steps that the industry urgently requires. “I call upon you to come to your senses, roll up your sleeves, and take the necessary measures to save the construction and infrastructure industry. It is essential to prepare a plan and take actions that will prevent the impending catastrophe.”

Among the measures demanded by Srugo: immediate implementation of a plan to bring 50,000 foreign workers into the construction and infrastructure sector within 30 days, immediate entry of 40,000 Palestinian workers from Judea and Samaria to work in the construction and infrastructure industry, facilitation of the rapid importation of products and raw materials from countries that are not hostile to Israel without regulation, and investment in the Israeli construction materials industry.

Srugo also demanded immediate inclusion of the construction industry in the compensation plan for businesses and requested that “legislation will stipulate that delays in the delivery of apartments during the war, caused by the shortage of workers required for the industry to function properly, would not result in fines being imposed on the home buyers. Instead, the legal delivery date of apartments would be postponed accordingly. In addition, he requested an extension in deadlines for public projects and compensation for the contractors due to delays and additional expenses endured.”

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 prior to entering into any transaction.

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