Developers’ Financial Incentives Return to Pre-Restriction Levels

After a brief slowdown, developers have resumed offering large-scale financing benefits on new apartments, reaching 31% of total transactions in September — up from 27% in August. According to a new report by the Ministry of Finance’s Chief Economist, in cities such as Netivot, Lod, Ramat Gan, Acre, and Kiryat Gat, the rate of financing incentives has even surpassed levels recorded before the Bank of Israel imposed lending restrictions earlier this year. Nevertheless, sales of new apartments remain at a low.

By Nimrod Bosu, Nadlan Center

Following temporary declines that came after the Bank of Israel’s March 2025 directive limiting developers’ financing campaigns (such as 20/80 or 10/90 payment plans), September data show a sharp rebound in these offers. The report found that 31% of transactions for new apartments with delivery dates more than a year after contract signing included financing incentives — a significant rise from the previous month’s 27%.

The Bank’s temporary order, valid until the end of 2026, requires banks to allocate additional capital for projects where more than a quarter of buyers defer substantial payments until delivery, and limits the proportion of “balloon” or “bullet” developer-backed loans to no more than 10% of total residential lending activity. Despite this, the findings suggest that these restrictions had only a limited and short-term effect.

In the Tel Aviv area (including Tel Aviv–Jaffa and Bat Yam), the share of transactions involving financing benefits rose from 23% in August to 30% in September — nearly matching the highest level reported since data collection began in late 2024. Of the 15 key cities analyzed, five — Netivot, Lod, Ramat Gan, Acre, and Kiryat Gat — now show incentive levels higher than before the restrictions took effect. However, in all these cities, the increase in financing benefits did not prevent continued declines in transaction volume, and in some cases sales fell sharply.

Conversely, in Herzliya, where financing incentives once covered 74% of sales, that rate dropped to 56% after the restrictions, alongside a steep fall in transactions from 71 to just 28 units per month. Sderot also saw a sharp drop in incentives, from 63% to 42%.

The report also notes a decrease in new-construction sales — apartments sold more than a year before delivery — to 57% of total new-home sales in September, a seven-point drop from August and five points below the same period last year. This suggests developers are now selling more apartments closer to completion, possibly due to tighter liquidity and buyer caution.

Contractor cash flow from apartment sales, before input deductions, totaled 5.3 billion shekels in September — a real decline of just 12% compared to last year, despite a 37% drop in potential inflows. The report attributes this to delayed receipts from past 20/80-style deals and payments for land sales.

Overall, 6,925 apartments (including government-subsidized homes) were sold in September — down 17% from a year earlier and 9% from August. Excluding subsidized sales, the decline was steeper: 19% year over year. New-construction sales fell by 25%, and among market-rate units alone, by 35%, while secondhand apartment transactions dropped a milder 10%. Investor activity rose modestly, with investors accounting for 17% of total purchases in September.