Up to Half a Million Shekels in Your Pocket: How Much Are Developers’ New Incentives Really Worth?

From “an interest-free loan of up to NIS 1 million for ten years” to “a 0% interest mortgage,” developer financing incentives have become more attractive than ever. But what’s hidden in the fine print—and, more importantly, what is the real monetary value of these benefits? An in-depth review by Nadlan Center.

By Li Saadon, Nadlan Center

One of the most common claims heard today about Israel’s housing market is that the real decline in apartment prices is significantly greater than what is reflected in the official Housing Price Index. The reason, according to critics, lies in the difficulty of quantifying the financial value embedded in the various financing incentives now offered by most residential developers. As previously reported, these incentives are becoming increasingly aggressive. Behind bold slogans such as “10% today and the balance on delivery,” “interest-free mortgage,” or “price protection” lies a complex financial mechanism that buyers may not fully understand. To better assess the value of these offers, Nadlan Center analyzed several of the most prominent incentives currently on the market.

The analysis, conducted with the assistance of Maor Ohana, CEO of a mortgage advisory firm, shows that in some cases the benefit offered by developers can amount to several hundred thousand shekels.

Scenario 1: How much is an “up to NIS 1 million” loan for ten years really worth?

A major developer is offering buyers a contractor loan of up to NIS 1 million—interest-free, index-free, and with no monthly repayments for ten years. In practice, this mechanism means that the developer obtains financing from the bank on preferential terms and provides it to the buyer as a “developer mortgage.” At the end of ten years, the full amount is repaid, with no financing costs during the period, subject to the buyer passing a repayment ability check by the lending bank.

An analysis conducted for Nadlan Center found that the developer’s financing costs for such a loan are approximately NIS 450,000 per apartment. The potential saving for the buyer, however, is around NIS 250,000 in interest alone. In other words, the developer takes a loan from the bank at nearly double the cost of what is effectively offered to the buyer. In addition, the exemption from the CPI can generate further meaningful savings. Assuming a conservative scenario of a 25% rise in inflation over the period, a buyer who borrowed NIS 1 million would otherwise have had to repay NIS 1.25 million, but instead repays only NIS 1 million.

Moreover, if buyers choose to save approximately NIS 6,500 per month—rather than paying it toward mortgage interest—in a conservative investment yielding 5%, they would not only avoid interest payments but also earn an additional net gain of around NIS 230,000 over ten years.

A conversation with one of the developer’s sales offices revealed that the financing incentives apply only to three-room apartments and above. A three-room apartment in a Holon project was offered at approximately NIS 2.82 million, with about 76 square meters and a balcony of about 10 square meters, for which a loan of NIS 500,000 is available.

The full benefit of up to NIS 1 million is granted only in projects with particularly fast occupancy, within about six months. In the specific case examined, the NIS 1 million incentive applied to five-room apartments in a Bat Yam project priced at around NIS 3.8 million, with expected occupancy within half a year. In projects with later occupancy, such as in about a year and a half, the benefit is typically reduced to around NIS 750,000, even for five-room apartments.

Scenario 2: Almost NIS 400,000 in savings in Kfar Saba

“0% interest on the mortgage for 15 years.” This is effectively subsidized financing in the form of a NIS 750,000 mortgage, with the interest fully paid by the developer. The offer applies to a single project—an extensive urban renewal project in the southeastern part of Kfar Saba. The four-room apartment spans approximately 100 square meters, with a 12-square-meter balcony, and is priced at approximately NIS 3.5 million. The offer applies only to certain four-room apartments, not the entire inventory.

The analysis shows that the benefit amounts to approximately NIS 380,000 over 15 years in interest savings, since the buyer repays only the principal without interest. The monthly repayment on this portion is about NIS 4,166 instead of around NIS 6,000 for a standard mortgage, representing monthly savings of nearly NIS 2,000.

If buyers choose to save the difference between the subsidized mortgage payment and a regular mortgage, about NIS 1,700 per month, and invest it in an alternative savings vehicle yielding 5%, the returns alone would amount to an additional NIS 135,000. Combined, total savings could reach approximately NIS 515,000.

However, this is where the less-prominent details come into play. The buyer is required to bring 20% equity at signing—around NIS 700,000. After the equity and subsidized mortgage, a remaining balance of approximately NIS 2.05 million must be financed, requiring an additional equity contribution of about NIS 175,000 and a second mortgage with no interest subsidy.

When spread over 30 years, the expected monthly repayment on that amount is around NIS 9,000, depending on the actual interest rate and mortgage mix. Ultimately, the total monthly repayment for the apartment could reach approximately NIS 13,000. While the incentive provides significant cash-flow relief and nominal interest savings on part of the mortgage, it does not change the fact that the buyer is committing to a high overall mortgage.

Scenario 3: Most of the payment comes two years after occupancy

A newly launched promotion for a specific project in Tel Aviv. Buyers pay 20% at signing, an additional 10%–30% before occupancy, and the remainder is provided as a contractor loan exempt from interest and indexation for two additional years after delivery, expected in December 2026. In effect, most of the payment is deferred for nearly three years.

The incentive applies to a limited number of apartments, including near-term occupancy units, and is for the purchase of two-room apartments of approximately 50–54 square meters with balconies and parking. The developer emphasized that the incentive is granted only after buyers pass bank underwriting. The information was obtained during a call with the project’s sales representative.

The initial equity amounts to approximately NIS 720,000 for an apartment priced at around NIS 3.5 million. The apartment key is delivered after about 11 months, allowing the buyer to rent the unit for approximately two years without exposure to indexation during that period.

The apartments are delivered fully furnished and equipped, including appliances, to facilitate immediate rental. According to the sales office, the expected rent is about NIS 8,500 per month, generating roughly NIS 200,000 in income over the first two years. They claim this represents an annual return of about 14% on equity alone, since no mortgage payments are required during that time.

According to Ohana, once the two-year deferral period ends, the buyer takes out a mortgage. As long as payments are deferred, rental income and accumulated savings create a sense of cash-flow comfort. The accumulated savings can serve as a safety cushion or partially reduce the loan principal.

Investors are required to contribute approximately 50% equity (NIS 1.75 million) before taking out a mortgage. On the remaining balance of around NIS 1.7 million, expected monthly repayments are about NIS 8,500, which should roughly balance the deal’s cash flow, though investors should be prepared for potential negative cash flow gaps in certain scenarios.

Less “meat” in the periphery

Although the analysis focuses mainly on incentives in high-demand areas, financing promotions are currently available nationwide, including in peripheral regions. According to Ohana, while such incentives exist even in towns like Ofakim, the lower the apartment price, the smaller the incentive a developer can realistically offer. For example, for a four-room apartment in Ofakim priced at around NIS 1.6 million, a developer cannot provide a NIS 1 million incentive as seen in more expensive central projects. Ultimately, the scope of incentives depends on the apartment price, and lower prices mean reduced benefits.

What should buyers pay attention to?

According to Ohana, buyers today are far more aware of the need to prepare properly for a transaction and understand that there is no such thing as relying on not completing the deal. In the past, there was a sense that price declines were temporary and that one could buy low and sell high before even moving in. Today, buyers understand they must be able to complete the purchase without relying on rapid price increases or early resale.

Regarding the financing incentives themselves, Ohana emphasizes that all of these benefits translate directly into money. This is money the developer pays and money the buyer saves compared to taking independent financing. In that sense, these are genuinely good deals. However, buyers must ensure that the purchase price still reflects a true market price and does not already incorporate the cost of the incentives. Everything depends on making a well-considered decision. Buyers who gamble on future price increases without real financial backing place themselves in a risky position.

Among the various financing models, Ohana believes that incentives in which the developer pays the interest for several years are the most beneficial for owner-occupiers. Balloon loans must eventually be repaid, often requiring a new mortgage later. When the developer covers the interest for several years, the buyer also pays down part of the principal early on, which is a significant advantage.