Update to Apartment Sales Law in Israel – July 2022

Yair Givati


Last week, a significant change to the Apartment Sales Law in Israel was made to protect buyers in new construction projects (off-plan from the developer).

As you may be aware, up until now, the purchase price of a property in a new construction project was linked to the building index set by the Israeli Bureau of Statistics. Prior to the recent pandemic, this index has typically increased by approximately 1%-1.5% yearly. One of the long-term effects of the global pandemic was the increase in the cost of shipping and materials, which in turn raised the building index by about 5% – 7% a year over the last year and a half. The resulting effect was that if a construction project took two years to finish, the purchase price of the property could go up by close to 10%!!!

The newly introduced legislation, which will come into effect as of Thursday, July 7th, 2022, sets limits on what portion of the price of the property can be affected by the increase in the building index. The law states that the first 20% of the purchase price, which is paid upon signing the purchase agreement, cannot be affected by the change in the index. Until now, developers would link the purchase price to the index set at the time the buyer would sign the registration form, and then claim for the increase of index price, even on the first payment paid upon signing. For any additional payment subsequent to the first 20%, the developer can charge the index increase for up to 50% of each subsequent payment.

In summary, the law basically limits developers from charging for the index increase for no more than 40% of the purchase price. The exception is that, if a purchaser is late in making payments or in cases of force majeure, the developer can charge the index increase on that portion of the payments as well.

More articles about Buying Property in Israel can be found here, and if you have questions about apartment sales law or any aspect of the purchase process, please be in touch with Yair Givati, at yair@givatilaw.co.il.

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