Purchasing Property In Israel: The Basics

Purchasing Property In Israel
The Basics

Disclaimer:
This document is intended merely as an introduction to some of the main issues involved in purchasing residential property in Israel, and should in no way be construed as legal representation of any sort. It is highly recommended that you obtain independent legal advice in connection with your purchase.

The Issues:
The main issues to be aware of when purchasing property in Israel are:

REGISTRATION
CONTRACTORS
TAXATION
CURRENCY
MORTGAGES

1. REGISTRATION:

Property in Israel is registered in one or more different locations – the Land Registry (“TABU”), the Israel Lands Authority (“MINHAL”) and/or Housing Companies (“CHEVRAH MESHAKENET”). The specific location will affect the procedures involved in transferring the title and the costs involved in taking a mortgage and registration.

2. NEW CONSTRUCTION:

When purchasing property from a builder, as opposed to from a private seller, the contracts of sale are generally longer, more complex and favor the contractor. The law does provide certain extra protections for the purchaser such as in the area of certain repairs for defects that arise during the first few years after taking possession. In addition the purchaser is entitled to a bank guarantee for such payments, to protect the purchaser. The payments are usually linked to the cost of building materials index. Most builders also demand payment to the contractor’s attorneys for the handling of the final registration in the Land Registry (Tabu), although this does not mean that the purchaser is being represented by such attorneys or that the purchaser’s interests will be taken into consideration. Please have your attorney explain your rights and responsibilities under the contract.

3. TAXATION:

The Purchase Tax (“MAS RECHISHAH”) is calculated as a percentage of the purchase price (in shekels, according to the exchange rate as of the date the contract is signed if the contract is in dollars). A one-off discount is available for most individuals who purchase a property from the period commencing one year before making Aliyah and ending seven years after making Aliyah. The calculations below are valid for 2012:

FIRST APARTMENT:

Amount in Shekels Tax Rate
First 1,421,760 NIS (approx $360-380,000) 0%
Next 264,635 NIS (approx $65-70,000) 3.5%
Above 1,686,395 NIS (approx $420-445,000) 5%

PURCHASE BY OLEH CHADASH

Amount in Shekels Tax Rate
First 1,540,855 NIS (approx $390-410,000) 0.5%
Above 1,540,855 NIS (approx $390-410,000) 5%

SECOND (OR MORE) APARTMENT:

Amount in Shekels Tax Rate
First 1,053,200 NIS (approx $265-275,000) 5%
Next 2,106,400 NIS (approx $540-560,000) 6%
Above 3,159,600 NIS (approx $810-830,000) 7%

4. CURRENCY:

The price for property in Israel is sometimes quoted in US dollars, yet most payments are required to be made in shekels, usually calculated according to the dollar-shekel rate last publicized by the Bank of Israel.

5. MORTGAGES:

Some Israeli mortgage banks cater specifically to foreign residents. Signing a purchase agreement obligates you to pay the full price so it is highly recommended to obtain pre-approval of a mortgage from at least one bank before you sign a contract.