AI Summary Box
- What: Monthly index of concrete, steel, labor, energy for Israeli construction
- Impact: Unpaid balance on off-plan purchases indexed - price adjustment
- 2026 Reform: Indexation applies only to construction component (approximately 40-50% of price) [Knesset, Sale Law Amendment 2026]
- Negotiation: Cap at 1.5-2% per year, freeze after 24 months, or exclude [Industry estimate 2026]
- Current Trend: Approximately 3-5% annually (post-COVID volatility) CBS - Price Index of Input in Residential Building
1. What is Madad Tsumot HaBniya?
Madad Tsumot HaBniya (Hebrew: מדד תשומות הבנייה) is the Construction Cost Index published monthly by the Central Bureau of Statistics (CBS).
The index tracks price changes in a fixed basket of construction inputs:
- Materials: Cement, concrete, steel, aluminum, glass, stone, insulation
- Labor: Wages for masons, electricians, plumbers, finishers
- Equipment: Crane rental, scaffolding, pumping, transport
- Energy: Diesel, construction site electricity
- Services: Engineering, supervision, testing
Base Period: 2020 = 100 points CBS - Price Index of Input in Residential Building
Publication Schedule: Published around the 15th of each month for the preceding month.
2. Why This Matters for Off-Plan Buyers
Off-plan purchases (Al HaNiyar) typically involve payment schedules:
- 15-20% at contract signing
- 80-85% during construction (or 85% at delivery)
The unpaid balance is contractually indexed to the Madad.
Simple Example
| Parameter | Value |
|---|---|
| Apartment Price | 2,500,000 ILS |
| Down Payment (20%) | 500,000 ILS (paid at signing) |
| Unpaid Balance | 2,000,000 ILS |
| Madad at Signing (Jan 2024) | 115.2 |
| Madad at Delivery (Jan 2027) | 132.5 |
| Index Increase | +15.0% |
| Additional Cost | 300,000 ILS |
Result: Buyer pays 2.8M ILS instead of 2.5M - a 12% increase from indexation alone.
3. The 2026 Legislative Reform - What Changes
Sale Law Amendment (Chuk Mecher) - Effective 2026 [Knesset, Sale Law Amendment 2026]
Key Changes
- Scope Limitation: Indexation applies ONLY to construction component (approximately 40-50% of total price), not land, developer profit, marketing, or VAT.
- Transparency: Developer must disclose construction component percentage in contract annex.
- Cap Option: Buyer can negotiate fixed cap (for example, max 2% per year or 10% total).
- Dispute Mechanism: Expedited arbitration for indexation disputes.
Pre-2026 vs Post-2026 Impact
| Scenario | Pre-2026 (Full Price) | Post-2026 (Construction Only approximately 45%) |
|---|---|---|
| Price | 2,500,000 | 2,500,000 |
| Unpaid (80%) | 2,000,000 | 2,000,000 |
| Construction Portion | 2,000,000 | 900,000 (45%) |
| Madad Increase 15% | +300,000 | +135,000 |
| Total Cost | 2,800,000 | 2,635,000 |
| Savings | - | 165,000 ILS |
4. Contract Clauses - What to Demand
Standard Clause (Developer-Friendly)
"The unpaid balance shall be indexed to the Construction Cost Index (Madad Tsumot HaBniya) published by CBS, from each payment due date to actual payment date."
Negotiated Buyer-Friendly Clauses
| Protection | Clause Language | Typical Compromise |
|---|---|---|
| Annual Cap | "Indexation shall not exceed 1.5% per year (compounded) on construction component." | 1.5-2.5% per year |
| Total Cap | "Total indexation over contract period not to exceed 8% of construction component." | 8-12% total |
| Cut-off Date | "Indexation ceases 24 months after signing or at Tofes 4, whichever is earlier." | 24-36 months |
| Floor Only | "Indexation only if Madad increases. No adjustment downward if Madad decreases." | Standard (unilateral) |
| Component Disclosure | "Developer guarantees construction component equals 45% of total price. Detail in Annex B." | Mandatory post-2026 |
5. Calculation Methods - Master the Math
Method A: Per Installment (Most Common)
Each payment indexed from its due date to actual payment date.
Adjusted Payment = Nominal Payment x (Madad at Payment / Madad at Due Date)
Method B: Global Balance (Simpler)
Total unpaid balance indexed from contract date to each payment date.
Adjusted Balance = Unpaid Balance x (Madad at Payment / Madad at Contract)
Method A favors buyer (less time for indexation to compound). Demand Method A.
Method C: Fixed Schedule with Cap (Buyer-Optimal)
Payment_i = Nominal_i + min( Nominal_i x (Madad_i / Madad_0 - 1) , Cap_i )
Where Cap_i = Nominal_i x AnnualCap% x (Months_i / 12)
6. Historical Trends and 2026 Outlook
| Year | Annual Change | Driver |
|---|---|---|
| 2019 | +1.2% | Stable |
| 2020 | +0.8% | COVID trough |
| 2021 | +4.5% | Post-COVID materials recovery |
| 2022 | +6.8% | Steel/cement peak, Ukraine war |
| 2023 | +3.2% | Normalization |
| 2024 | +2.9% | CBS - Price Index of Input in Residential Building |
| 2025 | +3.5% | CBS - Price Index of Input in Residential Building |
| 2026 YTD | +2.1% | CBS - Price Index of Input in Residential Building |
2026-2028 Forecast: 2.5-4% annually [Industry estimate 2026]
- Labor shortage - wage pressure upward
- Green building standards - materials cost upward
- Shekel volatility - imported materials risk
7. Buyer Negotiation Checklist
- Demand construction component percentage in writing (Annex B)
- Negotiate annual cap (start 1.5%, settle at or below 2.5%)
- Negotiate total cap (start 6%, settle at or below 10%)
- Fix indexation end date (Tofes 4 or 30 months, whichever is first)
- Specify Method A (per-installment indexation)
- Mandate CBS source only - no "developer index"
- Add audit right - buyer accountant verifies construction component calculation
- Link to bank guarantee - indexation amount also covered by Arvut Bankait
8. Numerical Example: Negotiated Cap Saves Money
Scenario: 2.5M ILS, 20% down, 30 months construction, Madad +12% over period.
| Approach | Construction Component | Indexation on 2M Unpaid | Total Cost |
|---|---|---|---|
| Without Cap (Old Law) | 100% (2M) | 2M x 12% = 240,000 | 2,740,000 |
| New Law (45%) | 45% (900k) | 900k x 12% = 108,000 | 2,608,000 |
| Plus Annual Cap 2% | 45% (900k) | 900k x (2% x 2.5yr) = 45,000 | 2,545,000 |
| Plus Total Cap 8% | 45% (900k) | min(108k, 900k x 8%) = 72,000 | 2,572,000 |
| Best Negotiated | 45% (900k) | 45,000 (annual cap binds) | 2,545,000 |
Savings vs Old Law: 195,000 ILS (7.1% of price)
9. Other Indices - Do Not Confuse
| Index | Hebrew | Usage | Publisher |
|---|---|---|---|
| Madad Tsumot HaBniya | מדד תשומות הבנייה | Off-plan payment adjustment | CBS (Monthly) |
| Madad Mechirim LeTzarchan | מדד מחירים לצרכן (CPI) | General inflation, rent indexation | CBS (Monthly) |
| Madad Sachar | מדד שכר | Wage indexation, service contracts | CBS (Quarterly) |
| Madad Diur | מדד דיור | Housing component of CPI | CBS (Monthly) |
10. Practical Tools
Official CBS Madad Page: https://www.cbs.gov.il/en/Pages/Search.aspx?q=מדד%20תשומות%20הבנייה [Central Bureau of Statistics, cbs.gov.il]
Monthly Update Process:
- CBS publishes around 15th of month for preceding month
- Your lawyer calculates adjustment for each pending payment
- Developer issues updated payment voucher (Shovar)
- Buyer pays adjusted amount via bank voucher
Red Flag: Developer uses proprietary index or "contractor index" - illegal under Chuk Mecher. Only CBS Madad authorized.
11. Frequently Asked Questions
What is Madad Tsumot HaBniya?
The official Israeli Construction Cost Index (CBS), tracking monthly changes in materials, labor, equipment, and energy for construction.
How does it affect my off-plan apartment price?
Your unpaid balance is indexed to it. If index increases 10% during construction, you pay 10% more on the unpaid portion (subject to 2026 reform limiting to construction component).
Can I negotiate an indexation cap?
Yes. Standard caps: 1.5-2.5% per year, or 8-12% total. Post-2026 reform, developers must disclose construction component percentage, facilitating cap negotiations.
What happens if the index decreases?
Standard contracts are unilateral - buyer pays increases but not refunded decreases. Negotiate bilateral adjustment if possible (rare).
Where can I find the monthly official index?
CBS website (www.cbs.gov.il), published around 15th each month for preceding month. Your lawyer tracks for payment calculations.
12. Developer Tactics to Watch For
Common Developer Strategies
Developers may attempt to maximize indexation revenue through various tactics:
1. Inflated Construction Component
Claiming construction represents 60-70% of price instead of realistic 40-50%. Always demand independent verification of component breakdown.
2. Base Date Manipulation
Setting base Madad at an artificially low point (for example, using contract signing date even if buyer paid deposits earlier). Ensure Madad base date matches actual payment dates.
3. Ignoring Payment Credits
Not crediting early payments against indexed balance. Require monthly statements showing payment application and updated indexed balance.
4. Vague Contract Language
Using ambiguous terms like "relevant index" instead of specifically "CBS Madad Tsumot HaBniya." Demand explicit CBS reference.
Red Flags in Developer Contracts
- Indexation applies to "total price" without construction component breakdown
- Developer reserves right to use "alternative index" if CBS data unavailable
- No cap or ceiling on indexation accumulation
- Indexation continues beyond Tofes 4 delivery date
- Buyer waives right to audit construction component calculation
When to Walk Away
If developer refuses all indexation protections after negotiation, consider alternative projects. A developer resisting reasonable caps may signal financial stress or poor track record.
Speak to an Advisor
Our team provides guidance on off-plan purchase contracts and indexation negotiation. Contact us to review your contract, or view available new developments.