Summary
- The 20/80 principle: you pay 20% of the price when you sign the contract with the developer, and the remaining 80% at handover of the apartment (Mesirat Dirot).
- Why developers offer it: these payment terms help sell without officially lowering the advertised price per square metre.
- The Madad question: check whether the balance is indexed to the Madad (the monthly index published by the Central Bureau of Statistics) or not. It depends on the contract: ask in writing which part is indexed.
- The risk of a deferred mortgage: if you need a mortgage (Mashkanta) to pay the balance at handover, you depend on rates and on your situation at that time.
- Legal protection: the 1974 Sale Law limits to 7% of the price the sums paid without a guarantee. Any amount above that must be guaranteed.
1. How Does the 20/80 Plan Work?
Off-plan purchases in Israel are governed by the 1974 law on the sale of apartments. This law protects the buyer: sums paid above 7% of the price must be covered by a bank guarantee or an equivalent instrument.
With rising interest rates, many developers offer deferred payment plans:
- 20% when you sign the contract with the developer;
- little or no payment during construction;
- 80% when the keys are handed over, at the handover inspection (Protocol Mesira).
Each developer sets its own terms. Only the contract is binding: the payment schedule is written in it, with the amounts and the dates or milestones.
2. With or Without the Madad
The Madad (Madad Tsumat HaBniya) is the construction cost index. Depending on the contract, it may or may not apply to the balance due at handover.
- With indexation: the deferred balance may increase if the index rises during construction. The final amount is therefore not known in advance.
- Without indexation (Ptor mi-Madad): the developer fixes the price. The balance at handover is the amount written on the day of signing.
In both cases, ask in writing which part of the price is indexed, and from what date. The clause must appear clearly in the contract, not just in the brochure or in a verbal exchange.
3. What This Plan Can Offer
- Cash preserved: you tie up a smaller share of your capital during construction.
- Fewer simultaneous costs: a future Oleh does not have to pay mortgage instalments in Israel at the same time as rent elsewhere during the build.
- A clear timetable: you know by when you must have the balance available.
These points are payment facilities, not a guarantee of gain. The property's value at handover may rise, stay stable or fall.
4. The 3 Points to Watch
- An interest-rate risk at handover: if mortgage rates are higher than expected, so is your monthly payment.
- A risk of mortgage refusal: if your financial situation worsens, the bank may refuse or reduce the loan just when you have to pay the balance.
- A valuation risk: the bank lends on the lower of the contract price and the value estimated by its appraiser. If the valuation is below the purchase price, your own contribution must cover the difference.
The Mortgage Is Not Secured in Advance
An in-principle approval from the bank (Ishour Ekroni) gives an indication, but it is valid for a limited time. The final approval is given closer to handover. Ask your bank for the exact conditions.
Reselling Before Handover
If you plan to resell before handover to fund the balance (assignment of the contract), read the contract's terms. Some developers prohibit assignment, or make it subject to their approval and to fees. Ask for these terms in writing before signing.
5. The NHI Checklist Before Signing a 20/80
- Is the balance indexed to the Madad? Which part, in writing?
- Is every sum paid above 7% of the price guaranteed, as the 1974 law requires?
- Is the guarantee given to you within the stated period (14 business days)?
- Does the developer allow assignment of the contract before handover, and on what terms?
- Have you had your borrowing capacity for the balance simulated by a mortgage broker?
- What happens if handover is delayed?
Editorial team
This guide is for information only: confirm every point with your lawyer and your bank.