ISRAEL Trends and Developments Contributed by: Hagit Bavly and Hadil Nassif, Arnon, Tadmor-Levy
In projects where construction has not yet begun, companies are required to pay financing expenses for land they have already purchased. The difficulty is greater if the land was purchased at higher prices and with higher credit leverage. According to Israeli banks’ reports, at the end of the third quarter of 2023, NIS98 billion (rep - resenting 34.5% of the construction and real estate sectors’ credit) was granted to projects secured on land where the construction process has not yet begun. NIS48 billion (representing 17%) is in projects under construction. If the stagnation in the construction industry continues, the ability to receive revenue to pay their debts will be impaired for companies man - aging projects that are in early stages. Transactions on Vacant Land According to the Bank of Israel Annual Report for 2023, based on Israel Land Authority data, the land marketing period is very long, with some land tenders published by the Israel Land Authority being signed three years after their publication.
In light of the increase in interest rates in the economy in 2022, the prices of winning land tenders have declined, and the success rate of tenders and land marketing is low. The decline in demand for residential units led to a decrease in demand for land. The interest of developers in land tenders has decreased. General As is sometimes the case, the current situation in the Israeli real estate market is an opportunity for certain companies and entities, both in order to direct their activities towards growth and profitable channels as well as to identify market opportunities for expansion. Strong companies in the Israeli economy, which have stable revenues and are less reliant on credit, see this period as an opportunity, and are taking advantage of the opportunities to improve their operations. The foregoing numerical data is from reports and reviews of the Central Bank of Israel, and from reviews published by the Chief Economist of the Ministry of Finance of the State of Israel.
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