The price of a new apartment usually appears as one figure, but most payments are linked to the construction input index. When the index rises, the developer charges more. In periods of rising prices this can reach tens of thousands of shekels.
What is the construction input index?
An index of the Central Bureau of Statistics that measures changes in construction costs, such as materials and labour. Linkage is meant to protect the developer against cost increases during construction.
How much of the price is linked?
Under the 2022 amendment to the Sale Law, for contracts signed after it, the first payment of up to 20% of the price is not linked. Of the remaining price, only half is linked, so roughly 40% of the price in total is index-linked. In addition, there is no linkage after the contractual delivery date, even if the developer is late.
How does it affect the payment schedule?
The earlier you pay, the smaller the portion exposed to linkage. On the other hand, paying early increases the amount paid before the apartment exists, so make sure every payment is backed by a Sale Law guarantee.
What can be negotiated?
- A higher, unlinked first payment.
- A cap on linkage differences, or an agreed base index.
- Clarity on how linkage applies to extras and upgrades.
Plan the payment schedule together with the mortgage bank so linkage differences do not come as a surprise. See buying with a mortgage.
Where do you go from here?
A developer’s contract is written by the developer’s lawyers, so it protects the developer first. At Paz Israel & Co. Law Office we represent buyers of new apartments and landowners in combination deals: we check the developer, the security and the specification, negotiate the contract and accompany you through handover and registration at the Land Registry. For more information see our property purchase and sale representation page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal advice or a substitute for reviewing your specific circumstances.