How To Approach Buying New Projects in Israel
(These are the thoughts of CapitIL Real Estate Agency Sales Director Ben Levene.)
The thought of buying in an off-plan project can be quite challenging and overwhelming for some people. As such, I broke down some of the main points you must understand and be comfortable with to move forward in purchasing an apartment in a new project.
This information and advice will guide you through the basic thought process and give you an understanding of what a potential off-plan purchase entails. It is not comprehensive and you must consult with your experts including your attorney to do thorough due diligence.
Understanding the Project Without 100% Certainty
Agents can provide you with almost 95-99% certainty on what the floor plans are, the specifications, and many little details.
However, with new construction, there will always be a slight unknown. With projects finishing in 2-3 years, it is just too hard to get some specific answers.
Are they building a completely new building or are they adding floors and refurbishing an existing building? What directions are the units facing?
Will they be putting in new plumbing or using the original pipes?
Many questions need to be answered about the structure of the project. What size elevator will there be? You may see that they have an elevator and think “Okay, that is great!” However, you may need to fit a double stroller in that elevator, and in that case, knowing the size is crucial because not every brand-new elevator is well-sized. If you need accessibility, knowing if there will be any stairs leading to the elevator is also a must.
It is quite standard for there not to be any fancy images showing you details as you may be entering at pre-pre-sale phase, and in the very early stages of projects, developers tend not to have projected images.
They can, however, answer these questions if they have received the permits. If you purchase before the permit, they will have a good idea, but not the final answers.
Some people need to know every little detail before buying an apartment, which is completely understandable and quite logical.
However, in this case, you have to be okay with knowing that there may not be an answer to every question. If that is not the case for you, purchasing new construction may not be suitable for you.
If you buy within the pre-permit phase, make sure there is a get-out clause. You can write something such as “if they do not receive the necessary permits within 12 months (or however long you are willing to wait), then you can get back your money and leave the deal.”
If there is no option for a get-out clause, I would not purchase in a pre-permit project as you do not want to get locked into a project for years with no out.
Make sure your lawyer does all the necessary due diligence and checks before signing anything, including checking all permits and guarantees. You must have a guarantee when buying in a project, so be sure to discuss with your lawyer what options are available and what is best for you.
Generally speaking, lawyers tend to prefer bank guarantees, however, each case is individual and must be discussed with your private attorney.
When buying into a project, there is a timeline given in good faith by the developer. Despite this, one should always be more conservative and estimate an additional 6 months to these timelines to give yourself some leeway.
Projects can finish early, but that is generally not the case, and they tend to run behind schedule. There are no guarantees when it comes to timing.
For example, if you buy at the time that they are at pre-permits (only do this with a get-out clause), permits can sometimes get delayed at no fault to the developer.
In the last few years, we have seen many permits get delayed due to Corona. There is also the situation where buildings are finished and only require the occupancy permits for residents to officially move in, but this is delayed due to bureaucracy and offices being closed and overworked - which is not necessarily the developer's fault.
Timing is a crucial thing to consider.
If you are on a strict timeline and need the apartment ready by a specific date, purchasing off-plan may not be for you. If you are buying as an investment and can wait, this may be a good decision.
Always check with your lawyer regarding protections in case of late delivery of your apartment from the developer.
Demographics of the Area/Project
Who is buying into this project? What is the community in the surrounding area? Is it centrally located?
Do not fall into the hyperbole of “new and upcoming area” marketing.
Make sure you look at it on a map, see where the closest supermarkets are, and check out what the shuls and schools are in the area. Do your research!
Having your broker looking out for you is also a massive advantage because they will only offer you relevant opportunities based on your needs.
When you go to contract, you will receive a 30-40 page document called a Mifrat Techni. This document outlines all the specifications that your apartment will come with.
Your project manager/designer or an inspector/engineer MUST look through this document with you. It is not something to necessarily negotiate, but you must understand exactly what the apartment will be coming with to understand what to expect, where you should upgrade, and make sure nothing substantial is missing.
If they have made promises regarding certain specifications, they must be listed in the Mifrat Techni or the attorney's changes. Verbal commitments are worth next to nothing, so if you were promised something it must be in writing.
Once you have gone through all this information and steps, and you are comfortable with the answers you have received, this is a good indicator to realize whether you want to move forward with the deal.
Please consult with your broker, lawyer, designer, and engineer to guide you through the process to ensure that you will have a successful purchase.
See available Jerusalem real estate here and most importantly and relevant to this article, all our new development projects in Jerusalem can be seen here.