Buying a Jerusalem Property Off-Plan

Buying a property off-plan is different to building from scratch or purchasing a second hand apartment.

As with any transaction, there are a number of pros and cons that must be weighed up before proceeding.

Pros of Buying Property Off-plan

  • Designed and built to your needs - One of the main advantages (and it’s a big one!) of buying real estate before it has been built, is the ability to customise the final layout and design of the property. Depending on how early in the process that you buy, you can have significant input and make changes to the layout of the apartment so that it’s tailor made to your requirements. A good interior designer can also make a huge difference to your apartment, even if you are purchasing too late in the process to be able to make significant changes to the interior layout.

  • Discounted Price - Depending on when you purchase, you can acquire a home for a price with a decent discount to the market value of a completed apartment. Generally, the earlier in the process that you buy or commit to buy, the greater the size of the discount.

  • Staggered Payments - Rather than paying the purchase price in full and up front, off-plan apartments will usually be paid for in installments, linked to the contractor completing specified stages of the construction process. These will be specified in your purchase contract.

  • Brand New - The apartment or house that you have bought will be brand new. Not only is it awesome to have a home that no-one else has ever lived in, being brand new, means that you shouldn’t have to deal with any maintenance or building problems for some time (particularly as new construction is guaranteed for a number of years after completion).

  • Potential increases in property values - With the exception of the price being linked to the building index, the price that you pay is the price of the apartment. Construction time frames can be measured in years, which means that the value of the completed property may be quite a bit higher than when you purchased it. (Obviously nothing is guaranteed, but in a market like Jerusalem, there are definitely opportunities to take advantage of this, particularly since average prices almost doubled between 2007 and 2017. And, the increase has continued into 2021 as well...)

  • Location - The large number of TAMA 38 developments being brought forward for sale in Jerusalem means that the opportunities to purchase brand new units in the most desirable neighbourhoods and streets has become much easier than waiting for a new development to be approved.

Cons of Buying Real Estate Off Plan

There are a number of potential downsides to buying a property off plan, however, with proper planning and the right professional advice, many of these can be mitigated or significantly reduced.

  • Construction Risk - As with any building project, there is a risk that the contractor can run out of money or stop work for a number of reasons. There are a number of things that you can do to mitigate this risk such as ensuring that there is a bank guarantee in place, making sure to choose a reputable developer, using a good lawyer to ensure you are protected, etc…

  • Delays - Construction always seems to take longer than anyone expects, even when you go through an experienced developer. Factor the possibility in that the construction will be delayed and consider how that might affect you and your budget - for example, will you need to pay rent for a longer period of time etc.. There are steps you can take to reduce the impact of this, including making sure that there are late penalties in the contract if the builder is late.

  • Quality of construction - There can be issues with the quality of construction which may not be obvious immediately. Luckily, contractors have to guarantee their work for several years after completion, but that doesn’t help get rid of the hassle of having to deal with additional building work on your new home. The best way to avoid this entirely is by carefully selecting the project that you choose to purchase in.

  • It can be trickier to obtain finance - It can be more difficult to obtain finance. It is definitely possible, and we know customers do obtain finance on a regular basis. If you have any questions, best to reach out to a mortgage broker who are experts in this subject.

  • Buying without seeing - Unlike buying a second hand apartment, the property that you purchase will in general not exist at the time that you commit to buying it. That means that you do have the potential for a surprise when it’s completed that you weren’t expecting or didn’t predict when you reviewed/approved the drawings.

  • Exchange Rate Risk - If you are an overseas buyer and you are planning to use a currency other than shekels to purchase the property, since the payments are not made all in one go, you may be exposed to changes in the exchange rate. You can protect yourself against these changes with a bit of forward planning - ask your lawyer for advice on this.


    * This page is part of the CapitIL website guide to buying property in Jerusalem. You can jump around to any of the articles using the guide menu. The next page in the guide after this one, is Building from Scratch.

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