Between a rural dream and a profitable channel

In Israel, a Nachala is defined as a homestead, an agricultural land unit that includes a primary residential home and, in some cases, additional residential units, storage structures, and agricultural land. The size of a Nachala typically ranges from 20 to 50 dunams. In most cases, the land is administered by the Israel Land Authority and leased on long-term renewable leases.

Purchasing a homestead in a moshav is subject to strict regulatory constraints. Israeli law imposes complex regulations regarding the acquisition of agricultural land, including limitations on foreign residents and restrictions on non-agricultural land use. In practice, most buyers are Israelis or new immigrants seeking to establish permanent residence in Israel.

It is estimated that there are approximately 65,000 homesteads in Israeli moshavim, a figure of considerable significance amid national policies encouraging densification of rural areas. Between 2022 and 2023, homestead prices in Israel rose sharply by more than 50 percent. In 2024, the market stabilized. Prices did not continue to rise, but there was also no significant decline.

“This is a temporary slowdown, driven in part by rising interest rates, economic uncertainty, and the implications of the security situation,” Ben David explains. “Despite this, demand for homesteads remains high due to the limited supply and the inherent planning potential.”

In the first half of 2024, approximately 900 real estate transactions by foreign investors were recorded in Israel, reflecting a 16 percent increase compared to the same period the previous year. Transaction volume surged by 70 percent, reaching 11.8 billion dollars, with 4.4 billion in the first quarter and 7.4 billion in the second quarter. These figures indicate a relatively rapid recovery following a sharp decline of approximately 21 percent between 2022 and 2024.

Policy changes implemented in recent years by the Israel Land Authority, following progress in discussions surrounding Amendment 5 to National Outline Plan 35, now allow for the subdivision of homesteads into independent land units. This shift creates substantial profit potential for buyers.

Ziv Cohen, a certified real estate appraiser who works in collaboration with Ben David, explains: “A properly executed subdivision of a homestead can generate significantly higher returns than selling the land as a single unit. This is a realization of building rights that increases land value.”

With regulatory approvals in place, investors can now pursue a distinctive investment model: acquiring a homestead, completing an orderly subdivision process, and selling portions as independent units, while retaining part of the land for future appreciation or personal use. “A homestead in Israel is not merely a real estate asset,” Ben David emphasizes. “It is a unique opportunity for those who want to live in open spaces while simultaneously creating an excellent investment. The ability to subdivide land, combined with the growing demand for private land in Israel, makes this investment particularly attractive.”

As an example, Ben David accompanied a couple in the acquisition of a homestead in the Mateh Yehuda region near Beit Shemesh, in a transaction valued at 9 million shekels. “The homestead included five dunams in Parcel A and five dunams in Parcel B, with building rights for three homes and the option to subdivide into two half-dunam plots,” she explains. “After a structured planning process, the two subdivided plots will be sold for a total of 6 million shekels. The buyers will retain four dunams in Parcel A and five dunams in Parcel B, with rights for one additional home and a future plan for another.”

The supply of homesteads in Israel is fixed and limited, while demand, particularly from affluent Israelis and Jews from the Diaspora, continues to grow. The Planning Administration has warned that construction of single-family homes in central Israel is expected to nearly cease in the coming years, turning such properties into a rare commodity with anticipated price appreciation.

Beyond planning potential, homesteads also offer diversified income opportunities, including tourism facilities, agricultural land rentals for experiential tourism, and the installation of solar energy systems. “This creates ongoing cash flow, allowing homestead owners to enjoy additional income over time,” Ben David notes.

Future trends in the homestead market point to continued stability and moderate appreciation in the coming years, driven by the growing shortage of available land and Israel’s demographic growth. Forecasts for the coming year suggest a gradual recovery in the rural real estate market, as declining interest rates and continued infrastructure development may increase demand for homesteads. This is particularly true among buyers seeking quality of life, planning flexibility, and diversified income streams. Given the severe land shortage, homesteads in central Israel are expected to experience even stronger value growth.

“For those who understand the regulatory complexity and are willing to invest in a proper planning process,” Ben David concludes, “a homestead in Israel is not just a rural dream, but a smart, stable investment with substantial potential. ״

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