Gov't agrees on new measures to ease housing shortage

Developers to receive 15% discount on tenders for ILA plots if they complete 80% of residential projects' apartments within 30 months.

November 15, 2010 19:00
2 minute read.
Mishkenot Ha'Uma building project

311_J'lem Building project. (photo credit: Paul Widen)


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Prime Minister Binyamin Netanyahu reached an agreement with the Finance and Construction and Housing Ministries on Monday on the first series of steps to be taken to alleviate the housing shortage in Israel and prevent the expansion of the real estate bubble that has sent prices for real estate soaring lately. Young couples and recently discharged soldiers looking to buy their first apartments will be the main beneficiaries of the proposed reforms.

According to a statement released by the Prime Minister's Office, all Israeli land developers will receive a 15 percent discount on tenders made to acquire plots from the Israel Lands Administration land for residential building with the requirement that the contractors complete construction of at least 80% of their projects' planned apartments within 30 months of the building start date.

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The PMO also announced a sharp reduction in capital gains taxes on land originally acquired between 1961 and 2001.  Until now, For land acquired from 1961 to 2001 was taxed at a capital gains rate of 45%. In 2001, the capital gains tax for newly acquired lands was decreased to 20%, the rate that will also now apply to all land acquired before 2001 sold in 2011 for building projects, provided the project is completed with 30 months of its start.

Lastly, local authorities will now be empowered to collect directly land development fees from real estate developers to help pay for public institutions and common areas in under local jurisdiction. Local authorities inability to finance public improvements to new areas has been often cited as a significant cause of building project delays.

Netanyahu sought to frame Monday's proposal as especially targeted towards alleviating the burden of high housing costs on young couples.

"The last five years have witnessed a sharp rise in housing prices, something which weighs heavily on the entire population, especially young couples," Netayahu said after the meeting. "The first step of leading a joint-life [with a spouse] has become an increasingly difficult step to take. The root of the problem is a lack of supply in the housing market. The purpose of the steps we propose today is to bring some relief for those young couples seeking to buy their first apartments in the near term."

Finance Minister Yuval Steinitz, added, "the situation in the real estate market, especially the difficulty faced by young Israelis to find affordable housing, requires a long-term solutions. This package of measures, drafted together with the Housing Minister [Ariel Attias] and with the support of the Prime Minister, is the first package of measures designed to encourage the construction of housing units in the center of country and in the periphery. Finance Ministry continues to hold discussions  in cooperation with the relevant authorities and we intend to take further steps [in the future].

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