The special offers by developers that have become very common in the residential real estate market in the past three years in response to the rise in interest rates have brought with them much criticism and many fears. Some of these offers allowed buyers of new homes planned or under construction to make only a very small advance payment at the time of the purchase, with the balance, the vast majority of the purchase price, not to be paid until handover. The fear arose that at the moment of truth, when the time came to pay the balance, these buyers would find that they didn’t have the wherewithal to do so. There are various signs that we may have arrived at this stage.
In a Facebook post, Galit Ben-Naim, Ministry of Finance senior deputy chief economist responsible for real estate, health, and analysis of company profitability, states that «6% of the deals in 2023 were canceled by the purchasers.» A graph attached to her post based on Chief Economist’s Department data on deal numbers between 2022 and 2025 shows that in 2023 18,500 new homes were purchased that were due to be handed over by 2030. If 6% of all new home purchases in 2023 were canceled, that amounts to 1,100 homes — a not inconsiderable number, and probably not final. «This year, the numbers are still small, but time will tell,» Ben-Naim stresses.
The cancelations number is a total for all deals, including those that were not tied to special offers, but since such offers became widespread in 2023, it can be assumed that a large proportion of the canceled deals were for purchases under the various financing schemes.
Ben-Naim points out in her post that the growth in the proportion of deals canceled is particularly noticeable in the south of the country, which can be seen as lending credence to the hypothesis that the cancelations are at least partly connected to the financing schemes, since, according to Ministry of Finance figures, such schemes are very common in that region.
For example, according to Chief Economist’s Department data, more than 40% of the new homes sold in October this year in Sderot and Netivot were sold through developers’ financing schemes, and in Ofakim the proportion reached 60%, more than double the national average in October.
A year ago too the south stood out for the frequency of these schemes. In a residential real estate market survey by the Chief Economist’s Department covering November 2024 it was found that in the Beersheva area the proportion of homes sold through financing schemes amounted to a third of the total, which compares with a quarter in Tel Aviv.
Ben-Naim’s figures are based on processing by the Chief Economist’s Department of real estate tax assessment files of the Israel Tax Authority, and apparently they represent only a small taste. More extensive data are expected to be published in the department’s next survey.
In April this year, Bank of Israel restrictions came into force on the sale of homes on the basis of deferred payment or financed by loans from the developer (termed by the Bank of Israel «bullet loans» or «balloon loans»). It was expected that these restrictions would reduce the frequency of special financing schemes, but in fact this has not happened. If anything, it’s the opposite.
The proportion of deals involving financing benefits of one kind or another has fallen from the peak recorded in March 2025, when according to estimates by the Chief Economist’s Department such deals represented about half the total, but it remains high. In October, financing schemes in five areas examined by the Chief Economist’s Department represented 26% of all home purchases. In September the proportion was 30%.
The proportion of balloon loans (which are mostly loans provided by developers) continued to be high. When the series of interest rate hikes began in April 2022 these loans amounted to 5% of all mortgage loans. In mid-2024, the proportion reached 17%. Following the introduction of the Bank of Israel’s restrictions, it has hovered around 14%, lower than the peak, but still nearly three times higher than in the period before interest rates started rising.
The upshot is that developers’ financing schemes are still with us, together with the fears that they provoke. It should be pointed out that most of the companies and most of the banks stress time and again that buyers who have bought homes through developers’ financing schemes in the past three years have undergone a complete underwriting process, meaning that the bank through which the loans were taken carried out financial checks on the specific buyer to make sure that he or she would be able to meet the payment of the balance due when the time came and to complete the purchase of the home. All the same, there are of course exceptional cases, and it would seem that these are now becoming manifest in the substantial number of cancelled deals.
«Most contracts don’t allow cancellation»
What are the consequences of cancelling a deal to purchase a home? «Until recently we were used to seeing deals being cancelled mainly by developers at the stages before a building permit or financing was obtained,» says Adv. Eli Segal, head of litigation at Yahav & Co., who mainly advises buyers in home purchase deals. «In most contracts, the buyer has no scope for cancelling the deal, only the contractor, not even in return for agreed compensation.
«Where there is nevertheless a section on cancellation of the deal, the agreed compensation to the contractor is usually 10% of the price of the home, but buyers who are in difficulty over completing the purchase are also likely to find it difficult to pay the agreed compensation. A tenth of the price of a home is not a small amount. I therefore suppose that this issue will ultimately end up in the courts, and that we’ll see a wave of lawsuits over it.»
Segal says that the phenomenon is new and its consequences have yet to be tested. «In most cases, anyone who seeks to cancel a deal will have planned to complete with some kind of finance, and something went wrong along the way. There are some who did not correctly plan their financial moves, but in my views these are extreme cases.»
Segal estimates that no serious damage will be caused to most developers. «In the worst case, they will simply sell the home again, since there has been no collapse in home prices. The bottom line is that anyone who made a deal in a planned and well thought out way will not be severely harmed. If both sides enter into a deal of this kind knowing that things can go wrong, no great damage will be occasioned to them, and certainly not to the economy.»
Published by Globes, Israel business news — en.globes.co.il — on December 22, 2025.
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