After being presented to the media yesterday in a press conference, Israel’s housing plan for 2024 was approved in today’s government meeting. The plan, which includes an investment of billions of shekels, was developed by the Ministries of Construction and Housing, Finance, and other relevant government bodies, with the goal of maintaining functional continuity in the industry and encouraging construction in priority national areas. It is understood that the real estate sector has significant importance in Israel’s economy and requires substantial resources for the benefit of the country’s citizens.
The plan includes: a subsidized housing program in peripheral areas for NIS 800,000, an increase in the quota for foreign workers, introduction of new construction execution companies, streamlining bureaucracy, NIS 1.1 billion investment in tenders, encouraging the employment of Israeli workers in the construction sector, legislative updates, promotion of the rental market, and more. The main points of the plan are as follows:
Apartment in the periphery for NIS 800,000.
A housing program for NIS 800,000 through subsidized development and marketing of land tenders. Deepening the development subsidy in order to increase the marketing success of land tenders in peripheral areas, by reducing development costs in tenders so that the price per target (100 sq.m.) four-room apartments in priority national areas will not exceed 800,000 shekels. Over 20% of the housing units sold at a discount according to the plan will be allocated to reserve soldiers. A total of NIS 1b. will be invested in this matter.
Development cost subsidies in local authorities will be provided up to approximately 50,000 shekels per housing unit, subject to the cumulative marketing forecast of at least 1,500 housing units in that authority in the next three years.
Additionally, development cost subsidies will be granted for sites with a slope of over 20%, due to the fact that these tenders are characterized by higher than average development costs, as well as sites where marketing failed during 2023 or 2024.
Foreign workers
In order to address the crisis in the real estate sector in the short term, various import solutions are required to ensure the arrival of a quantity of foreign workers to Israel for the needs of the industry as soon as possible.
Therefore, it was decided to increase the quota of foreign workers allowed to be employed in Israel to 65,000. In addition, a call for proposals will be published with the aim of expanding the scope of foreign execution companies working in the residential construction sector in Israel, and the quota of workers will be increased by an additional 10,000 workers.
Furthermore, in cooperation with the Population and Immigration Authority, a procedure will be implemented to reduce the minimum required working hours for foreign workers in order to allow medium and small contractors to employ foreign workers to supplement the shortage of labor for ongoing work. Additionally, according to the plan, the government will work to expand working hours at construction sites.
Promoting the employment of Israeli workers within the construction sector
Parallel to the effort to import foreign workers, the government believes that it is necessary to continue to encourage local populations to join the construction industry and therefore a grant program to promote employment in the industry with an investment of NIS 60 million will be advanced.
Encouragement of the rental market in Israel
To promote the institutional rental market in Israel, the plan proposes to promote an additional track for VAT exemption for long-term rental projects. Within this framework, developers will have the option to deduct VAT payments during the construction phase and postpone the VAT burden to the date of apartment sales or the end of the period of use of the property for long-term rental purposes, in accordance with the current market value at that time.
Incorporating technologies into the residential construction sector
Grant funding of approximately NIS 19m. will be provided for the establishment of advanced industrial production facilities for modular construction methods. In addition, a development expenses grant will be allocated according to regulations and guidelines for two advanced construction factories focusing on modular construction.
Revisions to the Planning and Construction Law
The program aims to amend the Economic Plan Law (2013) and the Planning and Construction Law (1965) so that large housing projects, including 80 or more housing units, and critical infrastructure initiatives can apply for permits or authorization from the National Licensing Authority or alternatively, a TAMA 38 without the need for the current fixed waiting period specified in the law.
Development of a framework for offering a state guarantee in pre-sale tenders
Within 45 days, the government will develop a mechanism to provide state guarantees for apartment construction projects in urban renewal (with more than 50 housing units per project). The mechanism may include providing state guarantees for elements of presale in the real estate market, prior to the commencement of construction. The requirement for the provision of the guarantee will focus on reducing the required percentage of presale by the funding party, by providing a state guarantee in line with the increase in credit risk resulting from the reduction in the required presale percentage. The guarantee will be enforced in the event that the project becomes insolvent.
Race for permits
To promote the approval of construction permits for urban renewal in 2024-2025, the mechanism for granting permits will be extended through a new call for tenders for these years, according to which local authorities will be rewarded with a one-time grant for urban development that serves the urban renewal process.
Deferred payments in land auctions
Under the plan, the deadline for payment of land fees in land tenders will be set at June 30, 2024 instead of the current 90 days. In addition, in terms of development expenses, full payment will be transferred to the government within 90 days from the closing date of the tender, except in exceptional cases.
Promoting urban renewal in outlying areas
Urban renewal is a solution with many advantages, as it contributes to the revitalization of old neighborhoods, strengthening urbanity while significantly improving the lives of residents, alongside the addition of protected residential areas.
Therefore, government decision 852, “Plan for Strengthening the City of Ashkelon and Amending Government Decision”, will be advanced to other cities, with budgetary resources allocated in the amount of hundreds of millions of shekels, which will serve as an alternative to the commitment in the umbrella agreement signed with the municipality for the allocation of complementary land for the subsidy of economically unfeasible urban renewal projects.
Stages of real estate taxation
Real estate taxation legislation will be amended so that the tax order regarding purchase tax, which currently applies to non-single housing units, will become a fixed provision. In addition, the tax benefit for purchase tax, available to developers operating in the field of urban renewal in projects built in the periphery, as defined in the real estate taxation law, will be increased, reducing the expected effective tax rate by an additional 2%.
Revision of the Real Estate Taxation Law (regarding appreciation and acquisition)
Gradual cancellation of the existing linear exemption for apartments purchased before 2014. The new mechanism will be a gradual increase of 5% per year, starting from 2026 until the tax rate is imposed on the actual increment at a rate of 25% or at the rate of tax on the sale of a non-residential plot as defined in the Real Estate Taxation Law, as relevant.
Roof agreements are tailored to comply with the Authority
Signing of ceiling agreements with local authorities with significant potential for increasing the quantity of marketing, and promotion of a budgetary investment adapted to the unique needs of urban development in the authority, aimed at providing complementary solutions and significantly encouraging the marketing of residential units.
