Why New-Build Purchases Carry Special Risks
Buying a new apartment from a developer (Katchlan) in Israel involves risks that do not exist in second-hand purchases — primarily because you are paying for something that does not yet exist, relying entirely on the developer's financial health and project execution. Purchaser protection law (Chok Mechira) provides significant safeguards, but only if you know what to verify.
Top Risks to Check
- Developer's financial stability: Developers with weak finances may not complete the project. Check land ownership, existing mortgages, and project financing.
- Bank guarantee (Avraham Bankait): The law requires the developer to provide a bank guarantee for all stage payments. Verify it is properly issued — not just promised.
- Planning approvals: Is a valid building permit issued, or is the project still in planning? Delays in permits delay delivery.
- Delivery date and penalties: What is the contractual delivery date? What compensation is owed for delay? Are the penalty clauses realistic?
- Specification changes: Developers can substitute materials and finishes — check what the contract says about specification changes and approval rights.
- Registration timeline: How long until the apartment is registered at the Land Registry in your name? Delays of years are common without contractual pressure.
Is a bank guarantee mandatory when buying from a developer in Israel?
Yes — under Israel's Sale Law (Apartments) and its regulations, developers selling unfinished units must provide a bank guarantee (Avrahat Bank) for each stage payment received that exceeds a defined threshold. The guarantee must be for the full amount paid and remain in force until the apartment is registered in the buyer's name or a registered mortgage in the buyer's favour is in place. Buyers should verify the guarantee document directly with the bank — not just accept the developer's assurance.
