At the end of 2024, Israel’s real estate sector received news it had been waiting for for a long time: after nearly five years, the National Planning and Building Council approved National Outline Plan 70 covering the areas around Metro stations in Gush Dan. The plan determines the building rights along the route of the planned Metro, and allows development in its vicinity.
Meanwhile, other proceedings connected to the Metro, such as setting the high Betterment Levy that will apply to its surroundings, have made progress, and have created a great deal of uncertainty. The approval by the National Planning and Building Council, even though it requires confirmation by the government to become absolute, provides the required certainty, and allows the market to understand the rules for development on the huge area of nearly 118,000 dunams around the Metro.
National Outline Plan 70 defines an "area of influence" for each Metro station, divided into three: the core area, up to about 100 meters from the entrance to each station; the first ring, from the edge of the core area to about 300 meters from the station; and the second ring, from the edge of the first ring to 800 meters (in the case of some stations 600 meters), from the center of the station. The plan sets development rules and building rights for each area, in accordance with the "zone designation" in the plan, which determines the mix of uses in each area of influence.
1. Certainty for the market
"The Metro is an urban event. It’s much more than transit routes," says Adv. Erez Kaminitz, head of the Government and Regulation practice at the Erdinast, Ben Nathan, Toledano & Co. law firm. "National Outline Plan 70 takes 109 stations along the route and creates a general plan for them, which from here onwards will allow detailed planning for upgrading the surroundings of the stations and turning them into urban centers of attraction. It will bring to fruition the capacity to create greater urban density by means of the Metro, and will make it possible to create a new urban environment with less traffic and fewer cars, and greater use of public transport."
"The approval of National Outline Plan 70 provides the certainty everyone has been waiting for," adds Adv. Sagiv Hanin, co-head of the Planning and Construction Practice at Goldfarb Gross Seligman & Co. "The approval amounts to the final determination of the areas of influence of the Metro stations, from which derive the intensity of construction that will be allowed around each station. Planning has already been operating in accordance with these principles, but now it has been officially determined by the National Council, and will provide certainty."
2. The incentive: a reduced Betterment Levy
On the face of it, the approval of National Outline Plan 70 should attract developers to the Metro surroundings, now that the rules have finally been clarified. For a long time this has not happened, even though the state hoped that it would turn out otherwise, and the area around the Metro route has not been developed at a high rate, mainly because of heavy taxation, which made development not worthwhile financially. Last June, an amendment to the Metro Law provided for a 15% reduction on the "Metro Betterment Levy" along the Metro route for any developer who files an application for a building permit by the end of 2030. The approval of National Outline Plan 70, as an important part of this puzzle, should therefore cause developers to get going and work against the clock to obtain a permit.
For that to happen, planning has to proceed to the next stage: the stage of detailed plans along the Metro route. National Outline Plan 70 is a general plan, and not a basis for issuing building permits, and so detailed plans need to be drawn up for the surroundings of each station. After these are approved, it will be possible to file a building permit application that will take advantage of the reduced Betterment Levy rate, but this will not be at all simple.
"The Metro Betterment Levy benefit is a good incentive, but only for developers who are already to some extent prepared," says Adv. Hanin. "Those who are already familiar with the route and the environment, who are active in the areas of influence, will certainly be able to move ahead, and will manage to file an application for a permit within the defined timetable."
3. The challenge: Tel Aviv
All along, many in the market have argued that National Outline Plan 70 does not award sufficient building rights, certainly given the heavy taxation. Despite the tax incentive, there are those who still claim that this is the case. The claims come mainly from the side of the developers, who of course have a clear interest in obtaining greater building rights, but their claims should be taken notice of in relation to one specific city: Tel Aviv.
Mainly developers claim that in Tel Aviv, National Outline Plan 70 provides lower building rights than the Urban Outline plan TA/5000, which is currently in force, and TA/5500, an update to the existing plan, which is in the process of being formulated.
National Outline Plan 70 and the Tel Aviv outline plan award rights on the basis of floor area divided by land area. If a plot is 1,000 square meters in area, and the ratio of floor area to land area is 4, then the building rights will be 4,000 square meters. The developers claim that while the Tel Aviv outline plan offers a ratio of 12, and even 15 in certain places, the highest floor area to land area ratio in the National Outline Plan 70 is only nine.
National Outline Plan 70 does however state that this is a minimum ratio, and in the final amendments to it the possibility was added of an incentive to increase it. For each addition of one to the ratio, the District Planning and Building Committee will be able to increase by 5% the area for non-residential use, in accordance with planning needs, which should work in favor of the local authorities. There are those who claim that even this is not enough.
"Developers we have spoken to, certainly in Tel Aviv, say that there are no good tidings as far as the floor to land area is concerned in the case of many of the stations in Tel Aviv," says Kaminitz. "The National Outline Plan does talk about a minimum, and the concept is that it will certainly be possible to increase the ratio after a more detailed examination, but the developers say that this is an illusion, and that the local authority will not allow an increase in rights except in places that this serves it as well. I certainly do see a problem in Tel Aviv, and it’s precisely there that development around the Metro is most challenging. On the other hand, this means that outside of Tel Aviv the Metro could be very important news."
4. Private landowners
The areas of influence around the Metro stations cover a great deal of land and many assets in private ownership of people who aren’t necessarily developers planning to redevelop the land. The Metro will pass though 24 local authorities, from Rehovot in the south to Ra’anana in the north, and along the route are numerous private owners who will also need to understand how the approval of National Outline Plan 70 affects them.
"The owner of an asset within the area of influence of the Metro has to become familiar with the planning information that National Outline Plan 70 gives him," says Hanin. "If I live in a neighborhood of houses with gardens, for example, it’s very important that I should know the density of construction that will be permitted, even if I’m not planning to do anything myself. If I live in an old building in an area of influence, and I have set my sights on urban renewal, I need to understand the planning potential; if I plan to buy an asset or sell one, or to embark on some real estate initiative, I have to acquaint myself with and study the relevant planning information in National Outline Plan 70."
Published by Globes, Israel business news - en.globes.co.il - on January 12, 2025.
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