Credit for the building sector has run out after rising quickly, already reaching NIS 74 billion (besides credit for apartment purchasers), said Deputy Examiner of Banks at the Bank of Israel, Zvi Tal, in a Finance Committee discussion.
Tal proposed that building companies and contractors raise the capital they require on the stock exchange or from other sources, which did not open up while bank credit was available and easy to obtain.
At a special discussion concerning the crisis in the building sector, Tal said that NIS 41 billion of the NIS 74 billion was monetary credit for construction, and most of the remaining NIS 33 billion credit was for guarantees in accord with the Sale Law. Tal noted that credit for the sector has already reached 30% of total credit in the economy, and has increased 29% since only the beginning of the year.
Deputy Accountant General Avi Gabai criticized the Bank of Israel’s credit policy to the building sector, saying that the sector does not merit the same all-encompassing attitude as the other sectors, but a treatment. "Building is not commerce and the money does not disappear, there are assets on the ground after construction," said Gabai.
President of the Association of Building Contractors Mordechai Yona said that by cutting credit, the Bank of Israel limits building starts to only 38,000 per annum. In an understatement, he referred to the Examiner of Banks’ directive to include high-yield real estate in the credit framework, as "an incorrect thing to do." This is in addition to guarantees in accordance with the Sale Law which are especially oppressive since they are not canceled when the apartments are handed over to their owners.
Yona claimed that the new directives, which will go into effect at the beginning of January, will burden the contractors with an extra NIS 1 billion and will reduce real estate supply even further.