At the end of December the Bank of Israel’s restrictions on the financing deals offered to homebuyers by real estate developers and contractors will expire. As the expiration date approaches, new data from the Ministry of Finance shows a significant revival of these financial incentives in the residential real estate market. In September, 45% of homes sold by developers included financing incentives - the highest rate since March 2025, when the Bank’s restrictions first took effect.
Given the renewed rise in the volume of these incentives and the various models offered by developers, the question arises: do the existing restrictions still effectively address the risks the Bank of Israel sought to mitigate? Furthermore, will the Bank choose to extend these measures or adjust them to reflect current market realities?
The Bank of Israel’s concern: Failure to meet obligations
The Bank of Israel’s decision to intervene in the housing market was made in March 2025, followed its observation that financing promotions were becoming more widespread, raising concerns about the risks created. At the time, the Supervisor of Banks warned that the phenomenon was intensifying and carrying an increased level of risk. The concern was that buyers were entering into transactions with a low initial down payment while deferring a major portion of the total price, without necessarily possessing the capacity to complete the purchase further down the line..
From the Bank of Israel’s perspective, this also posed a risk to the banking system and to the financing extended to developers. The directive establishes two key limitations: a 150% capital allocation requirement for projects where more than 40% of transactions involve significant payment deferrals, and a cap on developer-subsidized "balloon" and "bullet" loans, limiting them to no more than 10% of total residential mortgages.
These measures were introduced as a temporary directive effective until the end of 2026, with the Bank of Israel reserving the right to review their continued application and the need for any revisions. However, new data from the Ministry of Finance’s Chief Economist Division, presented today by Deputy Chief Economist Galit Ben Naim, reveal a clear trend. The share of deals involving financing incentives has risen from 20% in May 2026 to 45% in September. By September, the prevalence of such incentives had reached a level nearly identical to that recorded just before the Bank of Israel’s restrictions took effect - a figure that was 50%.
Nevertheless, the resurgence of these financing promotions has thus far failed to draw buyers back into the market. In September, developers sold 1,800 apartments on the open market nationwide, which comparable with the number of units sold during the same month last year. Despite the growing scale of these incentives, sales volumes remain stagnant. From the developers' perspective, it appears that promotional offers have become a key tool in attempting to drive demand yet they do not guarantee a sales recovery.
Developers are refining their incentives
The lengths to which developers have gone to attract buyers include a significant number of creative financing schemes that have been offered over the past year. Shalom & Nathan offered buyers a "developer loan" of up to NIS 2 million, exempt from index-linking for a two-year period, provided 30% of the apartment's price was paid at the time of purchase.
Gindi Holdings offered to defer a payment of NIS 900,000, part of the apartment's purchase price, until ten years after occupancy, utilizing a "balloon loan" with interest subsidized by the company. Aviv Melisron offered buyers a bridging loan secured against an existing property, either their own or that of an immediate family member, with the company covering all interest costs until the date of occupancy. Similarly, Azorim offered an interest-free, unindexed loan of NIS 1 million, free of monthly repayments, for a ten-year term, at the end of which the full amount must be repaid.
Thus, alongside payment deferrals and subsidized loans, developers are offering solutions that allow buyers to reduce the liquid capital required at the outset of a transaction. However, some of these arrangements entail major financial obligations that will eventually need to be settled. These promotional offers illustrate how developers are seeking to expand their toolkit to facilitate entry into deals for buyers, even those with limited available equity. However, such loans remain subject to underwriting and approval by the financing bank. But the question remains whether existing vetting mechanisms adequately address the risks arising from the deferral of a major portion of the payment and the financial obligations that buyers undertake.
The risks extend beyond the buyers
Phoenix Financial chief economist Matan Shitrit says that as financing promotions become more widespread and aggressive, the associated risks also increase. "There is certainly a case for the Bank of Israel to examine the need for expanded oversight and stricter limitations on these promotions. It is important to understand that the risks are not limited to the buyers alone. They also affect developers and the banking system," he explained.
On the buyers, Shitrit notes that the primary risk is uncertainty concerning future financing. "Today, a buyer commits to the price of an apartment, yet they have no way of knowing whether, years down the line, they will be able to complete the deal, and under what financing terms," he says. "Furthermore, should home prices fall (as is already occurring in many areas), some buyers may find that the deal is no longer worthwhile. If they are unable, or simply decide not to complete the deal, they risk losing a portion of the funds already paid and could face claims for damages, under the terms of the contract."
From the developers' perspective, he says, "The primary risk is cash flow-related." According to Shitrit, a developer may sell an apartment today but receive the bulk of the proceeds only upon delivery, "While construction and financing costs continue to mount. This implies a greater reliance on credit. If some buyers struggle to complete their deals or seek to cancel them, the developer could face delayed receipts, contract cancellations, and an increase in inventory, which is already at a historically high level, precisely when they are required to settle obligations to the banks."
On the banking system, he notes that the exposure exists on two fronts. He says, "Banks finance the developers while simultaneously providing mortgages and loans to the apartment buyers. A downturn in the housing market could negatively impact both types of borrowers. Continued weakness in sales, an uptick in deal cancellations, and an erosion in the value of collateral could heighten credit risk, particularly in projects with a high dependency on bank financing."
The Bank of Israel is aware of the resurgence of financing incentives in the market, as well as the evolution of the models being offered by developers. The Bank stresses that the Banking Supervision Department continues to monitor developments on these financing schemes and is assessing whether to update guidelines or implement further measures. It is noted that the temporary directive issued by the Supervision Department has already curtailed the scope of developer-led financing schemes - a trend that had been expanding since late 2023. The Bank further clarified that any consideration of future steps is being conducted through a structured, data-driven internal review process. It remains to be seen whether the Bank of Israel will choose to extend the temporary directive or tighten the existing restrictions.
Published by Globes, Israel business news - en.globes.co.il - on November 10, 2026.
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