About three months ago, six foreign companies (five from China and one from Portugal) were declared winners in the Ministry of Construction and Housing’s tender to build apartments in Israel. The managers of the companies have recently come here and they are starting to settle down in Israel. All the companies have already contacted consulting firms in order to learn about the terrain as well as possible, and this week the local representatives of the companies rented apartments for the managers.
The Chinese do not provide answers regarding the future - we have gathered the scraps of information about their planning from the few Israelis who have begun working directly with them. Yair Kaplan, CEO of the real estate consulting firm Paz Group, has been providing support to the companies over the last few months and he speaks about the thorough learning process being carried out by the Chinese in this area in Israel.
What can we expect in terms of quality? There are many contractors who underestimate the quality of the Chinese.
“Naturally, I don’t agree with those who belittle [the quality of the Chinese]. These are highly qualified companies. For example, China Harbor, which is building Ashdod Port, has proven that it builds at a fast pace and that it uses advanced technologies. They brought brand new equipment (still in its original packaging), they brought foremen and another 700 workers. They certainly aren’t any less good than the Israeli companies. Let’s not forget that some of the workers of the foreign companies that are coming here are familiar with Israel and worked here in the 1990s, so that they even have local know-how and are familiar with the standards and regulations here.
Will they take control of the industry here?
“In the short term, it is expected that newer building methods will be introduced into the industrial construction field. There is currently an acute shortage of performance contractors for the building frame stage. There are no workers. These companies have available workers. This will break the logjam and enable construction on a large scale; as did for example, Turkish company Yilmazlar, which has been working for over a decade with more than one thousand workers in Israel, amongst other things, building the Sarona Azrieli Center.”
“In the medium to long term, the Israel Builders Association is concerned that these companies will control the local construction market. However, at the end of the day, the objective is to resolve the market failure and not to replace Israeli construction. Therefore, we must reexamine their permit at the end of the license period.”
Will they bring finished materials with them from China or will they purchase them from suppliers in Israel?
“There are materials like cement, gravel and concrete for which there is no logic in importing them because these materials are used in huge volumes and transporting them is not economically feasible. On the other hand, there are finished materials, such as doors, flooring, aluminum and prefabricated elements where there is an advantage in importing them from China. There are Chinese companies, which will probably focus on the construction of building frames, in order to meet the construction target of 100,000 square meters in the first and second years and 150,000 square meters in the third year - these are some of the tender conditions for continuing their activities. Other companies will bring materials and there is a company that is considering building a factory to produce prefabricated elements. There are companies that are even considering being active construction developers in Israel and not only a performance contractor company.”
Will the Israeli buyer benefit from lower prices?
“Nobody knows whether the Chinese companies will reduce the prices of apartments. Ultimately, the entry of a performance contractor into a project impacts only on the wet works on the site. This does not touch the cost of the land, the cost of the finance, the fees remain the same fees, and the same applies to the fees of the consultants and all the other components of the apartment. The average price of construction in respect of a normal apartment in high-density construction in Israel is NIS 3,800-5,000 per square meter, not including VAT, for standard construction, and to this we must add the elevators, parking basements, public areas, etc.”
Are there specific projects that the Chinese are considering?
“They are conducting negotiations with companies that are building projects of 300 apartments and more. They are considering entering into prestigious projects in Tel Aviv, Harish and in Carmei Gat.
Published by Globes [online], Israel business news - www.globes-online.com - on February 1, 2017
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