Developers and contractors have been offering benefits and discounts to homebuyers for several months, and now one of the big banks is coming to their aid: Bank Leumi, together with Gindi Investments, recently started to advertise that it would offer special financing terms from Leumi Mortgages for buyers of apartments in the Gindi Ramat Ef’al project, enabling buyers to put up just 5% equity.
Under Bank of Israel rules, the banks are allowed to extend mortgage loans of up to a maximum of 75% of the value of the home being purchased. For move-up buyers, the limit is 70%, and for investment buyers who own at least one other home, it is 50%. Buyers have to find the rest of the price as equity. Now, in the joint campaign, Bank Leumi is offering to make up the equity such that buyers will have to put in just NIS 100,000 of their own money, which of course will considerably broaden the target market, but will also expose the buyers to much higher risk.
Gindi is selling 3.5-room, 82 square meter apartments in the project for NIS 2.9 million, which it says represents a 20% discount on the price of an average apartment in the neighborhood. It would be enough for a not-impossible scenario of a 4-5% fall in prices to materialize, for a buyer to find that the equity he has invested has been wiped out and that the mortgage debt is higher than the actual value of the apartment.
"Grab an apartment in Gindi Ramat Ef’al for just NIS 100,000 and receive a special loan of 15% of the price for four years, interest free," the advertisement says. This benefit comes from the developer itself, which is trying to interest new buyers in an environment of high interest rates and very low transaction numbers in the real estate market in the past few months.
Mainly for move-up buyers
Sources at the bank and the developer stress that the loan in question is not an additional loan to finance the purchase of the apartment, but is "at the expense" of the mortgage offered to buyers. That is to say, the amount of the mortgage itself will not grow. What changes is the repayment schedule, to make it easier for buyers at the stage of finding the equity. The sources say that the benefit will not expose the bank to higher risk, as the benefit is being entirely financed by Gindi Investments.
Gindi Ramat Ef’al is located in a high-demand area, in the east of Ramat Gan. It will consist of 470 units in six buildings between 13 and 16 floors high. The project is mainly aimed at move-up buyers rather than first-time buyers, and the benefit offered will mainly interest people who want to buy an apartment in the project but who have not yet sold their existing home, easing the financial burden in the interim.
More and more contractors and developers have been offering benefits and discounts to buyers recently. Kardan Real Estate, for example, is offering a similar benefit to that at Gindi Ramat Ef’al, namely 15% finance to complete the equity at zero interest, at a project in Tel Aviv. Gindi Investments itself has offered a "mortgage repayment" of NIS 10,000 monthly for two years for buyers of apartments costing NIS 6.5 million or more.
Published by Globes, Israel business news - en.globes.co.il - on February 6, 2023.
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