Construction Input Price Index – Buying an Apartment in Israel

In July 2022, Amendment No. 9 to the Sale Law (Apartments) entered into force, which changed the link to the Construction Price Input Index with regard to new apartments purchased in Israel. The amendment, which applies as of July 7^th 2022, is valid for all sales contracts signed from that date, including contracts signed as part of a ‘Discounted Apartment’ (governmental housing plan previously known as ‘Buyer’s Price’).

Linking the Price to the Index

The prices of new apartments in Israel are linked to the Construction Input Price Index. This lets contractors preserve the value of the money they receive as proceeds from the sale of apartments. In the past, apartment prices in Israel were generally linked to the US dollar, but since the mechanism of linking to the Consumer Price Index was changed, the last decade has seen apartment prices linked to the Construction Input Price Index. This has become an accepted economic mechanism, seeing as other aspects of the economy are attached to one or the other of these indices.

The amendment to the Sale Law states that in sales agreements between contractors and buyers, it’s now possible to set the price of an apartment according to the Construction Input Price Index, only when a maximum of half of each payment is linked to the Index, with the exception of the first 20% of the price of the apartment, which cannot be linked at all.

In any case, this attachment to the Construction Input Price Index only stands until the delivery date stipulated in that agreement (the time in which the apartment should be ready to move in), rather than the actual delivery date of the apartment unless the delay in delivery is caused by an act or omission of the buyer only, or as a result of obstruction.

The law also states that if the agreement between the seller and the buyer stipulates interests for late payment, the interest rate should not exceed the rate set by the Minister of Housing, provided that 7 days have passed from the day that payment is required to be made (as stipulated in the contract).

Petition to the High Court

Following the enactment of the amendment to the law, the Contractors’ Association petitioned against the amendment to the Israeli High Court, claiming that the amendment is expected to cause huge economic damage to contractors. A payment transaction for the sale of an apartment is no different to any other payment transaction, which carries interest and linkage, according to the Contractors’ Association.

The petition also argues against retroactive consequences, since many contractors won ‘Buyer’s Price‘ public tenders before the law was enacted, and they are committed to a sale price to their buyers based on a situation in which there have been no restrictions on linking the price of the apartments