Buying before it is built: payment terms, index linkage and the Sale Law guarantee

Most new Israeli apartments are sold off-plan, years before the keys exist. The price is agreed at signing, but how and when it is paid can matter almost as much as the price itself.

The usual shapes of a payment schedule

A standard contract spreads payments across construction milestones. Marketing campaigns often offer a lighter schedule instead: a small payment at signing and most of the balance at or near handover, usually described by the split, such as 20/80. A light early schedule keeps the buyer's capital free for longer, which is a real benefit. It is usually priced in somewhere, so compare the total cost, not only the first payment.

Index linkage on the unpaid balance

Many contracts link the unpaid part of the price to the Construction Inputs Index published by the Central Bureau of Statistics. If building costs rise between signing and payment, the amount still owed rises with them. Some developers advertise payments that are not index-linked as an incentive: another term to price in, not to ignore. The Sale Law itself now limits how much of the price may be linked. Ask what share of the price is linked, from which base month, and whether linkage stops at a fixed date.

What protects money paid before handover

Israel's Sale (Apartments) (Securing of Investments of Persons Acquiring Apartments) Law requires a developer to secure buyers' payments, most commonly with a bank guarantee issued against each payment, so that the money is protected if the developer cannot deliver. Payments are usually made into a project account supervised by the financing bank, with a payment voucher or a guarantee in return. Check that every payment is covered and keep each guarantee. When buyers take part through a company, who holds the guarantee, and in whose name, is a question for the offering documents.

Why the terms decide the return

Pre-construction returns come from the gap between the price agreed today and the value of a finished home later. Payment timing decides how much capital is tied up while that gap develops; index linkage and delays decide how much of it survives. A long delay on an index-linked balance can erase a discount that looked comfortable at signing.

What to ask

• What is paid at signing, and when is the rest due?
• Which share of the price is linked to the Construction Inputs Index, and from when?
• Which Sale Law security covers each payment, and in whose name?
• What is the contractual delivery date, and what compensation applies if it slips?

General information only: the contract and the law in force on the day decide the terms.