Purchasing Luxury Real Estate in Tel Aviv Without Down Payment: The Risks of Contract Cancellations

Contractor financing promotions have been gaining momentum since 2024. Financing benefits have decreased gradually since March 2025 and today stand at less than 25%. The decline in these benefits stems primarily from high market risks.

Last week, the Ministry of Finance published extensive data regarding contract cancellations. In the southern region, where the highest number of cancellations was recorded between 2023 and 2025 (475 transactions), two-thirds of the cases were attributed to "economic problems."

The Ministry of Finance reports that the stated reasons for cancellation ranged from "mortgage denial" to "inability to finance the purchase." Galit Ben Naim, Deputy Chief Economist at the Ministry of Finance, notes that even with contractor-provided loans—where the developer covers the interest—many buyers failed to complete their transactions.

An alarming figure emerging from the data is that one-third of these buyers did not pay a single shekel before the cancellation date. This involves over 150 individuals who signed contracts for the full amount, intending to pay the balance only upon taking possession of the property.

This trend highlights the high risk faced by small developers and suggests a potential attempt to mislead banks by presenting contracts that buyers cannot actually finance. Buyers who were told that "the transaction can be cancelled at any time" often failed to realize that the Tax Authority might still demand purchase tax, even if the deal never closed.

"If we add those who only managed to pay tens of thousands of shekels, we reach half of these cancellations," adds Ben Naim. "That is what happens when buying an apartment 'on paper' during an era of financing benefits. And paper, as they say, tolerates everything."

This is not limited to the periphery; Tel Aviv and Jerusalem are also seeing an acceleration in cancellations. Ben Naim cites a 2024 luxury transaction in Tel Aviv where the buyer paid nothing to the contractor.

In conclusion, she writes: "Many wonder about the cost of cancellation, as there is typically a 10% penalty—a matter of hundreds of thousands of shekels. Yet, many cancellation notices include the phrase 'as a gesture of goodwill.' Sellers often waive compensation or settle for partial amounts. While the average compensation in the south was about 20,000 shekels, one should not rely on averages. Ask those who were required to pay 200,000 shekels or more; in Tel Aviv, that figure reached half a million shekels."