Bank of Israel Set to Extend and Tighten Contractor Financing Limits
The Bank of Israel's temporary restrictions on contractor financing promotions are set to expire in December. Regulators plan to update and maintain the limits to curb housing market risks.
At the end of December, the temporary order issued by Supervisor of Banks Daniel Hahiashvili regarding the restriction of contractor financing promotions and mortgage benefits is set to expire. The decision was initially adopted in March 2025 to curb soaring housing prices and cool down the real estate market. Under the current regulation, developers are permitted to sell only 10 percent of apartments via contractor loans.
Despite the restrictions, developers quickly devised workarounds, bypassing the Supervisor's directives through alternative mortgage subsidies and creative financial packages. This loophole allowed developers to continue extending loans to prospective buyers, driving further increases in housing prices throughout 2024.
As the expiration date approaches, the Banking Supervision Department is facing a crucial decision on whether to extend the temporary measure. According to industry reports, the regulator does not intend to scrap the restrictions or restore the previous status quo. Instead, officials are weighing an updated framework that would keep contractor sales capped while potentially adjusting the specific percentages and addressing wider financing incentives.
The Bank of Israel originally intervened due to growing financial stability risks. Regulators expressed deep concern that buyers putting down as little as 5 or 7 percent equity would ultimately fail to complete their purchases when the remaining balance came due. Furthermore, officials warned that speculative buyers looking to flip properties could face severe losses amid stagnating housing prices, risking widespread contract cancellations.
Regulators are also expected to target complex financing schemes, such as deferred payment models offered by firms like Gindi, allowing balances to be paid in a decade, or zero-equity down payment structures utilized by Aviv Melisron, which rely on mortgaging buyers' existing real estate assets. Real estate companies acknowledge that while financing promotions will face tighter scrutiny, the sector is already preparing new creative avenues to attract buyers to sales offices.
