Less than 7% profit: how little it takes for a residential project to become loss-making

It is amazing to discover how little it takes for a promising residential project to become loss-making. It is not every day that a development company admits it is so close to that, and in its flagship project at that. This was revealed in the company's first data disclosure ahead of a stock issuance in Tel Aviv.

According to the prospectus, in the project currently being built in the "International Quarter" in Lod, there are 227 apartments ready for occupancy in a year and a half. The company expects total revenues of 540 million shekels against direct expenses of 504 million shekels. Gross profit margins are less than 7% — about 160 thousand shekels on average per apartment.

For comparison: in Sde Dov, where the company admits it expects low profit, margins are expected to stand at 13% (819 thousand shekels per apartment). In another project of 230 apartments in the "Special Quarter" in Ashdod, it expects a gross profit of 280 million shekels — 43% of revenues. However, this figure should be taken with limited confidence, as not even one apartment has been sold yet.

This is gross profit before financing, marketing, and tax expenses. The company admits that if apartment prices in the Lod project drop by 10%, it will be forced to present a gross loss of 11.5 million shekels. With 190 apartments remaining in stock at the end of 2025 (84% of the total), this is a cause for concern.

Already in 2022 it looked expensive

The International Quarter was the highlight of the roof agreements between municipalities and the state a decade ago. Prime Minister Benjamin Netanyahu personally attended the ceremony, promising development for the city in the center of Gush Dan. The neighborhood, built on lands transferred from Moshav Nir Zvi, will include 11,350 apartments upon completion.

5,000 apartments have already been marketed there. Developers complain about a "jungle of competitors" and the gap between development promises and reality. The main connection out, Highway 200, is the responsibility of the state, which is procrastinating on its execution.

In May 2022, Avisror paid 238 million shekels for 227 apartments — 1.05 million shekels per apartment. Even then, it looked expensive, as the average price of the ten developers who participated in the tender stood at 180 million shekels.

The gap between the price paid and the forecast

In February 2026, land tenders in the same neighborhood reflected a price of 773 thousand shekels of land per apartment — 26% less than what Avisror paid. In 2024, Avisror sold 25 apartments in the Lod project, and in the following year and a half, only 13 more were sold. Despite this, the company estimates the unsold forecast at 21,112 shekels per square meter, which seems optimistic given the current market.

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Stars of the week

Excellent: The National Council against the suppressed crisis

This week, the National Planning and Building Council approved a plan for 40 new wastewater treatment plants. This is a critical issue for a country whose population doubles every 3-4 decades. The real struggle will now be over the ability to approve the construction of these plants on the ground, as no one wants these "toilets" in their backyard.

Insufficient: Katzman does not get along with another partner

Chaim Katzman, head of G City (formerly Gazit-Globe), remains a prominent figure in real estate, but his history of cooperation is marked by conflict. Partnerships with Dori Segal, Uri Dori, the Bronitzki couple, Nathan Hetz, and in recent years with Israel Canada and Tzahi Abu, have all hit a reef. In a market requiring trust and capital, this is likely a factor in the company's decline.