A new era for 20/80 deals? One million shekels — and you enter a luxury apartment in Tel Aviv without a mortgage

After the 20/80, 10/90 deals and contractor loans that have become one of the main marketing tools in the residential sector in recent years, the Hagag Group is changing the rules of the game and offering a new purchase model — this time for luxury apartments that are already in advanced stages of construction.

The company emphasizes that during the deferral period, there is no need for a contractor loan or a mortgage, and there is no index linkage on the balance. For those upgrading their housing, this means a period of time that may reach about three years from today to sell the existing apartment and prepare for payment. For investors, the company offers a rental income guarantee for the first two years after delivery.

The main difference compared to some of the financing deals currently on the market is that during the deferral period, no contractor loan is taken out in the buyer's name for the balance of the payment, there is no need for a mortgage for the balance, and there is no index linkage on the deferred amount, in accordance with the terms of the promotion and the purchase agreement.

The group is launching a model at the Infinity luxury project on Ibn Gabirol Street in Tel Aviv, according to which one can purchase an apartment with an initial payment of only one million shekels — a sum that, according to the company, constitutes about 10%–20% of the price of the apartments relevant to the promotion — receive the apartment upon completion of the project, expected in about a year, and defer the payment of the balance for two more years.

The Infinity project is being built at the intersection of Ibn Gabirol and Jabotinsky streets in Tel Aviv and includes a 52-story tower and an additional seven-story boutique building. The complex is planned to include, among other things, an infinity pool, a gym, a lounge bar, green areas, and a lobby with security.

The main innovation presented by the company is that during the interim period, the buyer is not required, according to the terms of the promotion, to take out a contractor loan or a mortgage to finance the balance of the payment. The company adds that the balance of the payment during this period is not linked to the index.

In simple words: someone who buys today and pays one million shekels is expected to receive the apartment in about a year, but will pay the balance of the purchase price only two years later. Thus, a total time window of about three years from today is created for the buyer to sell an existing asset, realize investments, or arrange the source of financing for the balance of the transaction.

Why is this relevant for those upgrading their housing?

For those upgrading their housing, one of the central issues when buying a new apartment is timing: when to sell the existing apartment and when the money is needed for the new apartment.

In the outline presented by Hagag, the home improver is not required to complete the price of the apartment at the time of delivery. He pays one million shekels, receives the apartment in about a year, and the balance of the payment is deferred for two more years.

This means that the home improver receives, according to the schedule presented by the company, about three years from today to sell the existing asset or arrange the source of payment, instead of being required to carry out the sale towards the occupancy date.

Even in terms of purchase tax, the benefit contains an additional advantage, since those who wish will be able to defer the payment of the purchase tax (subject to the Tax Authority's conditions) since a consideration amounting to 50% of the apartment price has not yet been paid.

According to the Hagag Group, an investor participating in the move will pay one million shekels and receive, after occupancy, an apartment rented out for a period of 24 months, with the balance of the purchase price being paid only at the end of the period.

In the company's materials, a Cash on Cash yield of 24%–52% is presented for a period of 24 months, depending on the type of apartment and the expected rent. Thus, for example, for a two-room apartment, an initial payment of one million shekels is shown, a rent of about 10,000 shekels per month, and a cumulative income of 240 thousand shekels over two years; for certain 3.5 and 5-room apartments, a rent of about 22 thousand shekels per month and a cumulative income of 528 thousand shekels are shown.

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How much do you pay upon purchase? One million shekels. According to Hagag, this is about 10%–20% of the price of the apartments participating in the move.

When do you get the key? The company expects the project to be occupied within about a year.

And what happens with the balance of the apartment price? It is not paid at the time of receiving the key, but only two years after moving into the apartment.

Is there a contractor loan? No. The buyer does not sign a contractor loan for the balance of the payment during the deferral period.

Do you need to take a mortgage now? Not to finance the balance of the payment during the deferral period. At the end of the period, it will be necessary to complete the balance of the price using equity, selling an asset, a mortgage, or another source of financing.

Is the balance linked to the index? According to the terms of the move presented by the company, no.

Can you already live in the apartment even though most of the consideration has not yet been paid? Yes, in accordance with the purchase agreement from the date of occupancy of the project.

And what happens with an investor? According to the company, the apartment will be rented out for a period of 24 months, with the completion of the balance of the consideration being done only after the two years.

So how is this different from 20/80? In a typical 20/80 outline, the buyer pays a relatively small part of the apartment price upon signing and most of the consideration near delivery. In the Hagag outline, the delivery date and the payment completion date are separate from each other: the apartment is delivered, the buyer can live in it or rent it out, but the balance of the consideration is paid only two years later.

What should be checked before joining? The customer must ensure that he is prepared to pay the balance of the consideration in about three years by selling an asset, releasing deposits, etc.

Hagag: "The balance will be paid only two years after moving in"

The Hagag Group reported that more than 200 apartments have been sold in the project so far and that the move will be offered for a limited number of apartments, initially to club members and later to the general public.

According to the company, "The buyers pay one million shekels, receive the apartment upon its completion, and are not required to take a contractor loan or a mortgage for the balance of the consideration during the deferral period. The balance of the payment will be paid without index linkage and only two years after moving into the apartment."