Recent promises by the government for a change in legislation has caused a freezing of many projects. This is especially hard at a time when everyone is waiting for a lowering in real estate prices. One such “promise” is the exemption from V.A.T. for certain purchasers acquiring apartments in new construction projects. As this would not apply to projects where construction has already begun, many potential buyers in such projects have held back their purchases until information as to the finality of this new law becomes apparent. Another proposed law will give construction companies a discount on V.A.T. on construction services. These potential new laws have had an adverse affect on the sale of apartments in Tama 38 projects.
Tama 38 projects are projects where an existing building is renovated and strengthened against earthquakes. The renovations are paid for by the construction company doing the renovations in the building and in return they are permitted to construct more apartments in the building and sell those apartments for profit.
Since the fanfare of the government’s announcement about the zero V.A.T. for new apartments has died down a bit, it has been reported the willingness of purchasers to consider the purchase of new apartments in Tama 38 projects has decreased. It is possible that this is also a result of the other problems that these projects pose, such as a lack of parking, the fear of living in an old building that was strengthened but has the added stress of more apartments on it and the pressure on the infrastructure of certain cities that Tama 38 projects can bring. In addition to this, many of the construction companies involved in these projects have held off going into new Tama 38 projects as they are waiting to see what will become of the proposal to cut V.A.T. on building services. Indeed, where in the past the construction companies involved in Tama 38 projects courted the homeowners association in the various apartment buildings that fell under the Tama 38 rules, now these same homeowners associations are running after the construction companies. In my opinion another problem with Tama 38 projects that shut out many potential buyers is the difficulty in getting a mortgage for the purchase of a new apartment in a Tama 38 project.
Into all this mix we now need to consider the fact that the government has fallen. There will elections in a few months. A new government will come. Will this government continue to promote the two bills discussed above? It is this lack of security which has brought many real estate projects to a halt including the nationally important Tama 38 projects. Everyone is waiting around to see on which side the coin will fall. So I say to the Israeli government “make up your mind already” and let’s get on with it. Otherwise we might have to see on which side the building will fall should there be another earthquake.
