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Understanding Israeli Real Estate

Understanding Israeli real estate is not easy. It is a well-known fact that the majority of the land in Israel is owned by the Israeli Government.  Indeed, whole cities such as Beit Shemesh, Modiin, and large parts of other cities as well, are owned by the Government. These lands are administered by a government agency called the Israeli Land Authority. The purchasers of apartments built on this type of land get a long term lease for 49 years.  There are historical reasons for this, and it is important to understand these reasons because it gives a new perspective to the purchase of property in general in Israel.

Up till the late 19th century much of the land in Israel was not completely populated.  Indeed, Mark Twain points this out in his description of his travels in the Holy Land.  In the mid to late nineteenth century many Jews began to make aliya to the Holy Land due to changes taking place in their countries of origin. At this time the modern Zionistic movement began to emerge. 

In 1901, at the fifth Zionist Congress in Basil, the Jewish National Fund (Keren Kayemet L’Yisrael) was established. The goal of this organization was to purchase land in Eretz Israel and develop them for Jewish settlement. The JNF spent the next few decades purchasing large tracts of land in Eretz Israel. The question remained, in the absence of a Jewish state who would own the land? The answer was simple: The Jewish People. The ownership would stay in the hands of the Jewish people in perpetuity. It is for this reason that the purchaser that purchases an apartment on land of the Jewish National Fund receives a long-term lease for 49 years. At the end of the 49 years the lease is renewed for another 49 years.

When Israel became a state, these lands were given over to the Israeli government and are administered by the Israeli Land Authority.  In addition to the land of the JNF other lands are owned by the government, these include lands transferred to the Israeli government by the Mandate government in 1948 and lands abandoned by Arabs that fled the country during the War of Independence. All these lands are administered by the Israeli Land Authority.

When all the land set out above is added up it comes to about 90% of the land in Israel.

In order to ensure that the control and ownership of the land stays in Jewish hands, any foreign resident who is not Jewish cannot buy an apartment that is built on land that is owned by the Israeli government.

About 15 years ago, there was a change in policy. The ownership of apartments built on government land would be given to the lease holders with the caveat that when such an apartment is sold to a foreign resident, the purchaser needs to show he is Jewish.

It is important to note that when the JNF began to purchase lands other organizations followed suit. These organizations were usually private companies set up for this purpose. An example of this is “Hachsharat Hayishuv” which stills exists today. Other examples are companies such as “Geula” which bought land in Tel Aviv, and “The New Society” which also bought land in Tel Aviv. Before World War One many foreign companies sold shares to Jews all over the world with the purpose of raising money for the purchase of lands all over the country.

This week we marked the 125th anniversary of the first congress of the World Zionist Organization. At that event Herzl launched the modern Zionist movement which led to the decision to establish the JNF which led to the purchase of land in Eretz Israel as set out above.  The decisions made at that convention are still being felt in Israeli real estate today.