Investing in Israeli Land: A Comprehensive Guide and Overview
While purchasing lands for investment in Israel used to involve various complexities, today the process is straightforward, simple, and notably profitable. Yet, there are still several factors to take into account. To help you navigate these, we’ve created the most detailed and comprehensive online guide to teach you how to invest effectively and minimize risks. Let’s begin.
Land Investment for Beginners: Primary Background
Before we delve into the process and steps involved in a land purchase, it’s important to note that most land in Israel is not privately owned; about 93% of the land in Israel is owned by the Government of Israel and managed by the Israel Land Authority. This fact highlights the advantages of owning private land (especially given the tremendous demand against limited supply!) and offers every citizen and real estate investor an excellent alternative for purchasing a property by investing in plots for sale that have massive potential for high returns and profits in the future.
What are the two types of private land defined as saleable areas for investors?
In Israel, there are two types of investment lands: agricultural land and construction land, each with different characteristics and various regulations and requirements for purchase, development, and use. Here are the differences:
Construction Land – Land intended for the construction of homes, businesses, and other buildings. The building process may be subject to various regulations regarding the type of structure that can be built, development density, and other factors.
Agricultural Land – Land mainly used for agriculture and crop cultivation. These lands are primarily intended for agricultural use, and there may be specific regulations regarding how they can be used, such as restrictions on building or developing the land. The government (ILA) owns most of the agricultural lands and leases them to farmers, agricultural settlements, and other entities.
However, it is possible and feasible to convert agricultural land into construction land by:
Application for Change of Designation – This is a process of reclassifying land from agricultural to construction. This process requires a detailed development plan, including an environmental impact assessment, a public hearing, and the application for permits and approvals needed from the local government and other relevant authorities. Additionally, as there is a significant housing shortage in Israel (with demand only increasing yearly!), the state and local authorities encourage repurposing agricultural land for residential building construction.
During the investment stages, you will encounter several concepts worth familiarizing yourself with the land purchasing.
The Steps for Investing in Land
Choosing Professional Guidance: Firstly, before you begin, it is necessary and even essential to have a company that specializes in land sales by your side to assist and guide you through the local market from the start of the process to the end.
Market Survey: Before making any investment, it is essential to examine and thoroughly understand the land investment market in Israel, including current trends, prices (factoring in price increases!), potential for appreciation, future land value increases, potential returns, and more.
Identify Your Investment Goals: Determine your investment goals, such as annual value increase or turning the asset into profit. This will help you identify the type of land and the location that best suits your needs.
Locate the Land You Wish to Purchase: This includes verifying that the land is privately owned and not defined as lost property or state land.
Request a Land Survey Report – This report will provide detailed information about the land, including its boundaries, size, and any buildings on it. You should also be familiar with Standard 22, which includes a set of rules for real estate appraisers for lands not available for building. The purpose of this important standard is to protect investors, and its rules are used for appraising land marketed to the public in Israel based on expectations that the land’s planning status will change in the future, and building will be approved on it.
Assess the Location and Designation: Before submitting an offer, it is essential to assess the location and designation of the land to ensure it is suitable for your investment purposes. More importantly, ensuring that the land is not located in an area prone to flooding or other natural hazards is essential.
Negotiation: To facilitate the deal and ensure that all legal documents required are in order, extensive knowledge on the subject is necessary, and you must have a professional land marketing company and a lawyer accompanying the transaction.
Purchase Agreement: This legal document will detail the terms of the sale, including the purchase price, payment schedule, and more.
Securing Financing: To obtain the necessary financing (if needed), you can approach financing bodies for any purpose, etc.
Completing the Transaction: The land ownership transfer through a legal process called “registration of ownership transfer” at the Land Registry Office of the Israel Land Authority. When transferring ownership of land, it is important to ensure that the transfer is appropriately recorded in a way that is not subject to misinterpretation, as this ensures that the ownership of the land is legally recognized and any future ownership disputes can be resolved by referring to the official records. Additionally, it is important to ensure that the transfer is conducted following all local laws or regulations relating to land ownership, such as zoning laws or restrictions on land use. Remember, this is a document of critical importance, and assistance from a professional company specializing in the field and a lawyer accompanying the transaction will prevent many legal and unnecessary complications.
Purchase Tax: The purchase tax on land usually stands at 6% of the purchase amount and applies to any purchase of land or land rights not defined as residential property.
What are the Advantages of Purchasing Lands for Investment in Israel?
Strategic Location: It is important to remember that Israel is strategically located at the crossroads of Europe, Asia, and Africa, with convenient access to major markets, which makes purchasing land in Israel a particularly sought-after destination for businesses and investments, and could provide you with land with a significant future value increase and exceptionally high returns.
Economic Stability: A land purchase transaction can assure you of high returns that will provide a quick return on investment and bring you high passive income in the future by renting out apartments in residential buildings or shops in commercial areas. Moreover, once the land is repurposed, you can sell the properties and generate huge profits.
Growing Population: As Israel’s population grows, life expectancy increases, and the demand for housing and commercial properties grows, construction land will be a good investment opportunity in real estate. Additionally, it is important to remember that Israel is a popular tourist destination, and owning properties can generate rental income.
Ownership of Private Land: Private ownership of land in Israel is relatively rare (since there is not much private land in the country—only 7%!), and even more so when the land is planned for a change of designation, so you ensure yourself an area with high demand. Moreover, once you own private land, you neutralize your dependence on various bodies and do not need to worry about eviction following a sale or decisions made by others regarding the property.
Investment Channel with Low Risk and High-Profit Potential – In Israel, and especially in the real estate market, few investment options yield high returns and offer low risk. Purchasing land in Israel is the best option for acquiring an asset with an annual value increase and potentially incredibly lucrative returns.
Intelligent Use of Your Money: Unlike money that sits in a bank account where its value only decreases and is coveted, purchasing land for investment also assures your money’s value and allows for value increase. Additionally, it is essential to remember that there has been a price increase in the real estate market over the past decade, so you are preserving the value of your money and even profiting.
What do investors tend to worry about when purchasing lands for investment, and why do the advantages outweigh this?
The Unknown Period for Land Repurposing: Many worry that when it comes to agricultural lands for investment, the waiting time for repurposing will be incredibly long. In reality? There is nothing to worry about because, at any stage, you can sell the land at a higher value than the investment. Investment lands are a “rare commodity” in Israel, and there is always a high demand for them. Thus, you can only profit and not erode the value of money in the bank as already noted above.
Construction of Roads on the Land: It is important to purchase lands that are in the repurposing process from a professional and reliable land marketing company accompanied by a leading law firm specializing in real estate. Why? Because the company will accompany you throughout the process and ensure that the land for purchase is within the plan intended for residential construction. Additionally, if in the future, it is decided to pave a road on your land, you will receive building rights on the land closest to the land you purchased in the same plan, and your rights will be preserved.
“Isn’t it better to invest in an apartment?”
Well, while purchasing an apartment in Israel can be a profitable investment, this expense is impossible for most people. In contrast, investing in land provides a much more accessible price range, with the potential for tremendous profits.
Also, it constitutes a solid and safe investment that can yield more than one real estate asset in the long run.
Interested in Lands for Investment? Discover the Sadot Group
When it comes to investing in land, precision and expertise are crucial. The Sadot Group, led by real estate investment experts, offers a seamless blend of professionalism and the ability to spot low-risk opportunities in Israel and globally. This stable and profitable avenue requires deep knowledge and investment in the most promising lands. Our professional team works closely with each client, pinpointing lands with high appreciation potential, often resulting in substantial value increases. With years of experience, a track record of hundreds of satisfied clients, and unparalleled reliability, the Sadot Group and its team of specialists are the ideal partners for guiding you through your investment journey from start to finish.
Interested in learning more? The Sadot Group offers a free consultation call to thoroughly discuss your investment options.
