Developer 20/80 deals in Israel have become one of the main tools for selling new apartments in recent years: you pay about 20% of the price at signing and the balance only at handover. The offer sounds like free financing, but that financing is priced in somewhere, usually in the apartment price, in the indexation or in the terms that will apply to you on handover day. In this guide we explain how the mechanism works, what it actually costs compared with a standard payment schedule, which Bank of Israel restrictions took effect in 2025, how your money is protected and how to check in advance that you will be able to get a mortgage when the apartment is ready. For the current versions of these offers on the market, such as subsidized interest, see our update on developer financing offers; here we focus on the principles.
What a developer 20/80 deal is and which versions exist
In a standard purchase from a developer (kablan), payments are spread according to construction progress: a payment at signing, followed by installments by stage or by timetable, up to handover. In a 20/80 deal most of the price is deferred to handover. There are several versions:
- 20/80 or 10/90. A first payment of 10% to 20%, and a single balance at handover.
- Interim payment. For example, 20% at signing, 10% midway through construction and 70% at handover.
- Subsidized developer loan. The buyer takes a bank loan, usually a balloon or bullet loan in which the principal is repaid at the end, and the developer pays the interest during construction.
- “No indexation”. The developer waives linkage to the construction input index on all or part of the price.
Why developers offer 20/80 deals
When interest rates are high, many buyers find it hard to commit to a full monthly repayment while they are still paying rent or holding an existing apartment. Deferring payment lets the developer maintain the pace of sales, which is a key condition of the project financing agreement with the lending bank. There is also a less discussed reason: a financing offer lets the developer keep a high list price instead of giving an open discount. A price discount is recorded as a cheap transaction and affects the appraisal of the next apartments in the project; a financing offer does not show up that way in the recorded price.
What it actually costs: a worked example
The example is for illustration only, and all of its assumptions serve the calculation and are not a forecast. An apartment in a project in north Tel Aviv, with handover in three years. The developer offers two options:
- Standard track: ₪3,880,000, a discount of 3% off the list price, paid according to construction progress.
- 20/80 track: ₪4,000,000, with ₪800,000 at signing and ₪3,200,000 at handover.
Assume the construction input index rises 3% a year, that the buyer has ₪1,200,000 in equity, and that the balance is financed with a mortgage at 5% interest.
| Item | Standard track | 20/80 track |
|---|---|---|
| Contract price | ₪3,880,000 | ₪4,000,000 |
| Indexation differences (estimated) | About ₪70,000 | About ₪148,000 |
| Mortgage interest during construction (estimated) | About ₪200,000 | None |
| Total cost up to handover | About ₪4,150,000 | About ₪4,148,000 |
How we arrived at the figures: on both tracks only 40% of the price is indexed, as we explain below. On the 20/80 track the entire indexed portion, ₪1,600,000, remains exposed to the index for three full years, which compounds to about 9.3%. On the standard track the indexed portion is paid gradually, so the average exposure is roughly half as long. On the other hand, on the standard track the buyer draws down the mortgage gradually and pays interest on it already during construction.
The conclusion is not that 20/80 pays off or does not pay off. The conclusion is that in this scenario the two tracks cost almost the same, and the result is highly sensitive to three variables: the size of the discount on the standard track, the rate at which the index rises and your interest rate. If the discount on the standard track is 5%, the standard track is cheaper. If you have money on deposit earning a return, or you are selling an existing apartment only toward handover, 20/80 may be the better choice. This calculation needs to be done on your own numbers, not on the word “offer”.
Construction input index linkage in 20/80 deals
Since Amendment 9 to the Sale Law (Apartments), in contracts signed from July 7, 2022, only up to 40% of the apartment price may be linked to the construction input index (madad tsumot habniya). The first 20% paid is not indexed at all, and of every further payment only half is indexed. In addition, indexation stops on the contractual handover date, even if the developer is late.
In a 20/80 deal the rule works as follows: the 20% paid at signing is not indexed, and of the 80% paid at handover half is indexed, meaning 40% of the price. Because the payment is deferred to the end, the indexed portion is exposed to the index throughout the construction period. That is why it is important to check:
- Whether indexation is cancelled in the contract, or only “frozen” for a certain period.
- What the base index is: the index known on the signing date or another index.
- Whether there is a cap on indexation differences.
- What happens if you pay earlier: whether indexation on the early payment stops.
Bank of Israel restrictions on developer financing offers
In March 2025 the Supervisor of Banks issued a temporary directive restricting these offers until the end of 2026. The directive does not forbid a developer from offering 20/80, but it makes it more expensive:
- Higher capital requirement. A transaction in which more than 40% of the apartment price is deferred to handover is treated as a nonlinear payment transaction. In a project where more than 25% of the units were sold this way, the lending bank must allocate more capital against the credit to the project. A transition mechanism was set for existing projects.
- Cap on balloon and bullet loans. Such loans subsidized by the developer are limited to 10% of the total housing loans each bank extends per month.
What this means for the buyer: in projects where the developer has already sold a large share of the units under the offer, the developer may propose a different structure, for example 25/75 or an interim payment, in order to stay below the threshold. The offers have not disappeared, but the terms have changed, and some developers have moved to other incentives. What will happen after the end of 2026 has not yet been decided, and it is worth following the Bank of Israel updates on this.
Payment deferral or developer loan: the difference that matters
The two structures sound similar, but legally and financially they are very different.
With a payment deferral your debt is to the developer alone. You owe the developer the balance on the handover date, and until then you have no bank loan and no monthly repayment. On handover day you take a regular mortgage, on the terms that apply that day.
With a subsidized developer loan you take a bank loan right now, and it is registered in your name. The bank transfers the money to the developer, and the developer undertakes to pay the interest until handover. What this means:
- The loan is included in your liabilities toward the banks and affects your credit rating and your ability to take additional loans.
- The developer’s undertaking to pay the interest is contractual. It is worth checking what happens if the project is delayed beyond the subsidy period: who pays the interest from that point on.
- At the end of the period the balloon loan must be repaid or refinanced into a regular mortgage, at market terms on that day.
- Such a loan has already financed a large part of the price, so the Sale Law guarantee protection applies to the amounts paid to the developer from the loan funds, and you should make sure they went through the payment vouchers.
In both cases, the interest saved during construction does not disappear. It is built into the deal, and the only question is whether the price you pay for it is reasonable.
Protecting your money: the Sale Law guarantee and the voucher booklet
You often hear that the money goes into a “trust account”. That is not accurate. In a bank accompanied project the protection works as follows:
- The lending bank issues a payment voucher booklet (pinkas shovarim) for each apartment in the project.
- Every payment is made only with a voucher from the booklet, directly into the project accompaniment account.
- For each such payment the bank issues the buyer a guarantee under the Sale Law (Securing Investments), in the amount of the payment.
The law requires a developer who has received more than 7% of the apartment price to provide the buyer with security. A guarantee does not cover a payment made by ordinary bank transfer to the developer’s account, a payment for buyer modifications to an outside supplier, or money paid before the contract was signed without a voucher. In a 20/80 deal this has a double significance: during construction only the first payment is protected, so you should make sure that the guarantee for it was actually received and is kept in a safe place.
The main risk: the mortgage on handover day
The most important part of a 20/80 deal is the day on which the 80% must be paid. Several things can change by then:
- The interest rate. The monthly repayment will be set according to the rate on the day you take the mortgage, not on the signing date.
- The appraisal. The bank finances according to the lower of the contract price and the appraised value. If the appraiser values the apartment below the price you paid, the equity you need grows.
- The loan to value ratio. Under Bank of Israel rules, up to 75% for a single apartment, up to 70% for those upgrading their home and up to 50% for an investment apartment. If your status changes by handover, so will the financing ratio. We explained what determines that status in the article who counts as an apartment owner.
- The repayment to income ratio. The monthly repayment is limited to 50% of disposable income, and in practice banks prefer a lower ratio. A change in income during those three years has a direct effect.
To reduce the risk, check with a mortgage advisor or with the bank before you sign what you will be able to get, and calculate the monthly repayment at an interest rate one or two points higher than today’s. Also read what the contract says if you do not pay the balance on time: late payment interest, agreed compensation and the developer’s right to cancel.
How to decide whether a 20/80 deal suits you
- Ask the developer for a price on both tracks, in writing.
- Calculate the total cost following the example above, with your own interest rate and equity.
- Check the indexation clause and the clauses on late payment.
- Make sure the project is bank accompanied and that you have vouchers.
- Get an early mortgage assessment, including a higher interest rate scenario.
- If you depend on selling an existing apartment, align the timetable with the handover date.
To compare with an existing apartment in the same area, you can use a property valuation and browse our properties for sale.
Frequently asked questions
Is an apartment sold under a 20/80 deal more expensive?
Not always in the stated price, but the cost of financing is usually built into the price or the terms. The way to check is to ask the developer for a standard track price and compare the total cost.
Has the Bank of Israel banned 20/80 deals?
No. The temporary directive in force until the end of 2026 imposes a capital requirement on projects in which more than 25% of the units were sold with more than 40% of the price deferred, and limits subsidized balloon and bullet loans to 10% of monthly loans.
What happens if I do not get a mortgage on handover day?
Failing to pay the balance is a breach of contract, and the contract sets the sanctions, sometimes significant agreed compensation. That is why financing capacity is checked before signing, with a safety margin built in.
Is the first 20% protected?
Yes, if it was paid with a voucher from the project voucher booklet and a Sale Law guarantee was received for it. A payment made outside the vouchers is not covered.
Is a 20/80 deal worth taking even when I have all the money?
It depends on the discount offered for early payment compared with the return your money earns. When the discount is higher than that return plus the indexation differences, paying early is better.
Before you sign a developer offer
Developer 20/80 deals in Israel are a legitimate financing tool, and like any financing tool they suit some buyers and not others. The right question is not how much you pay today, but what the apartment costs up to the keys and what you will be able to finance on handover day. If you would like to weigh a developer’s offer against alternatives in the same area, we would be happy to help. You can contact us or call 077-500-4600 (from abroad, +972 77 500 4600).
The information in this article is general and does not constitute legal, financial or tax advice. Any transaction with a developer should be reviewed by a lawyer and a mortgage advisor.
