Israel Real Estate Investment Trusts (REITs)

Access Israeli real estate through the stock market — understand how Israeli REITs work, their yields, and how they compare to direct property investment.

What Are Israeli REITs?

Israeli Real Estate Investment Trusts (Kranot Hashka'ot BeMekarkin, or KHMs) are publicly traded companies on the Tel Aviv Stock Exchange (TASE) that own and operate income-producing real estate. They offer investors exposure to Israeli property markets with stock-market liquidity, professional management, and portfolio diversification.

Israel's REIT framework, established in 2006, requires REITs to distribute at least 90% of taxable income as dividends, own primarily income-producing properties, and maintain specific leverage and diversification ratios. This structure provides investors with regular income distributions alongside potential capital appreciation.

Israeli REIT Landscape

Sectors Covered: Israeli REITs primarily focus on commercial property: office buildings, retail centers, logistics/industrial, and some residential. Major REITs include Azrieli Group, Amot Investments, Gav-Yam, and Shufersal Real Estate.

Dividend Yields: Israeli REITs typically offer 4-7% dividend yields, higher than direct residential rental yields (2-4%). Distributions are usually quarterly.

Tax Treatment: REIT dividends are taxed at 25% for individuals (withheld at source). Capital gains on REIT shares follow standard stock market tax rules (25%).

Performance: Israeli REITs have delivered total returns (dividends + appreciation) of 8-12% annually over the past decade, with significant variation by sector and individual REIT.

REITs vs Direct Property

REITs offer liquidity, diversification, and professional management that direct property cannot match. However, they lack the leverage advantage (mortgage amplification) that makes direct property so powerful for wealth building. Most sophisticated investors use both: REITs for liquid real estate exposure and income, direct property for leveraged appreciation and tax benefits.

Market data

Price range: Any amount (shares traded on TASE)
Annual appreciation: 8–12% total return (historical)
Rental yield: 4–7% dividend yield

Pros

Stock-market liquidity, professional management, portfolio diversification, regular dividends, low minimum investment

Cons

No leverage advantage, market volatility, 25% dividend tax, less control, correlated with stock market sentiment

Frequently asked questions

Can foreign investors buy Israeli REITs?

Yes. Anyone with access to the Tel Aviv Stock Exchange can purchase Israeli REIT shares. Many international brokers offer TASE access. Dividend withholding tax of 25% applies, potentially reducible under double taxation treaties.

How do REIT returns compare to direct property?

On an unleveraged basis, REITs often outperform direct residential property (8-12% total return vs 6-9% for residential). However, leveraged direct property (with a mortgage) can significantly outperform REITs on a return-on-equity basis. The choice depends on your capital, leverage appetite, and liquidity needs.

Are REITs a good way to start investing in Israeli real estate?

REITs are an excellent starting point: low minimum investment, instant diversification, professional management, and full liquidity. They provide real estate market exposure while you research and save for direct property purchases.

Explore Israeli Real Estate Options

Contact Kobi Elkayam to compare REITs and direct property for your investment goals.

Call now: +972-53-658-4252 · קובי אלקיים נדל"ן

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