Combination Deals for Foreign Landowners in Israel
Combination Deals for Foreign Landowners in Israel
Some Americans own Israeli land that was bought by a grandparent, received in an inheritance or acquired as a long-term investment. Developing that land yourself from abroad is rarely practical. The traditional Israeli answer is the combination deal, in Hebrew iskat kombinatzia, in which a developer builds on your land and pays you not in cash but in completed units or in a share of the sales proceeds. The structure can unlock substantial value without requiring you to finance construction. It also transfers a great deal of control to the developer, so understanding the mechanics is essential before you sign a long agreement written in Hebrew.
How the classic model works
In a unit-based combination, you transfer part of your land rights to the developer. In return, the developer builds the whole project at its own cost and hands you a set number of finished apartments or commercial units. You keep those units, sell them or rent them. The developer earns its return by selling the remaining units on the open market.
The revenue-sharing variant
In a revenue-based combination, you receive an agreed share of the proceeds from selling the units instead of the units themselves. This suits owners who do not want to hold property or manage tenants. It also means your return depends on the developer's pricing and sales pace, so the agreement should give you visibility into sales reports and a say over minimum prices.
Unit-based deals give you tangible assets and control over when to sell
Revenue-based deals give you liquidity but depend on sales execution
Hybrid structures mix both and are increasingly common
What makes a strong combination agreement
The land is your only leverage, and once construction begins it becomes hard to change course. A careful agreement therefore front-loads the protections.
A precise description of the units you receive, including floor, orientation, size and finishes
Bank guarantees or insurance covering the value of what you are owed
A timetable with milestones and a right to terminate if they are missed
A clear division of taxes, levies and permit costs
Restrictions on the developer pledging your land beyond what financing requires
Planning status drives value
The value you can negotiate depends heavily on what the land can legally become. Agricultural land without an approved residential plan is worth far less than land with building rights in force. Before negotiating, have a planner review the zoning plans that apply and any plans in preparation. If the land still needs rezoning, consider whether to sign now or to first advance the planning yourself with professional help.
Special issues for foreign owners
If you live in the United States, you will need a trusted local team: a real estate lawyer, a planner, an appraiser and ideally a project monitor who reports to you. Signatures may require notarization with an apostille. You should also confirm that your ownership is properly registered and that there are no old liens, caveats or family disputes on the parcel. On the tax side, a combination deal is treated in Israel as a sale of part of the land in exchange for construction services, which can create VAT and other liabilities. Consult an Israeli tax advisor and a US CPA before committing.
Choosing the right developer
Ask for completed projects you can visit, bank references and the identity of the financing lender. A developer that works with a backing company, meaning a financial partner that monitors the project and supports its financing, generally offers owners more security. Competitive bids from several developers almost always improve terms.
Keeping an eye on the project once it starts
After signing, the developer controls the site, but you still have rights. Ask for periodic progress reports, photographs from the site and copies of the permits once they are issued. Many landowners appoint an independent engineer who visits at key stages and confirms that the work matches the specification. If you plan to keep your units as rentals, start discussing management options well before delivery, so the apartments do not sit empty while you arrange tenants from overseas.
Frequently asked questions
Do I pay anything toward construction
In a classic combination the developer bears construction costs. You may still carry certain taxes or levies depending on the agreement, so read that section with your lawyer.
Can I get some cash up front
Some deals include an advance payment or a mix of cash and units. This usually reduces the number of units you receive, so model both options.
What if the land has several heirs
All co-owners usually need to sign, and inheritance orders must be registered first. Settle family arrangements before approaching developers.
How long does a combination deal take
It depends on planning status, permits and market conditions. Land with an approved plan moves much faster than land that still needs rezoning.
Elkayam Group
Combination and complex deals are a specialty of Elkayam Group, alongside development, urban renewal, pinui-binui and TAMA 38. The group works with backing companies and partners and can provide guarantees, drawing on three generations and a family background dating to the forties. From our office on Rival Street in Tel Aviv, our team works in Hebrew, English and French with landowners around the world.
Send us the details of your parcel and we will outline what a combination deal could look like.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv