Combination deals in Israel for developers and investors
Combination deals in Israel for developers and investors
For a developer, a combination deal replaces a large upfront land payment with a promise to build. That frees capital and lets a project start on land that would otherwise be out of reach. The cost is a partner with strong rights, obligations to deliver specific units and a financing structure that must satisfy a bank, the landowner and any investors. This guide looks at the deal from the developer and investor side.
Why developers choose combination over purchase
Paying for land in apartments rather than cash reduces the equity needed at the start and aligns the landowner with the success of the project. It is common where owners are reluctant to sell, where land is held by families across generations, or where planning potential is still being unlocked.
The trade-off is that the owner's units are removed from the saleable inventory, so the project's economics depend on the remaining units covering construction, financing, taxes and profit.
Sourcing and screening land
Good combination opportunities often come from owners who have held land for a long time, from heirs who want to realise value without selling, and from plots where a new plan has added rights. Screening begins with the registered rights, the zoning plan and a realistic view of what can be built.
A developer should test whether the plot can carry the owner's share and still leave a margin, and should check early whether there are co-owners, disputes or encumbrances that will slow signature.
Rights check – land registry or Israel Land Authority records
Planning check – current plan, pending plans and permit history
Feasibility – units, costs and sales assumptions reviewed by an appraiser
Structuring the agreement
The contract defines the land share transferred, the owner's units and specification, the timetable, the guarantees and the tax allocation. It should also cover how design changes are approved, how disputes are resolved and what happens if a permit is refused.
Clear mechanisms protect the developer too. A well-drafted deal avoids reopening the terms at every stage and gives the bank the certainty it needs to finance the project.
Financing and bank accompaniment
Most residential projects of this kind are financed through a closed bank accompaniment arrangement. The bank reviews the feasibility, requires a level of equity, supervises a dedicated project account and issues guarantees to buyers and to the landowner.
Because the landowner holds guarantees, the bank treats the owner's units as a liability of the project. Investors should understand how that affects the credit line and the equity requirement before committing.
Bringing in partners
Many developers bring in capital partners or a backing company to meet equity requirements, provide guarantees or add execution strength. The partnership can be a joint company, a profit share or a subordinated investment, each with different control and exit terms.
Elkayam Group works with backing companies, brings partners into combination projects and provides guarantees for clients, which helps a deal that is sound on paper get signed and financed.
Equity partner – shares in profit and in risk
Backing company – strengthens guarantees and credibility with the bank
Investor loan – capital with priority but without control
Frequently asked questions – combination deals for developers
How is a combination deal different for the developer from a land purchase
The developer pays with units instead of cash. Less capital is needed at the start, but the landowner's units and guarantees become part of the project's obligations.
Do banks finance combination projects
Yes, usually through bank accompaniment. The bank will examine the agreement with the landowner closely, especially the guarantees and the timing of the land transfer.
What should an investor ask before joining a combination project
Ask about the planning status, the owner's share, the bank terms, the developer's record and how profits and losses are divided. Independent legal and appraisal advice is essential.
Why Elkayam Group
The group works in development, urban renewal, combination deals and complex deals, cooperates with backing companies, brings partners into projects and provides guarantees for clients. The team works in Hebrew, English and French.
Contact: +972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv