How a combination deal works for landowners in Israel
How a combination deal works for landowners in Israel
In a combination deal, known in Hebrew as iskat kombinatzia, a landowner transfers part of the rights in a plot to a developer and receives, in return, finished apartments or other space in the building that will rise on it. No cash may change hands at the start, yet the deal can be worth more than an outright sale. It also ties the owner to the developer for years, so the structure, the guarantees and the partner matter as much as the headline offer.
How the exchange actually works
The owner sells the developer an undivided share of the land. Instead of paying money for that share, the developer pays with construction services: it builds the whole project and hands the owner a defined set of units. The developer keeps the remaining units and sells them to finance the work and earn its profit.
Some deals are built on a share of sales revenue rather than specific units, and some mix units with a cash component. Each variant shifts risk differently, so the owner should understand which one is on the table before comparing offers.
Unit combination – the owner receives specific apartments described in the contract
Revenue combination – the owner receives a share of the proceeds from sales
Mixed deal – units plus a payment, often used when the owner needs liquidity
What the landowner should expect to receive
The contract should describe the owner's units precisely: floor, direction, size, parking, storage and a technical specification attached as an appendix. Vague wording such as units of average quality invites disputes at handover.
Owners should also agree on who carries the taxes and levies that the transaction may trigger, including VAT on the construction services, purchase tax on the land share and any betterment levy. These costs can change the real value of an offer considerably, and an accountant should model them before signing.
Guarantees that protect the owner
Between signing and handover, the owner has given away land and holds only a promise. That gap must be secured. Common tools include a caveat registered in the land registry in the owner's favour, bank guarantees under the Sale Law for the value of the owner's units, and a bank accompaniment agreement for the project.
The land share should normally pass to the developer only in step with progress, and the contract should say what happens if the developer stops work or becomes insolvent.
Caveat – a warning note registered in favour of the owner's future units
Sale Law guarantee – bank or insurance security for the owner's units
Completion mechanism – a clear path to finish the project if the developer fails
Negotiation points and common risks
The main risks are delay, a weak developer, a planning process that stalls and a specification that shrinks. Owners negotiate on the number and location of units, deadlines with compensation for delay, the timing of the land transfer and the conditions under which they can cancel.
It is worth asking how the developer finances the project, which bank will accompany it and what similar projects it has completed. An offer from a developer without backing is rarely worth more than a smaller offer from a strong one.
Practical steps for an owner
Start by clarifying the rights on the plot and the planning potential, ideally with an appraiser and a real-estate lawyer who represents only the owner. Then invite several proposals and compare them on the same basis, including taxes, guarantees and timetable rather than unit count alone.
Elkayam Group works on combination deals from both sides, which helps owners see how a developer prices the land and where there is room to improve the terms.
Frequently asked questions – combination deal for landowners
Does the landowner pay tax in a combination deal
Usually yes, because the exchange of land for construction services is treated as a sale. Purchase tax, VAT and capital gains questions arise, and who bears each cost is negotiable. An accountant should review the structure before signing.
What happens if the developer goes bankrupt
That is exactly what the guarantees are for. With a caveat, Sale Law guarantees and a bank accompanying the project, the owner has recourse. Without them the owner may be left with an unfinished building.
Can I get cash as well as apartments
Many deals include a cash component alongside the units. It usually reduces the number of units the owner receives, so it should be priced against the value of the space given up.
Why Elkayam Group
From Rival St 37 in Tel Aviv, the group is active in development, urban renewal and combination deals, works 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