How to add value to property through betterment in Israel
How to add value to property through betterment in Israel
Much of the value in Israeli real estate is created not by construction but by planning. When a plot gains building rights, a new permitted use or permission for more units, its value can change even before anything is built. This process, known in Hebrew as hashbachat nekhasim, is the basis of many development and renewal deals. This guide explains the main routes to betterment, how the value is created and what it costs to get there.
What betterment means
Betterment is an increase in the value of a property that results from a planning change. It can come from a new local plan, from a relief granted by the planning committee or from approval of a use that was not previously permitted.
The owner captures that value when selling, building or leasing on the improved terms. The public also shares in it, through the betterment levy that the local authority may charge.
Main routes to adding value
Each route has its own procedure, timeline and level of uncertainty. Some can be pursued by a single owner, while others need a detailed plan prepared with planners and approved at local or district level.
Additional building rights – more floor area under a new or amended plan
Rezoning – for example from agricultural or industrial to residential or mixed use
Extra units – permission to divide the permitted area into more apartments
Change of use – converting offices, storage or commercial space to another permitted use
Relief – a limited deviation granted by the local committee
How the value is actually created
A buyer pays for what a property can legally become. When rights increase, the land can carry more saleable area, so its value to a developer rises. The difference between the value before and after the planning change is the betterment.
The size of that difference depends on the market, on construction costs and on how certain the new rights are. An approved plan is worth more than one that has only been filed.
Costs, risks and timing
Betterment requires planners, architects, lawyers and appraisers, and planning procedures can take a long time. Objections from neighbours, policy changes and infrastructure requirements may reduce or delay the result.
The betterment levy, fees and the cost of any obligations imposed by the plan must be deducted from the expected gain. An appraiser should model the net result before money is spent on planning.
Planning risk – the plan may be changed or rejected
Timing risk – procedures may take longer than expected
Levy and fees – part of the gain may be owed to the authority
Working with a partner
Owners who lack the capital or experience for a planning process can partner with a developer, sell the plot with its potential or enter a combination deal. Each option shares the gain differently.
Elkayam Group works in development, combination deals and complex deals and brings partners into projects, which helps owners choose the structure that captures the most value for their situation.
Frequently asked questions – property betterment
Can I add building rights to my property on my own
Some reliefs can be requested by a single owner, but significant changes usually require a plan prepared by professionals. A planner can tell you what is realistic for your plot.
Does betterment always increase the sale price
It increases the value if the new rights are usable and in demand. Levies, costs and market conditions determine how much of that value the owner keeps.
Should I sell before or after the planning change
Selling after approval usually captures more value but requires time and investment. Selling earlier transfers both the potential and the risk to the buyer.
Why Elkayam Group
It 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