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Shekel Contracts: Managing Exchange-Rate Risk

Q: Should I convert everything at signing?

There is no right answer that fits every buyer; it depends on how much certainty you want and on how your money is held at home. Decide on a policy with your adviser before signing rather than reacting to daily rates.

Q: What is the construction inputs index and why does it matter?

It is an index published by the Central Bureau of Statistics measuring construction costs. New-build contracts commonly link unpaid instalments to it, so the shekel amount you owe can rise during the build.

Q: Can my Israeli bank sell me a forward contract?

Most Israeli banks offer forward contracts to customers who have an account and have passed onboarding. Ask about the deposit the bank requires and the cost of extending the contract if dates move.

Currency exchange planning for a property contract in Israel

An Israeli purchase contract is almost always denominated in shekels, and when the buyer's money is in dollars, euros or pounds, the real price of the apartment is not fixed until the last instalment is converted. For a completed apartment the gap between signing and delivery may be a few months; for a new-build it can be years. The question for a foreign buyer is therefore not whether there is currency exposure, but how much of it to carry and for how long. This page explains where the exposure sits and the ordinary tools for managing it, without recommending any particular rate view.

Where the exposure comes from

The contract price is in shekels, so each future instalment is a fixed shekel amount with an unknown home-currency cost.
New-build contracts usually link the unpaid balance to an index, most often the construction inputs index published by the Central Bureau of Statistics, so the shekel amount itself can rise over the build period.
Purchase tax, lawyer's fees, broker's fee and later furnishing costs are also in shekels.
If you take an Israeli mortgage, the loan is in shekels and the repayments continue for years after delivery.

Linkage to an index is a contractual term, not a legal requirement, and the Sale (Apartments) Law 5733-1973 and the regulations under it govern what a developer must disclose. Ask your lawyer to explain exactly which index applies, from which base month, and to which part of the price, before you sign.

Option one: convert early and hold shekels

The simplest approach is to convert the full price, or a large part of it, soon after signing and hold the shekels in an Israeli account or in your lawyer's trust account until each instalment is due. The price in your home currency is then known. The cost is that you give up any benefit if the shekel weakens later, and you tie up capital that might otherwise earn a return at home. The money also has to pass the receiving bank's compliance review once, in one go.

Option two: convert in stages

Converting each instalment shortly before it is due spreads the conversions over time. No single rate decides the whole purchase, and your capital stays in your home currency longer. The exposure remains open until the last payment, and a sharp move before a large final instalment can hurt. This approach also means more transfers, more fees and more compliance questions.

Option three: hedge with a bank or broker

Banks and licensed currency brokers offer forward contracts, which fix today the rate at which you will buy shekels on a future date, and related products. A forward removes the uncertainty for the amount and date it covers, but it is a binding commitment: if the instalment date moves, for example because construction is late, you may need to extend or unwind the contract at a cost, and the provider may require a deposit. Only deal with a regulated provider, read the terms carefully and make sure the hedge matches the contract's actual payment schedule. Check what disclosures the provider owes you under the rules of its own regulator.

Matching the hedge to the contract

List every instalment with its date, its shekel amount and whether it is index-linked.
Decide what share of the total you want fixed and what share you are willing to leave open.
For new-builds, remember that milestone dates can slip; a hedge tied to a calendar date may need adjusting.
Keep a cash reserve in shekels for the extra costs that arrive around delivery.
If you are taking a mortgage, the bank's own drawdown reduces the amount you need to convert; coordinate the two.

Can the contract itself be in foreign currency?

Occasionally a private seller agrees to price in dollars, and a developer may accept payment in foreign currency at an agreed conversion method. These are negotiated terms. They shift the exposure to the seller rather than eliminate it, and the seller will usually price that in. Purchase tax and registration are still calculated in shekels under the Real Estate Taxation Law 5723-1963, so the tax authority will convert the price at the rate on the relevant date. Discuss with your lawyer whether a foreign-currency clause is realistic for your deal.

Common mistakes

Treating the shekel price at signing as the final price without allowing for index linkage.
Waiting for a better rate until the week an instalment is due, then paying late.
Buying a forward for a date that no longer matches the construction schedule.
Hedging the full amount and then also drawing a mortgage, so the hedge is larger than the cash you actually need.
Forgetting that mortgage repayments keep the currency exposure alive for years after delivery.

FAQ

Should I convert everything at signing?