Real Estate specialist, Adv. Amnon Sorek:"costs of funding due to credit restrictions by the banks are high and raise the price of the land by 10%". "If once, when an entrepreneur bought land in Tel Aviv by the sea in order to build a luxurious condominium 5 banks would stand in line to give a construction loan account, Today, no bank would give funding for such a project. The banks are afraid." Says Att. Amnon Sorek a partner at the law firm of Hamburger Evron, specializes in Real Estate in an interview given to "Asakim". "Today, projects like this exactly, scare the banks since among other things, these projects depend on apartments sold to foreign citizens, who are influenced by world economic climate." Sorek goes on to explain the implications of banks currently halting funding for such projects: "in the past, and today as well, from the moment a contractor buys a piece of land, he has to wait at least two years until he is given a building permit. Once, the cost of funding during this intermediate period was low and inconsequential. Today, the cost of funding, due to the credit restrictions by the banks are so high, that they raise the cost of purchasing the land by 10%. The banks today even require contractors to have an initial sum of 50%. When an entrepreneur has no such sum, he has to borrow the money elsewhere, which proves to be very costly. This in turn, raises the costs of funding. As a result, there would be contractors who would have to leave the business, there would be less competition and the housing prices would go up." According to Sorek, even a contractor who bided a governmental tender and won, often encounter difficulties with conditions set by the banks. For instance, a bank would give a construction loan only if 30% of the apartments were already sold. It is hard to sell apartments these days. The contractors all know this and are afraid to bid tenders since it is unclear whether they would receive any funding. Sorek goes on to explain, that once, a contractor was able to build four projects 100 apartments each with an initial capital of 10 million NIS. Today, this contractor with the same capital could build two projects, 50 apartments each. "This is exactly the decrease in constructions beginnings." Sorek claims that the solution is governmental intervention:"if the government would let institutional investors build projects designated for rent close to railway stations in places like Rehovot, Hadera, Netanya, in an annual return of 6%, the housing problem would have been felt less. An 80-90 sqm apartment would be leased for 2500 NIS and after 25 years the institutional investors could sell the apartments while handing over a percentage of the profit to the government. Many apartments for sale would be vacated by people who prefer to rent for less. " |
Our Legend
Hamburger Evron & Co. was founded in 1928 by the late Adv. Arie Hamburger.
Since the 70's, the firm was headed by the late Adv. Amnon Evron, who was recognized as one of the leading lawyers in Israel in the fields of commercial law, and was renowned as an expert lawyer and a gifted litigator. In addition to his legal activities, Adv. Evron was a member on the board of the international Arthur Rubinstein Voluntary association, and was a board member of the new Israeli opera association.
