The Ministry of Construction and Housing is preparing for the publication of the target price tenders, and released new draft tender documents for public comment yesterday. The target-price plan can only go into effect following the approval of the 0% VAT plan, which is currently expected to take place at the beginning of Knesset’s winter session at the end of this month.
The draft tender addresses the contractors’ payment options, their obligations to the Ministry of Housing, the fines they will be required to pay should they not fulfill their obligations, and more. The draft tender states that the tenders will be only for contractors and real estate developers, not buyer groups or non-profit organizations. This is a significant blow to the non-profit organizations, which had hoped to be included in the plan, as well as in the 0% VAT plan. Ministry of Housing sources explained that it was decided that these tenders would initially be only for contractors and real-estate developers, and the possibility of including buyer groups and non-profits will be examined at a later date.
The tender documents further state that those eligible to purchase discounted apartments under the plan will be able to do so only after the project has received a building permit. In other words, apartments will not be sold “on paper.”
In addition, the draft tender states that developers and contractors will not be permitted to charge apartment buyers anything beyond the amount set forth in the tender. In other words, no changes or additions may be made to the apartment specifications. Under the new tender, the tender winner will also be required to deposit “a guarantee to ensure it will meet the terms of the target price tender,” at a rate of NIS 25,000 per housing unit in the project. This is a significant amount, and these conditions do not exist in other tenders.
The final tender documents will include a chapter addressing the technical specification of the apartments to be built under the target-price plan. These specifications are meant to be identical to that of the 0% VAT plan. These specifications, as well as those of the 0% VAT plan, have not yet been approved by the Ministry of Finance. The Ministry of Housing said yesterday that the specifications, as well as other parts of the target price tenders, will be published only following the public comments over the coming weeks.
20% lower than market prices
Under the target price plan, the government will publish tenders in which the contractor or developer who wins will be required to sell a significant portion of its approved apartment offering under the Urban Building Plan (Taba) at a pre-determined price, which will be 20% cheaper than equivalent apartments in the same area. The prices will be determined based on calculations to be made by Ministry of Justice Chief Government Assessor Tal Alderoti.
Under the terms of the tender, the contractors and developers will bid on the land, and the winner will be the bidder that offers the highest price for the land, accounting for the other conditions. This plan, in contrast to the 0% VAT plan, will be open to people buying larger homes, and not just first-time home buyers. A buyer participating in the target-price program will not be able to buy a home discounted under the 0% VAT plan. In addition, the buyer will not be allowed to sell the apartment for five years, but renting the apartment during this period will be permitted.
The Ministry of Housing said, “This is a benefit that will allow young couples to attain new apartments in high-demand areas, and will impact people moving upmarket as well, who make up an important portion of the market. Reducing the prices of new apartments in the area will also impact the prices of second-hand homes, which account for 75% of real-estate market transactions, in the area, and is expected to causes a similar reduction in their prices as well. The target-price plan complements the 0% VAT plan, which applies only to first-time homebuyers.”
Those eligible for target-price apartments include first-time homebuyers, and people moving to a larger/different home (who own only one apartment and wish to move to a target-price home instead). Buyers will need to present a certificate of eligibility, which will be issued by the Ministry of Housing.
The draft tender that was presented for public comment is still subject to change. Real-estate market insiders, as well as the general public, may comment on the draft text by submitting an e-mail to the following address at the Minsitry of Housing: matara@moch.gov.il.
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2014
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