When purchasing an off-plan apartment, the contract price is rarely the final amount paid. One of the main factors driving up final costs is the Construction Input Index linkage, which can add tens of thousands of Shekels.
What is the Construction Input Index?
Published monthly by the Central Bureau of Statistics, this index reflects changes in the costs of building materials (cement, iron), labor, and shipping. Developers link unpaid installation balances to this index to shield themselves from material cost spikes.
The Sale Law Amendment: Limiting Linkage to 40%
Following an important legal reform, developers are prohibited from linking the entire apartment price to the index. Today, only a maximum of 40% of the property value can be linked, while the remaining 60% remains fixed. This limits buyer exposure but still allows for substantial extra costs.
How to Negotiate and Minimize Index Linkage?
Your attorney will employ several strategies to mitigate indexation exposure: 1. Setting the latest baseline index (the contract signing month instead of earlier calls). 2. Exempting specific installments from linkage. 3. Prepaying balances (secured by bank guarantees) to freeze indexation on those amounts.