Will Financing Deals Continue to Dominate the Market?
Mark Zeevi, Chairman of BMBY Software Systems, was interviewed for an article on the topic alongside senior marketers and developers. He discussed a financing solution that the company is developing in collaboration with leading financial institutions.
After emerging at the peak of the economic crisis in 2023, real estate financing deals—where homebuyers are required to provide only 5% to 20% of a property’s price as an initial payment—have nearly become the norm. However, with the market’s recovery and warnings from the Bank of Israel, there has been a reported decline in the volume of such transactions and a slowdown in post-presale sales. Opinions on the matter remain divided: “They’re here to stay,” some industry players told the Real Estate Center website.
According to Bank of Israel data, in September last year, approximately 25% of new home sales were conducted under the 20/80 financing model. Despite the bank’s warnings about the risks associated with such financing deals, the model appears to be holding strong.
A Decline in Post-Presale Sales Volumes
Mark Zeevi, Chairman of BMBY Software Systems, noted that in light of the Bank of Israel’s recent warnings, there has been a drop in the use of financing deals and balloon loans after the presale phase. This has resulted in an average 35% decline in the sales rate of new projects post-presale. Until November 2024, the average post-presale sales rate stood at 2.7% of the project’s apartments per month, whereas in January 2025, it had decreased to 1.8%.
Developers and banks primarily use these financing deals during the presale period to secure initial sales but then scale them back. However, due to the decline in sales, they are now seeking alternative solutions to maintain high sales volumes.
Financing Loans from Non-Banking Institutions
One such alternative, according to Zeevi, is offering contractor loans through non-banking financial institutions, with the interest covered by developers. This approach can boost sales and accommodate buyers who want to enter the market early without taking on a mortgage amid the current high-interest environment.
“For developers, this is a beneficial solution,” Zeevi explained. “Buyers now expect financing deals in every transaction, not just during the presale phase. Covering the interest payments for buyers is an incentive that developers can afford, given the continuously rising property prices.”
Nimrod Tzvik, CEO of Marom – Project 360, noted that financing deals have lost their uniqueness: “They’ve become the norm. The key now is to tailor financing solutions to each client’s specific needs,” he said. “Not every buyer requires the same financing deal. The best approach is to customize offers instead of repeating the same formulas.” Tzvik also believes that 20/80 financing deals won’t solve long-term market issues. “They primarily address symptoms rather than the core problem. These deals cost developers money and can lead to liquidity issues, and ultimately, no one knows what the market will look like in two years.”
Raz Schreiber, co-CEO and owner of InHouse Project Marketing, argued that contractor loans linked to 20/80 deals help mitigate risk. “These loans proved their value in 2024 and remain effective today,” he said. “They’re particularly useful in a tough secondary market and for long-term projects.” Schreiber explained that contractor loans reduce financial risk: “They ensure that buyers are pre-approved by banks, which lowers the developer’s risk. The buyer only faces full payment at the project’s completion, while the developer covers the interest during construction, simplifying cash flow management.”
Orel Ben Or, co-founder of Beta Real Estate Development, added that his company offers an upgraded version of the deal: “We use the 20/80 model but with a contractor loan. This way, the buyer secures financing from the bank, while the developer covers the interest and indexation costs.”
In conclusion,despite the decline in 20/80 financing deal volumes, the model isn’t disappearing. While some developers worry about liquidity risks, others see these deals as essential market drivers. The debate over the model’s viability continues, but the availability of various financing options—including contractor loans and non-bank funding—suggests that developers are finding ways to navigate the complexities of today’s market.