Purchasing Groups in Israel — What They Are, Whether They're Worth It, and the Real Risks in 2026

What Is a Purchasing Group and How Does It Work

A purchasing group (kvutzat rechisha) is an association of individuals who jointly purchase land and build a residential project on it. Instead of buying a finished apartment from a contractor, the group members essentially become the developers themselves — they hire an execution contractor, plan the building, and manage the entire process (usually through a professional organizer).

This model grew rapidly in Israel during the 2000s and 2010s, when apartment prices surged and buyers sought ways to bypass the contractor's profit margin, which typically represents 7%–25% of the apartment price.

The process involves several key stages: a professional organizer (management company, lawyer, or developer) identifies suitable land, recruits buyers, and establishes the legal framework — a co-ownership agreement, management agreement, and appointment of a fund trustee. After purchasing the land, the group hires an architect, obtains a building permit, selects an execution contractor, and oversees construction through to occupancy.

Purchasing Group vs. Buying from a Contractor — An Honest Comparison

The central promise of purchasing groups is saving 10%–20% compared to a new apartment from a contractor. In the Ono Valley, where a new 4-room apartment from a contractor costs approximately NIS 2.7–4.1 million (2026 data), such savings would theoretically amount to NIS 270,000–820,000. But this figure is misleading — it doesn't account for hidden costs.

Sources of theoretical savings include: elimination of the developer's profit (7%–25%), savings on marketing and sales costs, and historically — significant savings on VAT and purchase tax. But since Amendment 69 in 2011, purchase tax is calculated based on the finished apartment value, closing a significant portion of the tax gap.

When you factor in all costs — management fees (up to 10% of construction cost), delays, budget overruns, and tax payments — the real gap between a purchasing group and buying from a contractor shrinks to approximately 5%–7%. In cases of significant delays, the gap may disappear entirely.

The Risks — What Can Actually Go Wrong

The central risk in a purchasing group is that you're taking on entrepreneurial risk — the same risks that in a standard purchase are borne by the contractor. This includes budget overruns, permit delays, problems with execution contractors, and in extreme cases — project collapse.

According to various industry estimates, approximately 30% of purchasing group projects in Israel have experienced significant delays. 15% of projects failed entirely or materially changed their terms. The average budget overrun stands at 15%–25% of the original budget. Exact figures are difficult to verify, but the trend is clear.

Israeli history is filled with painful examples. The Inbal Or affair ended with a 7.5-year prison sentence for fraud related to purchasing groups. Eldad Peri (Peri Real Estate) collapsed, leaving hundreds of buyers stranded. Rom Kinneret accumulated debts of NIS 137 million in a tower project in Bat Yam. These are not outlier cases — they are direct results of a structure lacking adequate buyer protections.

The greatest risk, which many are unaware of: the Housing Sales Law does not apply to purchasing groups. In practice, this means there is no bank guarantee on the money you've paid, no statutory 7-year warranty on construction defects, and no legal limits on delivery delays. All protections are contractual only — dependent on the agreement's wording and the parties' willingness to honor it.

Taxation of Purchasing Groups in 2026 — Amendment 69 and What You Need to Know

Until 2011, one of the biggest advantages of purchasing groups was reduced taxation: purchase tax was paid only on the land component (5%), not on the finished apartment value. Amendment 69 to the Real Estate Taxation Law changed this completely.

Since Amendment 69, acquiring rights in a purchasing group is calculated as purchasing a finished apartment. This means purchase tax is assessed based on the expected apartment value — not just the land price. This closes a large portion of the tax gap that made purchasing groups attractive.

Practical example: A sole-apartment buyer in a purchasing group, whose expected apartment is valued at NIS 2.5 million, will pay approximately NIS 20,700 in purchase tax. If buying from a contractor — they'd pay exactly the same. The tax advantage has essentially disappeared.

Important note: VAT in 2026 stands at 18%. In a purchasing group, VAT is paid on construction services (not on land purchased from a private individual). When buying from a contractor, VAT is included in the price. The correct comparison must account for both components.

How to Choose a Purchasing Group — 10 Essential Checks

If after everything you've read you're still considering a purchasing group, you need to perform comprehensive due diligence. Here are the essential items to verify before signing any document.

First, investigate the organizer. What is their track record? How many projects have they completed successfully? What happened with previous projects? Request a list of buyers from previous projects and speak with them. Don't settle for references the organizer provides — seek independent reviews.

Second, examine the fund management mechanism. Is there a separate trust account? Who is the trustee — and what is their relationship with the organizer? Are funds protected from the organizer's collapse? If the trustee is connected to the organizer, that's a red flag.

Third, verify the land status. Is there an approved detailed plan (TABA)? What are the building rights? Are there planning restrictions? Land without an approved TABA adds years to the timeline and increases uncertainty.

Fourth, check the bank financing. Closed financing (where the bank supervises every payment) offers better protection than open financing. Ensure you have in-principle approval from a financial institution before committing.

Purchasing Groups in the Ono Valley and Gush Dan — The 2026 Landscape

In the Ono Valley specifically, the purchasing group model is less common in 2026 than it was a decade ago. The reason is straightforward: the housing market in the area is active and competitive, with a growing supply of new contractor projects and urban renewal (Pinui-Binui) developments. A new 3-room apartment in Kiryat Ono starts at approximately NIS 2.2–2.3 million, and a 4-room apartment from NIS 2.7 million.

In the broader Gush Dan area, purchasing groups still operate — primarily in large projects in Tel Aviv, Ramat Gan, and Bat Yam. Some are led by experienced companies with a track record of successes, but even here the model faces challenges from high construction costs (which rose further following the October 7 war), labor shortages, and building permit delays.

A purchasing group conference held in December 2025 at the Real Estate Center indicates renewed interest. But it's important to understand: approximately 26% of all purchasing groups in Israel are concentrated in Tel Aviv and Jerusalem alone. In satellite cities of Gush Dan, including the Ono Valley, the model is less prevalent.

For those looking for an apartment in the Ono Valley, it's worth considering the alternatives: new contractor projects (with full Housing Sales Law protections), second-hand apartments in established neighborhoods that may change with urban renewal projects, and Pinui-Binui projects that offer new apartments in established locations. Consult with a local real estate agent familiar with the area to map out your options.