Eight months in which the rental prices went wild to record highs that we have not known in the history of the State of Israel, and now the government reform for long-term rentals has finally been approved, which had been delayed until now even though it had already been approved in legislation.
The Authority for Investments and Development of Industry and the Economy, which is under the Ministry of Economy, today (Monday) approved the new route, which was passed in the latest Settlements Law, and includes unprecedented tax benefits for companies and individuals that will build residential projects in which two-thirds of the apartments, or at least 10 apartments (whichever is the highest), will be nominated For rent for a period of 15 years at least.
The formula is simple: tens of thousands of housing units will be built in the coming years for long-term rental, in exchange for tax benefits for the developers.
The big profit is for the renters, since the tenants in these projects will enjoy a type of supervision with rental contracts for an aggregate period of at least 10 years, with certainty of the amount of payment throughout the contract period.
The route is structured so that the longer the owners rent their property - the more significant the tax benefits will be, according to the following model:
• In the first 5 years, the leasing company will be entitled to a reduced corporate tax rate of 11%, instead of the current rate of 23% (a reduced rate of 29% for individuals).
• After 5 years and up to 10 years, corporate tax is reduced at a rate of 9% (27.5% for individuals).
• After 10 years and up to 15 years at a rate of 7% (25.5% for individuals).
• Those who continue to rent the building for up to 20 years or more will be entitled to a reduced corporate tax rate of only 5% (24% for individuals).
The new route makes it possible to sell the projects in their entirety to those who will continue to lease the project in accordance with the conditions established by law and similar to many OECD countries.
In this way, the route encourages a secondary market for long-term rental projects and increases the economic viability of these projects.
In addition, as part of the reform, there is a unique route for the periphery and minority settlements that will encourage projects in these settlements as well.
Since the new route was approved under the Arrangements Law, there has been a lot of interest from projects, and it is expected that in the coming years, the construction of tens of thousands of apartments for long-term rent will be encouraged all over the country.
The route joins the government's efforts to encourage long-term rental projects, which include the construction of over ten thousand rental housing units that have been sold in tenders of the government company "Dirah Lachshakir" in recent years, and it is estimated that it will attract many projects also in construction on private land and in urban renewal.
Minister of Finance, Avigdor Lieberman:
"This is real news that will allow tenants certainty and security to rent an apartment long-term, as in the world. The move that goes into effect today will make long-term renting in Israel viable for entrepreneurs while providing tax benefits along with protecting tenants."
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