12/5/2012

Government Approves Minister of Finance's Proposed Tax Exemption for Institutional Entities on long-term Apartment Rental Revenues

 

The decision should increase the supply of residential apartments and afford more housing options for younger people Today, the Government approved Minister of Finance's proposed tax exemption for institutional entities on long-term apartment rental revenues.

 

This proposal is part of a tool box created this year by the Ministry of Finance and the Tax Authority, in order to increase the supply of residential apartments and to mitigate price increases in this market.

 

Today's approval of this proposal is a first step in establishing and developing a new market in Israel - one of long-term rental residential apartments. Unlike other Western World countries, corporate apartment rental is not offered in Israel. Moreover, Israeli provident funds invest in long-term residential rental projects overseas.

 

The Israeli apartment rental market is typically a short-term rental market, for about 1-2 years. These are usually private tenants, who prefer a short-term lease. Housing developers are also uninterested in projects requiring long-term management, since the yields on a rental housing project is not attractive for real estate developers.

 

The creation of a long-term rental market is designed to provide a stable alternative for younger people who lack equity; to provide a mix of apartments of different sizes and construction standards, to fit tenant needs; to inject significant capital in order to increase housing supply; and to increase credit available for the real estate market.