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Israelis quaking as credit crisis reaches E. Europe property scene By TheMarker Correspondents and Staff , By Raz Smolsky and Michael Rochvarger The many Israelis who stampeded the Eastern European real estate market during the boom years are now feeling the ground quaking beneath their feet, as local banks turn tougher on lending money for projects. "About four years ago, there was a gold rush. The market was like the Wild West," says David Flusberg, an American Jew who co-founded the Israeli real estate company Adama Holding. Advertisement Nobody knows exactly how many Israelis actually have invested in the roaring Eastern European real estate sector, though industry sources believe there are thousands of them. Flusberg, for one, believes that many were not strongly tied to the business community - not "serious businessmen," as he puts it. They had heard about the fantastic opportunities in the region and were willing to take a risk. The Israelis operate mainly in Romania, which has become a magnet for investors from all over the world, but also have invested in Russia and other countries in the area. Many bought land on the cheap and managed to exit at top dollar. Certainly during the boom, the Israelis found it easy enough to borrow: Until the end of 2007, the banks bent over to lend. Not any more. Then came the U.S. subprime crisis that triggered the worldwide credit squeeze. One upshot has been that if banks lend money at all, especially for real estate ventures, they demand higher interest rates. "The banks have toughened their position," says attorney Ephraim Shpitalni, chairman of Gamla Millennium Investments, which invests in Eastern Europe. Nowadays the banks hardly ever approve financing for projects in Bucharest, Shpitalni says. Now they insist that the developer commit to remain involved in the project for the long run, until the apartments are put up for sale. Shpitalni suspects that the banks don't want to finance only the land purchases - they want to provide the mortgages to homebuyers as well. This would explain their sudden coolness to what they perceive as speculative buyers, who hop over, buy land and sell it as quickly as possible at a profit, without building. But are the Israeli entrepreneurs really in trouble? Shpitalni thinks many are, based on the increase in partnership proposals he's been getting. Many of the smaller real estate companies that issued bonds on the Tel Aviv Stock Exchange, instead of raising money from the bank, are now frightened that they can't meet their debt repayments and are hawking chunks of their projects to prospective buyers, he says. Oscar Katzenelson, chairman of Nanette Real Estate of the Olimpia group, isn't worried. "This is mainly a crisis in America, Western Europe and central Europe, but it hardly touches Eastern Europe," he argues. "That is because the percentage of mortgages in Eastern Europe doesn't even reach 10% of GDP. In Britain, for comparison, the proportion of mortgages is equivalent to 72%." Recently Nanette wrapped up financing for new projects in Poland, Romania and Croatia, Katzenelson says. "The only slowdown we've been feeling is in the sale of apartments, because of the crisis in the European and Polish stock markets. We believe the slowdown is transient and won't affect long-term economic activity in Eastern Europe." Bookmark to del.icio.us   Never forget Peres, at Warsaw uprising memorial: Israel will avenge Holocaust through peace. Return to Haifa Provocative new play evokes sympathy for both Jews and Palestinians

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