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"There will be no real recovery until the real estate sector recovers," say the leading bankers, and - in the same breath - they say clearly that they are still not optimistic.

The crisis in the commercial property sector is deep because of the great excess supply of offices and commercial space; many building contractors are in financial straits because they just cannot wait that long; and even on the residential side, things are not so good, as the number of building starts is lower than that required to keep the existing contractors going. Building starts today number around 25,000-30,000 housing units, while it takes 40,000-50,000 to have a growth situation.

The optimism that sung out of the major banks' financial reports this week seemed to have bypassed the real estate sector, the field that takes the largest chunk of the banks' credit portfolios. The two biggest banks reported larger provisions for doubtful debts for this sector. Leumi has put many small contractors under special supervision, which pushed its problem debt item up to around NIS 2 billion. Every month sees more casualties in the sector.

Even long-standing companies with solid reputations like Solel Boneh are in difficulty, and had it not been for a welcome injection of cash from owner Housing & Construction (Shikun v'Binui), that firm too could have collapsed. The general feeling is that seven/eight years of recession for real estate has left no more than 10 good solid building companies around.

The banks believe the worst is behind us, though they are still left dealing with bleeding small and medium-sized contractors. A NIS 90 million debt here, a NIS 40 million debt there, and the doubtful debt provisions and problematic debts pile up.

For the sector to recover, there needs to be a recovery in the economy in general, among companies and the general public, too. As consumers feel more money in their pockets, and a feeling of security returns, so companies will feel more confident and the crisis will be over and finally, finally, the investments will flow and pull us all out of the mire.