Israeli Government Publishes First Target Price Tender Terms

Target Price program offers builders state-owned land at a discount, so long as they pass on the lower cost to the buyers of the homes they build.

Nir Keidar

After delays, the government’s Target Price plan moved a critical step forward on Wednesday when the Housing and Construction Ministry and Israel Lands Authority released terms for contractors bidding in the first tender issued under the program.

The tender terms seek bids from contractors for various sites in the town of Rosh Ha’ayin designated for construction of 2,048 homes.

The Target Price program, which received far less attention than the government’s abortive Zero-VAT plan, offers builders state-owned land at a discount, so long as they pass on the lower cost to the buyers of the homes they build on it so that prices should be 20% less than the market rate.

The first two tenders for the Target Price program, whose prime backer is Housing Minister Uri Ariel, were published in December for Rosh Ha’ayin and ModI’in. But after that, the process ground to halt, which ministry officials attributed to tax-related issues and complications trying to manage a new and untried program.

Rising home prices and the government’s failure to successfully address the problem has emerged as a major theme in this year’s election. But Ariel this week promised that the Target Price plan would work. “It will be the main way we lower home prices in coming years,” he said in statement.

The plan envisages tendering land between 2014 and 2019 zoned for some 60,000 houses.

In the tender for Rosh Ha’ayin, builders must construct 61% of the homes that will sell for 9,400 shekels ($2,350) a square meter, or 940,000 shekels for a typical four-room apartment, not counting extras like balconies and parking. That is about a fifth less than the local market price, the Housing Ministry said.

Adding in those extras, the 100-square-meter apartment with a 10-square-meter balcony will be priced at 987,000 shekels, and a 122-square meter unit with a 25 square-meter balcony at 1.241 million shekels, the ministry said.