Next Real Estate Bubble: Undeveloped Land With Uncertain Future

‘Prestigious Glilot quarter’ comes with strings attached.

The Glilot compound that abuts Tel Aviv to the north will unquestionably be built up. But what exactly gets built there, and where and when, are key questions that can cause investors nagging doubts about buying parcels in the area and figuring out how much they’re worth.

But the land dealers have no problem eagerly marketing pieces of the thousands of dunams of real estate, already labeling it the “prestigious Glilot quarter.” Footholds of a few dozen square meters in this “quarter” are already being sold to investors for around NIS 500,000, but according to experts there is a fair chance such an investment will end in a loss.

Several weeks ago Gila ‏(not her real name‏) visited Tel Aviv’s Electra Tower for a meeting at the offices of the Eisenberg Group, a company dealing in Glilot land, to find out about buying in. “I found out about it through an ad on the Internet saying they’re selling land to build a home in what it called ‘the prestigious Glilot quarter,’” she explained. “I discovered at the meeting that this is an area situated between Ramat Hasharon and Tel Aviv, and that the exact location of the property, and the city to which the future construction belongs, isn’t at all clear.”

The deal offered Gila at the company’s offices was the purchase of an 83-square meter piece of land in block 6618 in the Pi Glilot area for NIS 517,000. Together with lawyers’ fees, a marketing fee and purchase tax, the total sum reached NIS 560,000. In a calculation laid out for her ‏(but not part of the purchase agreement‏) the cost of building a 4-room home encompassing a net 112 square meters, 12 square meter balcony, parking spot and storage area − including construction, planning, levies and fees − would total NIS 1.53 million.

Although this would be an extremely attractive price for a home in northern Tel Aviv, Gila didn’t rush to close the deal, and eventually had a change of heart and left. “I couldn’t figure out how the plans related to the specific plot I would be buying,” she said. “I asked for time to consult with a land appraiser, but the marketing people gave me the feeling that if I didn’t close immediately they wouldn’t hold it for me. The pressure to close fazed me in the end. Someone like me, with limited capital, can’t put down this amount of money without checking out the story more thoroughly.”

Besides Eisenberg Group, Trigo Real Estate Investment also deals with selling land in the compound, starting at NIS 490,000. A video clip on the company’s website displaying the area as the Glilot quarter describes an investment there as “a safe investment in the last large land reserve remaining in greater Tel Aviv.”

This reporter called the company’s offices, located in the industrial area of Herzliya, saying I was interested in buying. The sales agent tried to persuade me that the deal was worthwhile. “Anyone holding 83 square meters of land today is supposed to receive a housing unit or the equivalent value in commercial property,” he said. “Unfortunately what I’m saying here isn’t reflected contractually.”

If it’s so definite that buying land will lead to having the rights to a unit, why isn’t this reflected in the contract? “The word ‘definite’ doesn’t exist here,” he said, “but this is what presently arises from the plans for the ground.”

But what arises from the plans on the ground is far from a promise of anything. Bordered by the coastal highway ‏(Route 2‏), Route 5, the Ayalon Highway ‏(Route 20‏) and Tel Aviv’s Ramat Aviv Gimmel neighborhood, a patchwork of plans was approved for the area in 2004 and 2005. These are general plans calling for the construction of 6,000 to 9,000 housing units in the north part of the compound belonging to Ramat Hasharon, and 3,000 units in the southern part belonging to Tel Aviv.

There hasn’t been any change to the plans since, and for a reason. Several obstacles lie in the way: The site of the fuel tanks that operated in the area left ground pollution to an extent that still hasn’t been thoroughly examined, and it isn’t clear if all parts of the land can be built on. Security installations in the area also pose a limitation for construction. There are other planning problems standing in the way too. Even the Trajtenberg Committee, which in 2011 defined the Glilot area as being slated for expedited development, didn’t succeed in quickening the slow pace of progress for the area’s plans.

Reasons for skepticism

But even if the plans were moved forward, it’s not at all certain that the tiny pieces of land of the type being sold would be the basis for a home in the area. It is important to understand that of each parcel of land bought today, 40% will be expropriated in the future − perhaps more − for roads and public services. Therefore anyone who buys an 83-square-meter plot will be left with less than 50 square meters in the future. What will this be enough for? How many partners will the landowner need to split the project with in the future? When will all the partners reach agreement on splitting the project among themselves? These are questions that can’t be answered right now, but from experience gained elsewhere, it can be said that building a project on land owned by multiple partners can be complicated and lengthy.

These reasons and others are why attorney Aviad Shoob, who manages 630 dunams in the Pi Glilot compound of behalf of the courts together with attorney Joseph Segev, is quite skeptical about the quality of the investment. “The planning isn’t being advanced today by the [Israel Lands] Authority,” he says. “There is a very remote chance that such a few meters of land in the end will provide for a housing unit, and it is entirely uncertain that construction will take place right where the land was bought. If we add the existing planning uncertainties in the area, anyone who buys an 80 square meter plot in the compound has thrown his money away.”

The Eisenberg Group responded that according to the ILA, plans for Glilot are being prepared to be sent to the district planning committee for public perusal, after which detailed planning for the various sections of the land can proceed quickly.

“Land buyers are also explained explicitly on signing the agreement that the land might receive building rights or be assigned for commercial use by the authorities,” the company said. “In any case a handsome return on the land is expected. We believe it’s a good investment and that many of the skeptics will eat their hearts out in the future.”

Trigo Real Estate Investment stated: “Our company deals with marketing land in the best locations in the country, including Glilot, for investment purposes and to investors. From taped conversations we found that the sales agent said explicitly that at this planning stage the land bought would not ensure the right to an apartment unit.”

Itzik Ben-Malki