Respecting Rabbis, Jewish Law Is Part of Quality Construction

Contractor Rabbi Pinhas Zaltzman explains how the real estate business operates in the ultra-Orthodox community.

"A contractor who builds apartment buildings for the ultra-Orthodox community but isn't sufficiently sensitive to its special needs could pay dearly," says Rabbi Pinhas Zaltzman, CEO of the Neot Hapisgah and Mishkan Ha'aretz construction companies. In an interview with Haaretz, Zaltzman says, "Negative information about ill treatment or insensitivity toward rabbis that makes the rounds among students at one yeshiva in Jerusalem in the morning is discussed at yeshivas in Bnei Brak in the evening, at all the yeshivas around the country the next morning and at all the yeshivas overseas by evening."

The outcome, he explains, can be devastating: "With a single decision by rabbis, the finished project can be boycotted and the contractor left with a stock of unsold apartments and heavy bank debts. Furthermore, any additional projects the contractor wants to undertake in ultra-Orthodox neighborhoods could be met with opposition from the rabbis of the community who have been updated on his exploits."

As an example, Zaltzman tells of a secular contractor whose conduct in building two projects for ultra-Orthodox residents in Elad was "beneath contempt" in terms of his attitude toward the residents and responsiveness to their needs. "That contractor was about to buy land in Ramat Beit Shemesh and decided to do some experimental marketing, to ascertain the level of anticipated demand. A moment before the signing, he learned that nobody wanted to buy an apartment from him, and after he realized that the general mood was against him, he decided to pass."

Rabbi Zaltzman, who lives in Bnei Brak, runs two of the construction companies that are active in ultra-Orthodox towns. The Neot Hapisgah company, he says, holds land for building 2,500 housing units in Modi'in Elite, of which 400 units are already under construction, and is currently developing land for building an additional 500 units in the town. The privately held company is also owned by an ultra-Orthodox resident of Bnei Brak, Shlomo Meir, and the Eden Hasharon firm. In the past 18 months, Zaltzman says, Neot Hapisgah has sold housing units for a total of $25 million.

Mishkan Ha'aretz, owned by Zaltzman and Meir, also focuses on construction projects in ultra-Orthodox towns and cities and was one of the more active partners in building Elad. In recent years, the company has also marketed hundreds of housing units in Ramat Beit Shemesh, Ashdod and Elad, where it is currently marketing a compound with 250 housing units belonging to the Mashab and Dona companies.

How different is building an ultra-Orthodox neighborhood or town from construction for secular buyers?

"It's very different. First of all, in order to build a town or neighborhood, you need the blessing of the Council of Torah Sages and their guidance on where and when to build the neighborhood. The construction of the Ramat Beit Shemesh neighborhood, for example, was held up for eight years in keeping with the rabbis' recommendation. The neighborhood was built about 12 years ago, even though by every standard it should have gone up 20 years ago.

"The reason for the delays was the desire of the Torah Sages to focus on increasing construction projects in Jerusalem, such as the construction of 2,500 housing units in Shuafat and additional building in the Ramot neighborhood. Only afterward, once Jerusalem had a broad range of ultra-Orthodox neighborhoods with tens of thousands of households and the satellite city of Betar was up and running, did the Torah Sages recommend building the ultra-Orthodox neighborhoods in Beit Shemesh.

"Likewise, the Torah Sages recommended building the city of Elad only after construction of the ultra-Orthodox neighborhoods in Petah Tikva. Now, all of the Torah Sages and a substantial number of Hasidic leaders are recommending Modi'in as their preferred choice."

After deciding to build a neighborhood, is there any difference in the planning of the neighborhood or planning of the apartments?

"Certainly. The planning is completely different. When building for the ultra-Orthodox, for example, there is no need for swimming pools or community centers. On the other hand, extensive areas have to be allocated for yeshivas as well as large areas for family gardens - in contrast, for example, to parks for teenagers. In addition, it is very important that the buildings stand in such a way that regardless of a reasonable distance, no window is opposite a window; a large space must also be set aside for a religious convention held periodically in the neighborhood that can also serve to host various festivities such as Simchat Beit HaShoeva [during Sukkot].

"One of the important things in planning a building is to create an option for the future, so a three-room apartment can, at minimum cost, become a four-room apartment, to accommodate the relatively fast-growing ultra-Orthodox family. Therefore, a building has to be planned in such a way that it can absorb the addition. Furthermore, every apartment plan has to include a sukkah porch measuring at least eight square meters as well as a living room separated from the rest of the house to create a closed family space or study area for the husband, where he won't be disturbed by the children.

"There are projects in which the contractors have been forbidden from installing the infrastructure for television, even though the Housing Ministry building code obligates them to do so. Therefore, in order to meet Housing Ministry codes and not undermine the demands of the ultra-Orthodox, contractors frequently lay the groundwork for television, but conceal it."

What about marketing to the ultra-Orthodox?

"Marketing in the ultra-Orthodox world can be divided into into two parts. One type is marketing to large groups in advance. In this case, a Hasidic group arrives, or a group from a yeshiva, or a collection of up to 500 households, and they register as a group. This method has disappeared over the past year. The focus now is on the second marketing method - marketing to individuals through real estate agencies in Bnei Brak or Jerusalem. In both cases, advertising is confined to newspapers, street posters, etc. There is hardly any advertising on ultra-Orthodox radio networks."

Is anyone entitled to buy an apartment in any neighborhood?

"A very important issue in marketing to the ultra-Orthodox world is the application committees. These committees characterize the neighborhood in accordance with the level of demand, while safeguarding the correct mixture of ultra-Orthodox Judaism with its various streams and characteristics. Judging by the results, I can tell you with certainty that in all the cities where the application committees have operated, there has been tremendous success from the point of view of the residential make-up of the neighborhoods."

Exactly how does it work?

"If you decide that you want to buy an apartment in a new ultra-Orthodox neighborhood, the application committee will check to see whether you're suitable. For example, they'll check whether your lifestyle suits the surroundings. If it does, the rabbis will approve your residence in the neighborhood.

"Even though the real estate market has been in a recession for the last seven years, people in the field estimate that the ultra-Orthodox market operates separately, as though there were no recession. How does that happen? It happens because the ultra-Orthodox community is conceptually different from the secular one. For us, it is very important to buy an apartment for a young couple. From the wedding night, when the checks are added up, we immediately think about how to save for a house for the kids. The ultra-Orthodox hardly ever spend evenings out, they don't spend on luxuries, and they save up to buy an apartment for the children. When parents cannot afford to do this, the communal charities help out."

How does that work?

"There are communal charities in all of the ultra-Orthodox cities. They are funded by wealthy ultra-Orthodox from Israel and around the world. After getting to know the borrower and finding out about him, it is possible to borrow tens of thousands of dollars, to be returned over many years with no interest."

What about taking out a mortgage? Is there any difference in comparison with the secular market?

"Mortgages are taken out at banks in Israel. The leading bank is Bank of Jerusalem, followed, at a substantial distance, by Bank Tefahot, Adanim Mortgage Bank, and, lastly, Bank Mishkan - Hapoalim Mortgage Bank. First International and Discount are hardly felt in the market."

Didn't the cancellation of Housing Ministry grants in April 2003 hurt the ultra-Orthodox market?

"The cancellation of grants put the market down into a holding position, and demand is now resurging in some places to between 60-70 percent of previous levels."

How is the price of an apartment determined?

"The price of an apartment today is set according to `a neighborhood brand,' such as an area with good neighbors. This is in contrast to the past, when there was a premium on living adjacent to the centers of Torah study, the Hasidic world or the rabbis. In addition, buyers have of late begun demanding high standards of construction, which was never the case before. For example, the Super Ceramic company only recently entered the ultra-Orthodox world."

This constitutes a significant change in ultra-Orthodox conceptions, does it not?

"Yes, but it is not the only change. The ultra-Orthodox world is constantly changing. In another 10 years, some of the things said in this interview will no longer be relevant."