In Israel, there are two types of land available.
Property may be
built upon:
Private land.
Land owned by the Israel Land Authority (Minhal) and leased for
a period of years. Private land is in short supply in Israel,
and only some 5% of the land is private. Private land is available
primarily in the older cities and towns, and other areas which
were settled early in the history of the modern state.
The majority of the country's land is held by the Israel Land Authority,
which was created in 1960 to administer lands held by the state, primarily
those which had been acquired over the years by the Jewish National
Fund. In keeping with the nationalistic and socialistic concepts prevalent
in the governments of the time, those lands were considered national
lands, and were not to be sold permanently, but rather to be leased
for a period of 49 years, with an option for renewal for an additional
49 years. The lease period corresponds with the biblical concept of
the Jubilee year, in which all lands sold during the 49 year Jubilee
cycle were to be returned to their original owners in the 50th year.
Minhal land is offered for lease in periodic closed bid auctions which
are announced to the public in the newspapers. The land is initially
leased under a development contract which requires construction on the
property within a specified period of time, usually three years, after
which the lessee receives an actual lease. The construction requirement
is intended to encourage development, and to prevent speculative purchase
of land, where an individual might seek to lease Minhal land in anticipation
of a price rise and subsequent resale. In addition, the Minhal requires
lessees to submit to it for approval all building plans on properties
it leases, in addition to the normal approval process of local authorities.
This contract provision adds more time, effort, and cost to the approval
process.
Minhal land is leased without tender to specific end users only in
special situations where the government seeks to encourage growth, such
as development areas where land may be leased directly to industrial
companies and developers for special uses.
The predominant form of Minhal land leases are capitalized land leases,
where the major portion of the entire stream of payments for the 49
year lease period is prepaid at the outset, with the total price calculated
to take into account the value of the up front payment. The most common
type of lease is executed by an initial payment of 91% of the property
value, with no additional payments. The remaining 9% is symbolically
the state's portion of ownership.
The initial lease is for a 49 year period, with an option for an additional
49 years.
Although many buyers prefer private land, nevertheless, most investors
have no choice but to purchase Minhal land. It is interesting to note
that prices for private versus Minhal land do not vary greatly within
the same property market.
