Purchase Groups (Kvutzat Rechisha) in Israel: How They Work

A purchase group (קבוצת רכישה, kvutzat rechisha) is a group of private buyers in Israel who join together to buy land and build a residential building on it themselves, so the group takes the developer’s place. The members hire the professionals, choose the bank and the contractor and pay the building costs as they arise. The appeal is a lower final price because nobody takes a developer’s margin. The catch is that the members, not a developer, carry the risk that costs rise and the timetable slips, and a genuine group does not give its members the Sale Law guarantee that protects a buyer’s payments to a developer. Israeli tax law has its own definition of a purchase group, and in a genuine group each member’s purchase tax is worked out on the value of the finished apartment, not only on the land.

This page is for anyone who has been offered a place in a group, or a deal marketed as one, and wants to understand what they would actually be signing up to before talking to a lawyer.

What the law means by a purchase group

The Real Estate Taxation Law (חוק מיסוי מקרקעין) defines a purchase group as a group of buyers who organise to buy a right in land and to build on it, through an organising party (גורם מארגן, gorem me’argen), provided the buyers are bound by a contractual framework (מסגרת חוזית). The organising party is whoever organises the buyers for the purchase and the building, including preparing the contracts, in return for payment. The contractual framework is a set of linked contracts through which the group works to receive a finished building. The definition covers both residential apartments and non-residential property.

In practice the group acts as the developer. Through its organiser and its members it hires a licensed surveyor, a real estate appraiser, lawyers, accountants and an architect, chooses an accompanying bank (the bank that finances and supervises the project), deals with the local authority and picks the main contractor and the subcontractors. The group usually has a lead organiser who represents it to the professionals, the land seller, the contractor and the authorities.

Three deals sold under similar names

Three quite different arrangements are marketed with almost the same Hebrew words. Which one you are in decides who carries the risk and which protections you have, so pin it down first.

A bulk buying group is an ordinary purchase from a developer, with no special treatment from the state, but it can still win a lower price, because the developer sells several units at once and saves on marketing and financing.

Why people join: the claimed savings

The case for a genuine group rests on cutting out the developer. The advantages its promoters usually list are:

• No developer payments. The developer’s marketing, advertising and profit fall away. Madlan estimates these at about 10% of the apartment price. That is an estimate, not a saving anyone guarantees, and cost overruns can wipe it out.
• Possibly cheaper finance. Because most units are taken by members before building starts, the project may borrow on better terms.
• Lower management fees where members run parts of the project themselves on a voluntary basis.
• Control over the team. Members can replace professionals, including the main contractor.
• A say in the design and specification. Members can choose a better finish than the minimum specification a developer often sells.

Madlan also notes that purchase groups were very popular in the past and have declined in recent years because of their disadvantages. We have found no official count of how many groups operate today, so treat claims of a comeback, or of a fixed discount, with care.

The risks members carry

The same feature that removes the developer’s margin removes the developer’s promises. These are the risks to weigh.

The price and the timetable are not fixed

A developer’s contract sets a price, a delivery date and compensation for late delivery. In a purchase group the timetable can stretch and the price can rise significantly, with nobody owing the members compensation. The best known example is the United Sharona towers group in Tel Aviv, which won its land in an Israel Land Authority tender in 2016. Madlan reported that, because of mistaken cost estimates, members had paid about 50% more than the price originally offered and that many tried to leave as the project became mired in legal disputes. The Nadlan Center reported on 30 March 2026 that the towers had just received Form 4, the occupancy approval, and that original members were expected to add millions of shekels each beyond what they had been told they would pay.

Everyone’s money keeps the project moving

The project is funded by members’ own payments. If some members cannot pay a call, because it is higher than planned or because of personal hardship, the whole project can be delayed and financing costs grow for everyone. Madlan reported that United Sharona members had to pay about 90% of the apartment’s value before a building permit was issued.

Decisions need agreement

Disagreements between members can arise at any stage, and many decisions need the consent of all members, for example selling your apartment before occupancy. A detailed partnership agreement with agreed ways to resolve disputes is the main defence.

No Sale Law guarantee in a genuine group

The Sale (Apartments) Law and its Assurance of Investments companion law protect a buyer who buys from a seller, and the law defines a seller as someone who sells an apartment they built or will build, themselves or through others, in order to sell it. Members of a genuine purchase group are building for themselves, so they do not get the protections a buyer from a contractor has: the guarantee or other statutory security on payments, and the Sale Law’s rules on the specification and on defects. Those protections are explained on our page on off-plan buyer protections and payment flows.

The label alone does not decide this. In July 2026 the Tel Aviv administrative court upheld a fine imposed by the Housing Ministry’s Sale Law Commissioner (ממונה חוק המכר) on a company that had called a TAMA 38/1 project in Holon a purchase group. The court looked at the substance: the company had committed to specific apartments at a final price, promised to cover any cost overrun and to pay monthly compensation for late delivery. That made it a seller, so it could not collect more than 7% of the price without giving a Sale Law guarantee or other security. Our news report on the Galgal ruling covers the case.

Inexperience and misrepresentation

Groups are often run by people with little experience of managing a building project, which can lead to unplanned costs and delays. Members have also joined on the strength of things organisers told them that turned out to be wrong. In the Inbal Or groups, Madlan reports, misrepresented approved building rights led to significant extra payments. Courts have since ruled on claims from failed groups, including a Tel Aviv ruling on the Inbal Or group’s lawyers and a Rosh HaAyin case where a couple paid for five rooms and were left with four. Both cases are worth reading before you rely on an organiser’s promises.

How purchase tax and VAT apply

The tax rules are where older guides go most out of date. Some still say members pay no purchase tax on the apartment and a reduced rate only on the land. That is not what the law says today.

• Purchase tax is charged on the finished apartment’s value. For a buyer who is a member of a purchase group, the Real Estate Taxation Law sets the value of the right sold as the sale value of the built property, the finished residential apartment (section 9(ג1ג)(4)(ד), with a matching rule for non-residential property in section 9(א)). The usual purchase tax brackets then apply, as set out in our purchase tax guide.
• The land is not automatically VAT free. The VAT Law counts a sale of a right in land to a purchase group by a person whose business is not selling land as an occasional transaction (עסקת אקראי), which is a transaction within the VAT Law. Ask your accountant how VAT applies to the land and to the construction services in your project.
• A slow group need not cost you the sole home rates on your next home. If you are an Israeli resident, bought your apartment in a purchase group when it was your only home, and later buy another home, you can still pay purchase tax at the sole home rates on the new one if 4 years passed after the group purchase without building starting (or with another material delay the Tax Authority accepts), or 6.5 years passed without you receiving possession. The delay must be outside your control and not known when you joined, and you must sell the group apartment within 18 months of its completion (section 9(ג1ג)(2)(ב1)). You declare this on the Tax Authority’s purchase declaration form.

If the Tax Authority decides that a deal does not meet the legal definition of a purchase group, for example because the organiser was in substance a developer selling finished apartments, the members’ tax position can change. Get advice from a real estate tax lawyer on the structure before you sign.

How a purchase group is set up, step by step

Questions to ask before you join

• Which of the three arrangements is this, in substance? Who owns the land today, and who is promising what price and delivery date?
• Is any payment you make protected by a Sale Law guarantee or other security? If not, what protects it?
• What happens to your unit and your money if the city cuts the plan, costs rise, or another member stops paying?
• Which decisions need every member’s consent, and how do you leave or sell before occupancy?
• Who is the organiser, how are they paid, and what have their previous groups delivered?

Sources

1. Real Estate Taxation (Capital Gain and Purchase) Law 5723-1963, consolidated Hebrew text (Open Law Book), sections 1, 9(א) and 9(ג1ג), checked 29 October 2026.
2. Israel Tax Authority, declaration on the sale and purchase of real estate (form 7000), section 2.5 on a home bought in a purchase group, checked 29 October 2026.
3. Value Added Tax Law 5736-1975, consolidated Hebrew text (Open Law Book), section 1, definition of an occasional transaction, checked 29 October 2026.
4. Sale (Apartments) (Assurance of Investments of Apartment Purchasers) Law 5735-1974 and the Sale (Apartments) Law 5733-1973, section 1, definition of a seller, checked 29 October 2026.
5. Ministry of Construction and Housing, the court upheld the Sale Law Commissioner: the security duty cannot be avoided by presenting a sale as a purchase group, published 22 July 2026.
6. Madlan, the guide to purchase groups: advantages and disadvantages (undated), for the market labels, the claimed savings, the risks and the United Sharona and Inbal Or examples.
7. Nadlan Center, United Sharona purchase group receives Form 4, 30 March 2026.

If you have been offered a place in a purchase group or a developer’s buyers group, tell us about the project and what you want to buy. We will set it against new-build and resale homes in the same area, so you can see what the group really has to beat before your lawyer reviews the documents.