Buying agricultural or unzoned land (karka chaklait) in Israel is often marketed as a high-reward investment, with advertisements promising huge returns once the land is rezoned for residential construction. While the potential for profit is real, this is one of the riskiest forms of real estate investment in the country.
Here is what every investor must know before buying unzoned land.
The Concept of Rezoning (Hafsharat Karka)
The entire investment thesis rests on a process called hafshara, which means “thawing” or rezoning. This is the complex, lengthy bureaucratic process of changing a land’s designation from agricultural to residential. This process is controlled by municipal and national planning committees and is never guaranteed.
The Risks Are Immense
- It May Never Be Rezoned: There is absolutely no guarantee that the land you buy will ever be approved for construction. It can remain agricultural land indefinitely, leaving you with an illiquid asset that generates no income.
- The Timeline is Extremely Long: Even if the land is in a national master plan for future development, the rezoning process can take 10, 20, or even 30 years. This is not a short-term or medium-term investment.
- You Own a Small, Undefined Plot: You are typically buying a small share of a very large parcel of land. You do not know where your specific plot will be located after a new urban plan is approved. A significant portion of the land will be allocated for public use (roads, schools, parks), so your final plot size will be much smaller than what you originally purchased.
- Significant Additional Costs: If the land is eventually rezoned, you will be liable for significant taxes and levies. The betterment tax (hetel hashbacha) alone can be up to 50% of the increase in the land’s value. You will also have to pay for infrastructure development costs.
Due Diligence is Crucial
Before even considering such an investment, you must hire an independent real estate lawyer and appraiser (shamai) to perform thorough due diligence. They will investigate:
- The Land’s Status: Is the land part of any national or municipal master plan (like TAMA 35)?
- Ownership: Is the title clear and registered in the Land Registry (Tabu)?
- The Promoter’s Reputation: Is the company selling the land reputable?
Conclusion: Buying agricultural land is a high-stakes gamble, not a conventional real estate investment. It is only suitable for sophisticated investors with a very high tolerance for risk and capital that they can afford to have tied up for decades.
