At the end of last week the Central Bureau of Statistics reported that home prices were rising after two months of falls – a 0.3% rise in overall process and 0.4% in prices of new homes. The Tel Aviv district led the trend, with a 1.2% rise in just one month. But on the ground, developers are facing sluggish sales, high financing costs and tough competition that is compelling them to further erode their expected profitability. According to the data, there are currently 85,310 new apartments in the pipeline that are not sold – “a supply for 32 months of sales.”
Last week, Yigal Dimri, the controlling owner and CEO of residential housing developer Y.H. Dimri Construction & Development (TASE: DIMRI), said that his company also “has projects that are not economical.” Speaking at the Real Estate Center conference held in Eilat, Dimri admitted: “I have several projects in Tel Aviv that are at zero, or even in the red. Today I wouldn’t take them. Profitability is almost non-existent.”
This grim reality is not unique to Y.H. Dimri, nor to Tel Aviv. An examination of the annual reports of publicly-traded real estate companies shows quite a few companies dealing with very low profits, and some of them – including Dimri itself, as the company owner noted – even show losses for certain projects. This is compounded by market sentiment, in which more and more companies are currently having difficulty maintaining minimal profitability.
More than a million shekels loss in a project
The profit line presented by the companies at the individual project level concerns the gross profit – that is, “primary” profit before deducting sales, marketing, administrative and general expenses, etc. In other words, on the way to net profit, a significant number of additional expenses must be deducted. The data do show the 2025 summary, but the market situation has not improved since then (and may even have worsened, following the Iran war in the first quarter). In most cases, projects with low profitability are relatively few out of a large backlog; and yet, such a prevalence of projects with low or zero profitability has not been seen in Israel for a long time
Y.H. Dimri, whose controlling shareholder has publicly spoken about the problem: has a TAMA 38 urban renewal project on Antigonus Street in Tel Aviv, where it has a gross loss of 3% – about NIS 1.8 million. This is a project begun in 2022 and due to be completed this year. It has 27 apartments, 10 of which Dimrii can sell, but only two of them had been sold by the end of 2025.
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Av-Gad has a TAMA 38 project on Shmuel Sharira Street in Rishon Lezion, where it is showing a gross loss of 2%, which translates into about NIS 1.12 million. This is a project that is set to be completed in the coming days. The company notes that “the decrease in gross profit and surplus compared with the annual report for 2024 stems from an increase in the estimated construction budget.” It also notes that there has been a delay in the delivery of some of the housing units, and that “we are unable to fully assess the amount of compensation for apartment buyers, and if they are entitled to compensation.
Propdo has a TAMA 38 project on Rav Hava Street in Ramat Gan, which recorded a gross loss of 1% – about NIS 395,000. This project includes 24 apartments, 16 of which are for sale, all of which have already been sold. Its completion is scheduled for the second quarter of 2026. The company has another TAMA 38 project on Pinellas Street in Tel Aviv, where gross profit is only 4% – a figure that leaves almost no profit – a reasonable developer’s profit in the home sector is about 15%.
Amram Avraham has a project in Ashdod, AQUA PARK, which it defines as “very substantial.” This is a residential project that includes 359 apartments, of which 287 are for sale with a government subsidy. The gross profit on the project is 7%, and its completion is scheduled for March 2028. This is one part out of four in the entire AQUA PARK project, and that in the other three parts, the company presents a gross profit of 17%-19%.
Rayk Aspen has a project called Shir Tower in the Kiryat Menachem neighborhood of Netivot, which includes three residential buildings with 167 apartments, of which 48 are for sale with a government subsidy. In this project, the gross profit rate was 12.75% in 2023, and in 2025 it was cut to only 5.28%. The reason for this may be, among other things, the replacement of the contractor. The company notes that the gross profit estimate was set by an appraiser’s report, which did not include a payment to the Israel Land Authority for permit fees and financing costs that were capitalized to inventory until the start of building work. The project is scheduled to be completed during the second quarter of this year, and seven apartments remain for sale.
Africa Housing has a project on Lot 32 in Neds Ziona’s Savion and Irus neighborhood, which showed a gross profit of 5% at the end of 2025, and its construction is due to be completed in 2026. The company’s project on lots 30 and 31 in the same neighborhood showed a gross loss of 14% during 2025, although overall a gross profit of 5%. 216 apartments will be built in the neighborhood in six buildings, 162 of which will be for sale with a government subsidy.
Shikun & Binui has a project in Or Yehuda; in two of its lots (each with 194 apartments), which shows a gross profit of 7%. Construction on both lots began in February 2025, with completion due in August 2028.
Interest, war, and construction costs
In their financial reports, the real estate companies provide the familiar explanations for the decline in profitability since the outbreak of the war. At Y.H. Dimri, they note that the impact is mainly reflected in “the increase in raw material prices as well as the cost and availability of labor – an issue that affects project completion dates and profitability rates.”
Amram Avraham focuses on the financing and regulatory angle of the buyers, explaining that measures such as higher interest rates and restricting financing deals and monthly mortgage repayments “Lead to lower demand for apartments, and negatively affect the group’s revenue and profitability.”
Interest rates in the economy are still relatively high, despite the recent decline, while the construction input index, which continues to rise and expresses in numbers the warnings of contractors about rising construction costs. In April, the index rose 1.1% – the highest monthly increase rate of this index since April 2025. In the last 12 months, the index rose 3%, and since the beginning of the year by 1.6%.
“We are in a new reality”
Yahav & Co. law firm managing director Adv. Einat Shaked, who represents tenants and apartment owners in urban renewal projects, says “Today, large developers prioritize projects and delay progress on those that do not have enough profit. They are waiting for better days to come. Many developers are telling tenants during this period: ‘What we thought is not what is actually happening, profitability is low and not worth it for us.’ This is happening because of the worsening financing conditions, because of a shortage of manpower and because of an increase in expenses. The project simply does not work out economically.”
She adds, “Developers no longer have profits of 18% or 20%. 15% profit is an excellent situation, and today projects are being implemented even at 12%-13% profit. Mechanisms for sharing profits with apartment owners are almost non-existent. We are in a new reality. In many projects, we have had to change developers because the project did not progress. There are quite a few cases in which developers take on projects, even if they are not sure they will be implemented, just to present a large backlog of projects in preparation for an IPO – a trend that has become very common in the industry recently.”
Published by Globes, Israel business news – en.globes.co.il – on May 19, 2026.
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