Israeli Rental Funds Buy Apartments at Discounted Prices

In a notable shift within Israel's real estate sector, long-term rental funds are actively acquiring substantial portfolios of apartments directly from developers. This trend is driven by a slowdown in the traditional sales market, leaving builders with significant unsold inventory. These transactions, averaging approximately 2.7 million shekels per unit, represent a strategic move by rental fund operators to secure assets at favorable terms.

Recent data reveals that since the beginning of 2026, at least 15 such deals have been finalized, encompassing over 700 apartments with a total value nearing 1.6 billion shekels. The average price per unit in these transactions, excluding a specific deal involving apartments leased to Amidar, stands at roughly 2.6 million shekels. This activity highlights a growing appetite among institutional investors for rental properties as a stable income stream, particularly when acquisition costs are reduced.

Leading the charge is Abu Megurim, managed by entrepreneur Tzachi Abu, which has purchased 248 units for 420 million shekels. Following closely is Megurit, a prominent player in the long-term rental space, having acquired nearly 200 new apartments for close to 600 million shekels. Other significant participants include Azorim Living, which acquired 156 units for 382 million shekels, and Rent It, securing 82 units for 172 million shekels. Notable individual transactions include Megurit's purchase of 54 apartments from Almogim in Rehovot for 117 million shekels (averaging 2.2 million shekels per unit) and Rent It's acquisition of 52 units from Aura in Hadera for 109 million shekels (2.1 million shekels per unit).

The current market conditions, characterized by a stagnant sales market and an estimated 86,000 unsold apartments held by developers as of August, have created a 'win-win' scenario. Developers can offload inventory, recover capital, and realize profits, while rental funds secure properties at discounts often ranging from 10% to 20%, especially for units subject to long-term rental regulations. Sharon Tusiya-Cohen, CEO of Rent It, notes that developers are keen to extract their equity and bank financing, making these bulk sales attractive.

A significant strategic shift observed is the timing of these acquisitions. Previously, funds focused on early-stage sales (pre-sale). Now, there's a strong emphasis on acquiring units nearing completion or ready for immediate delivery. Erez Rosenbuch, Chairman of Megurit, highlights that four out of their six deals this year involved immediate handover. This approach minimizes financing costs for the fund and allows for immediate revenue generation from rental income, a stark contrast to the earlier model of purchasing during the initial construction phases.

While the volume of these transactions is substantial, it represents a fraction of the total developer inventory. Fund managers emphasize that these are not fire sales but rather strategic acquisitions driven by market dynamics and a desire for well-priced assets. The Israeli rental market, supported by entities like Amidar and driven by funds such as Megurit, Azorim Living, Rent It, and Abu Megurim, is demonstrating resilience and adaptability amidst broader market fluctuations.

The implications for the broader real estate market are significant. This trend could help alleviate developer inventory pressures, potentially stabilizing prices in the long run. Furthermore, it bolsters the supply of professionally managed rental housing, a segment that has seen considerable growth and investment interest in recent years. The average acquisition price of 2.7 million shekels per unit reflects a premium market, even with discounts, underscoring the underlying value and demand for residential real estate in key Israeli locations.