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  • Credit in the construction and real estate industry is a significant component of total balance-sheet business credit (about 39 percent) and of total balance-sheet credit to the public (about 21 percent) in respect of activity in Israel.
  • Balance-sheet credit to the construction and real estate industry from the five large banking groups continued to grow at a high rate (about 14 percent) in 2025. This growth was accompanied by some increase in credit risk to the industry, in view of the decline in demand for new dwellings, an increase in the stock of unsold new homes, which hit a record high, and some erosion in the major credit risk indices.
  • In view of these developments, the Banking Supervision Department continues to closely track developments in credit to the industry, monitor emerging risks across the various activity segments, and require banks to maintain exacting risk management of credit to the industry in accordance with accepted and sound practices.
  • In 2025, outstanding balance-sheet credit for land among the five large banking groups increased moderately by approximately 6 percent, reaching about NIS 104 billion. This followed the slowdown in such credit during 2023–2024.
  • In 2025, financial credit intended to finance residential construction projects rose sharply by approximately 40 percent—from about NIS 49 billion at the end of 2024 to about NIS 69 billion at the end of 2025. This continued the upward trend in such credit from 2023–2024. The increase in developers’ financing needs for residential construction in 2025 is partly explained by the slowdown in the number of transactions for the purchase of new dwellings, the rise in construction costs, and sales promotion campaigns offered by developers, which in some cases included a substantial deferral of payments for the dwellings purchased. As a result, in 2025 the average absorption capacity ratio[1] in residential construction projects declined by about 12 percentage points, to approximately 58 percent, although this ratio still indicates relatively wide safety margins. In addition, in 2025 there was an increase of about 9 percentage points in the total exposure of the five largest banking groups to projects in which the pace of engineering execution exceeded the pace of sales[2], to about 44 percent at the end of 2025.

 

 

[1] The absorption capacity ratio reflects the maximum possible decline in apartment sale prices that can occur without the bank incurring losses on the project.

[2] A gap between the pace of engineering execution and the pace of sales serves as an indicator of the level of risk in a construction project.