National Outline Plan 38: Investment and Financing Fund

National Outline Plan 38 is a series of planning laws and regulations relevant to a range of buildings, and especially residential buildings, across the country. The aim is to strengthen buildings to increase their resistance to earthquakes and other disasters. As part of the project many buildings have been made more attractive, more comfortable and been significantly improved by the addition of extra construction elements and reinforcements designed primarily to provide a solution from the dangers resulting from vibration.

National Outline Plan 38 was the brainchild of the Planning and Construction Council. A large team of consultants planned and studied the plan’s blueprints and today, many contractors are putting the plan into action. National Outline Plan 38 was approved by the Government of Israel in 2005.

Geologists discovered that Israel’s geographical location places the country at risk from earthquakes. This demanded early planning and strengthening of buildings. In order to promote the plan, developers are awarded a range of building rights for the building being strengthened. This give the building’s residents a significant advantage and raises the value of their property. Developers also gain an advantage from the extra building rights and the additional apartments that can be sold or rent-able commercial areas. This translates into significant sums of money.

תמונות לפני ואחרי של פרויקט תמ"א 38

What’s the Aim of the Plan?

National Land Planning laws and regulations are designed to encourage residents to agree to have the building they live in strengthened and improved whist being rewarded by the government which encourages the project. The main advantages of National Outline Plan 38 are in the protection it provides the residents from earthquakes and the improvement of residential units including:

Addition of a fortified, secure room to the building’s apartments. In the reality of Israel today, we need fortified, secure rooms in each home and not just because of earthquakes but also because of the country’s worsening security situation.

Strengthening the building. Strengthening the building adds years to its life and protects us from disasters and earthquakes.

Adding extra parking spaces and elevators. Adding additional parking spaces and installing elevators increases the quality of life and increases the value of the building and the apartments.

Increasing construction area. Increasing the area available for construction is a long term investment both in terms of improved quality of life and the increased value of the property.

Closing balconies. The addition of an extra room to an apartment by closing a balcony adds value to the building and increases the value of its apartments.

Improving the building’s façade. Renovating the building and improving its façade along with additional construction of up to 25 SqM. This is worth an investment but, on the other hand, in order to carry it out, we must find financing and money.

Financing National Outline Plan 38

Many people want to renovate their residential building with the aid of National Outline Plan 38 but need to find the financing. So, where do they begin?

In order to start applying for and receiving National Outline Plan 38 financing, a meeting must be help of all the buildings residents where an explanation must be given regarding the significance of the plan and the renovations that need to be made to the building.

After consulting with an engineer who has provided all the data, it is now necessary to explain to residents the benefits and profit to gained from raising the investment from an investment house and the building’s increased value, usually in the region of 30%. Now it is possible to approach an investment company.

Amongst the companies that can provide help, you can also turn to us. B Funds helps many apartment owners in projects such as National Outline Plan 38 renovations and others.

We assist in financing the renovations and the building’s restoration and then, once work has been completed, we are refunded the money invested plus interest that was agreed in advance.

Helpful Tips for a Smooth Renovation

Short Term Security Loan

Many people need a short term security loan to renovate their property. A short term security loan can be taken to fund the Plan 38 project. If we choose this type of financing, after renovations are complete we return the entire sum in one payment rather than installments as with a regular loan. This is done without endangering the money borrowed and after a direct investment in the property.

בניין במהלך בנייה בתמ"א 38

Why is it Worthwhile Investing in Real Estate?

Significantly large profits are possible in today’s real estate market. Investments made primarily in buildings being renovated are very profitable which makes it worthwhile for many companies and individuals to consider where best invest their money.

Important Considerations before Making an Investment

The project’s geographical location – In any real estate investment, the project’s location is of great importance. The closer the project is to in-demand areas, so the developers can sell apartments at higher prices and in less time. This prevents project delays and makes a significant difference in estimated revenues.

An experienced developer – “Experience is everything…” Projects such as Plan 38 demand a great deal of care and attention, personal dealings with the building’s residents, complex construction jobs and great care throughout the process. Because of this, it is vital that the contractor has experience and a proven track record in Plan 38 projects.

Zero report – A financial feasibility report compiled by a real estate assessor which describes the state of the project. The report is intended for credit agencies (banks/funds) so that they can consider approval of a loan for the project. The report is divided into a number of sections – project description, estimated expenses and establishment costs, estimated revenues and sales, estimated revenues offset against expenses, balance points, an analysis of sensitive issues, summery and conclusions.

Required permissions – Before the start of any construction project planning and building permission must be obtained from the local planning committee and other authorized bodies. In a development such as a Plan 38 project this process takes, on average, about one year. Before making the investment it is important to be sure that the specific project has all the needed, valid permissions and authorizations and that all fees, taxes and levies have been paid to local authorities.

Investment period – the length of a project is determined first, by its size and second, by delays that can be caused by the construction site’s ground conditions, objections by different agencies, people and more. It is important to ensure that the length of the investment does not exceed the recommended period and, if it does, that this issue is addressed in the investment agreement. It’s important to be sure that you can wait for the return of your capital until the end of the project.

The advantages of a Plan 38 project – in cities where there are no land reserves in in-demand areas, Plan 38 is the main solution for increasing supply. Additionally, most of the contractor’s apartments are built on an existing building’s top floors which means that apartments are more expensive and in greater demand.

Questions and Answers – Everything You Need to Know

Can the residents fund the renovation without the help of an investment company?

Of course! So long as there is a budget and all the residents can meet their payments, then the simplest and easiest way to fund the Plan 38 project is if the residents fund it themselves.

After the investment company has invested the funds, does the building belong to the company?

No! The company is only investing in the renovations and, when completed, will get its investment returned. After renovations, the building remains the property of the residents and they can sell it and their apartments for a large profit.

Is it easy to reach agreement on all the issues involved in Plan 38 projects?

Not always! When you hold a tenants meeting to discuss Plan 38 there are many different opinions and arguments and conflicts may develop. That’s why many tenants decide to hire the services of an external company to manage all the issues concerning Plan 38 and the project in the simplest way possible.

What are the main advantages of the Plan 38 project?

The primary solutions were passed into law by the government and they added a range of elements in addition to the basic strengthening of the building which increase the building’s value. These include: elevators, parking spaces, closing balconies, the additional 25 SqM of constructed area and an improvement to the building’s exterior.

If not all the tenants agree to the renovations – what happens then?

A number of laws relate to tenant meetings and agreements. There are percentage levels at which it is possible to begin different renovations. Agreement of 50% of the tenants is needed to approve the closing of balconies and building an elevator. 60% of the tenants must agree to increase apartment sizes. In order to add additional apartments on the building’s roof, 100% of the tenants must agree.

How will Plan 38 increase the quality of our lives?

Plan 38 will improve the quality of life by improving the aesthetics of the building’s façade and courtyard, by allowing for an increase in the sizes of apartments and the building. It lets us add an extra room to our apartment, increases residents parking spaces (these can be both inside the building and electrically operated parking bays), elevators in multi-story buildings and an overall improvement to the quality of life by a general renovation of the entire building.

The Disadvantages of Plan 38

So, after we’ve explained all the benefits and advantages of a Plan 38 renovation, now’s the time to talk about some of the disadvantages entailed in this type of renovation project. As well as the obvious benefits such as the increase in the quality of life and the property’s value – there are also some disadvantages to a Plan 38 renovation.

Perhaps one of the more significant disadvantages is the difficulty in getting the required majority of residents to agree to even begin this type of renovation. To this, we have to add the difficulty in getting financing from the building’s residents, different and conflicting opinions and disagreements between neighbors and, last, but by no means least, many financial difficulties that can be overcome by getting financing from an external company dealing in real estate financing.

To summarize: We’ve explained that, with regard to a Plan 38 renovation, strengthening the building and the actual renovation will return the investment plus a profit! The renovation is in the residents benefit and significantly increases the building’s value. This makes the financial, the emotional and the personal effort worthwhile.

Additional sources of information:

Professional legal information regarding Plan 38 can be found on Attorney Raz-Cohen and Partners web site.

The National Outline Plan 38 entry on Wikipedia – the world’s largest internet encyclopedia.

The Urban Renewal, National Outline Plan 38 and the Israeli “Move and Build” portal.

Contact us