Key Takeaways
- Required by statute on every off-plan residential purchase under Israel's Sale Law (Apartments) (Assurance of Investments) 1974, no exceptions.
- Covers 100 percent of buyer payments above a defined statutory threshold. The bank, not the developer, is the obligor.
- Should be issued in the buyer's name personally, not through any developer affiliate, sales office, or trust intermediary.
- The alternative statutory mechanism is a Polisat Bituach (insurance policy issued by an authorized insurer). Both qualify; Arvut Bankit is the more common form.
Short Answer
Arvut Bankit is the bank guarantee that protects an off-plan buyer's payments during construction. Israeli law requires developers to secure every payment above a statutory threshold through one of two mechanisms: Arvut Bankit (bank guarantee) or Polisat Bituach (insurance policy). If the developer fails to deliver, the buyer presents the guarantee to the issuing bank and recovers their funds in full. This is structurally stronger than escrow because the bank itself is the obligor.
Full Definition
The Sale Law (Apartments) (Assurance of Investments) 1974 (Chok HaMecher (Dirot) (Havtachat Hashkaot)) requires developers selling residential property off-plan to secure every buyer payment above a defined threshold via one of several approved mechanisms. The two practically important mechanisms are Arvut Bankit (a guarantee issued by an Israeli bank, in the buyer's name personally, for the full amount paid) and Polisat Bituach (an insurance policy issued by an authorized Israeli insurer covering the same risk). Buyer funds typically flow through a controlled developer account under bank supervision (Livui Bankai), which functions as the structural complement to Arvut Bankit. The bank monitor verifies construction progress before releasing funds to the developer; the guarantee independently protects each buyer's specific payments. Arvut Bankit terminates when the buyer takes delivery and the apartment is registered in the buyer's name at the Tabu. Until that point the buyer's capital is protected against developer insolvency, abandonment, or failure to deliver.
Why It Matters for Foreign Buyers
Arvut Bankit is the buyer's primary defense against developer insolvency in a multi-year off-plan construction cycle. Foreign buyers should verify the guarantee before each payment and confirm three structural points. First, the issuing bank should be a recognized Israeli bank (typically Bank Hapoalim, Bank Leumi, Mizrahi-Tefahot, Discount Bank, or First International Bank). Second, the guarantee should be held in the buyer's name personally, not in any developer affiliate, sales office, escrow, or trust intermediary. Third, the guarantee amount should match each payment exactly; underwritten amounts are not uncommon when sales offices are aggressive, and the gap between paid amount and guaranteed amount is buyer-side risk. Confirm with your Israeli attorney that the guarantee covers extension scenarios where the project delivery date slips; well-drafted guarantees automatically extend with the delivery date, but poorly drafted ones expire and require renewal.
Related Reading
- Livui Bankai (bank-supervised developer financing)
- Chok HaMecher (Sale Law of Apartments)
- Off-Plan vs Resale: the foreign buyer's decision framework
- The 20/80 payment plan explained
Sources and References
- Sale Law (Apartments) (Assurance of Investments) 1974
- Bank of Israel, Supervisor of Banks, Developer Project Financing Guidelines
Reviewed by Hershtik & Adoram, May 2026. This glossary entry is informational and does not constitute legal or tax advice for any specific transaction. Israeli real estate law evolves; verify current rules with qualified Israeli counsel before relying on any specific figure or rule.