What is TAMA 38?
TAMA 38 was a special project started by the Israel Housing Ministry back in 2005. The project helped to solve two problems for the government without them having to pay any money.
The first problem is that Israel sits on a serious fault line, meaning that the country is earthquake prone. Historically the country has suffered from severe earthquakes that caused much loss of life and property damage.
Buildings built before 1981 were built without earthquake safety standards and could provide a great hazard in case of earthquakes. The second issue was urban renewal, to upgrade the country’s aesthetics and bring the cities up to date.
Essentially TAMA 38 grants builders who undertake aesthetic and structural improvements to an eligible building the rights to add additional apartments and sell them to the public.
Win Win All Around
TAMA 38 is designed in a way that all parties stand to benefit.
Homeowners – Aside from improved safety, the exterior of the building is beautified as well the public areas, often with an elevator and parking added, the big gain for homeowners is the expansion of their apartment. It can come in the form of an additional room, porch, storeroom and parking improvements. Moreover the capital gains tax and betterment tax, that is typically due with renovations, is waived by the government.
Builder – The builder builds additional, usually luxury apartments which they sell on the open market earning a handsome profit.
Government – Buildings are safer, stronger and more appealing in the cityscape. Monetarily the expansion will add additional funds to the city coffers in the way of future property taxes.
The Hurdles
The greatest hurdle to this process is that the builder needs the consent of two thirds of the tenants in order to get approval for a project. That means working the halls, door by door for consent. As builders in the country don’t have the best reputation, and are eyed with suspicion by the general public. While it took a while for it to take off, things are humming along now.
Time Running Out
Time, however, is running out. The municipalities are feeling squeezed. On one hand they are not collecting the betterment tax and on the other hand more apartments and people require more infrastructure ,which falls on them.
The benefits of TAMA 38 are set to expire in October 2022. Projects not underway by then will no longer be approved. Now is the time to grab those brand new apartments in the newly refurbished buildings before they are all gone!
