Calcalist, Amitay Gazit, 12.05.2020
The Ministry of Construction and the Ministry of Finance is promoting a dedicated loan fund for construction companies that are facing difficulties due to the Corona crisis , Calcalist has learned. A session on this initiative, which is still in its infancy, is expected this week with the participation of officials from both the Ministry and the Bank of Israel.
The need for such a fund was born because construction companies find it difficult to obtain loans from the rescue funds established following the Corona crisis, even though, according to their dry criteria, they are open to all industries in the economy. According to data obtained by "Calcalist", as of last week, 5,000 loan applications were submitted to banks by construction companies, but only 1,100 (22%) of them responded positively. In contrast, out of the 27,000 applications submitted by companies from all sectors of the economy, 19,000 were approved, or about 70% - according to data published by the Treasury last weekend. At the time the data on loans approved for construction companies were collected, their aggregate amount was NIS 600 million, compared with NIS 6.6 billion for all sectors of the economy.
Moreover, the data shows that in the area of private residential and office construction, there is a difficulty for SMEs. According to the data, 560 applications in the private construction sector were approved, which is 24% of the 2,300. But these figures do not separate the performance contractors, whose wages are guaranteed if they complete the work, and entrepreneurial companies that benefit from building and selling apartments or offices. The "Calcalist" examination shows that Bank Hapoalim does not approve state-guaranteed loans to finance private sector construction projects, and it seems that other banks also approve such loans.
From the banks' perspective, the established state guarantee fund is not suitable for the real estate industry because the interest rate is relatively low in the industry in view of its risks, there is no requirement for minimum equityinvestment as is customary in financing construction projects and there is no solution to the guarantees that the bank must provide to the home buyers. The banks guarantee that the guarantee for every business that takes out a loan is 85% of the loan, but if a significant proportion of the loans is not repaid to the banks, the state will cover only up to 15% of the fund. This should be added that the SME Fund allows a loan of up to NIS 20 million, an amount Relatively small in construction projects, such a bank Companies prefer to divert the usual construction financing tracks and more expensive.
Due to the Corona crisis and the reduction in the number of Palestinian construction workers working in Israel , many construction sites are disabled or working more slowly. As a result, construction companies are absorbing unexpected costs. This leads to erosion of projected profits. In addition, during March and April there was a sharp decline in the sale of new apartments, a decline that is expected to lead in the near future to falling prices.
Contractor Association President Raul Sarogo said: "The state must help. A severe shock in the industry could expose banks and the entire economy to the risk that they should not be exposed."