The Difference Between a Regular Sale and a Combination Deal

You're sitting on land worth millions, and a developer approaches you with a tempting offer: “Instead of selling me the land, let’s become partners.” It sounds good at first — but what’s really going on? Is this a brilliant deal, or could it end up costing you dearly.

In recent years, Israel’s real estate market has been marked by skyrocketing land prices, making this question a major concern for hundreds of landowners each year. The choice between a regular sale and a combination deal can mean the difference between a modest profit and the kind of return that turns you into a millionaire — or the opposite.

So, what exactly is a combination deal?

In a regular sale, it’s simple: you sell the land, get paid, and that’s it. A combination deal is a very different game — it’s a partial sale in which you “invest” the land and its associated building rights, and in return, the developer provides construction services that ultimately convert into new apartments in the project built on your land.

Instead of one single old asset, you receive multiple new and modern units. The question is: will the project really succeed?

How does it work in practice?

Let’s say you own a lot worth NIS 12 million.A developer offers: “Instead of selling it to me, I’ll build a 20-apartment building and give you 8 units.” Sounds reasonable — if each apartment is worth NIS 2.5 million, you end up with NIS20 million instead of NIS 12 million.

But here are the critical questions: When will the building be constructed?What happens if real estate prices drop?What if the developer goes bankrupt halfway through?What guarantees are included in the deal?What if the planning authorities reject the proposal?

When Should You Consider a Combination Deal?

Given the right circumstances, a combination deal can be an excellent choice:

When you believe in the area – If the location is expected to develop (e.g., a new train station, an emerging tech zone), the apartments may be worth significantly more than the cash you’d receive today.

For experienced real estate investors – If you already hold income-generating properties and want to expand your portfolio, this is a way to turn one asset into several.

Deferring betterment tax – In a regular sale, you pay betterment tax immediately. In a combination deal, the tax is deferred until the apartments are sold in the future — and in some cases, a full exemption may apply.

When is a Regular Sale the Better Option?

Sometimes, a regular sale is also the best option:

Immediate need for cash – If you need money now (for another investment, retirement, to cover debts), don’t wait years for apartments.

Unstable market – If there are concerns about a downturn in real estate, it’s better to secure the money today.

Lack of confidence in the developer – In a regular sale, you receive the money and part ways. In a combination deal, you're tethered to the developer for years.

Why You Need a Real Estate Lawyer

This is the point where you need to pause and understand: a combination deal is one of the most complex transactions in the real estate market. Without an experienced real estate lawyer, you may be entering a deal without the ability to truly understand its structure, advantages, risks, and financial implications.

A lawyer specializing in real estate will review all land rights, conduct due diligence on the developer — including their experience and financial strength — and draft a contract that protects your rights. They’ll also explain the complex aspects of real estate taxation: betterment tax, purchase tax, and betterment levies.

One of the most important roles of a lawyer in a combination deal is to examine the mechanisms meant to protect the client. These include bank guarantees, caveats (notices on title), and provisions for what happens if the developer fails to meet their obligations or delays the delivery of the new apartments. The lawyer will also structure the deal in a way that minimizes risk and increases your chances of achieving a profitable outcome. Their role includes helping with due diligence on the developer, evaluating whether the developer’s proposed plan is truly feasible, and drafting agreements that protect you even in extreme cases.

Combination deals require a deep understanding of complex contracts, building rights, and urban planning. Experienced developers know how to take advantage of a landowner’s inexperience. Without the guidance of a real estate attorney, you may find that instead of earning more — you've lost millions.

How Do You Make the Right Decision?

The right decision depends on your goals and the specific circumstances of each case: the value of the land, development potential, the financial stability of the developer, and of course, your personal financial situation and specific needs.

The key thing to remember: in real estate, there are no free deals. If a developer offers you “the deal of a lifetime”, make sure you fully understand how they profit — and from where.And most importantly — make sure you have an expert real estate lawyer to protect your interests.