What is TAMA 38?

By Aryeh Deverett

TAMA 38 graphic

TAMA 38 is a unique Israeli construction program created to strengthen and upgrade older apartment buildings. It serves to protect them from earthquakes and to increase urban housing units in high demand areas. Developers get to add new floors on the top of existing apartment buildings in exchange for improvements. These can include strengthening the existing building, or adding features such as elevators, balconies, safe rooms or parking. The tenants benefit from all of this work for free.
Older apartment buildings tend to be located in the best neighborhoods for which there is high demand – primarily near Tel Aviv, though some are also in Jerusalem. Developers earn substantial profits for renovating these buildings, and are happy to borrow private funding at high rates to fund these projects.

Why is TAMA 38 becoming so popular?
TAMA projects help the State of Israel enormously. They make apartments safer and stronger, create urgently needed new housing, generate jobs, and stimulate economic development and tax revenue. Additionally, investors can earn excellent returns with relatively low risk.

What does American Israel (AIC) do?
AIC finances the first stage of construction in a TAMA project, through loans from private lenders. Lenders earn 15% per year, with the loan timeframe being 24 – 36 months for most projects. Lenders also have the option to purchase new apartments at discounted prices.
AIC manages the project on behalf of the lenders. The emphasis is on maximum safety for the invested capital.
What is the security on the loans?
Lenders effectively get a registered charge over the rights to the TAMA building project, plus a charge over all of the other projects that the developer has in his portfolio, plus a personal guarantee from the developer. This is similar to the security package that a bank gets. It makes TAMA 38 lending very secure.

How can developers afford to pay 15% per year?
TAMA 38 is extremely profitable for developers. In reality, the developers stand to earn about four times more than the lenders. However, the lenders get paid out in full before the developer can earn his profits. This gives the lenders excellent security and peace of mind on their loans. Many lenders and developers are going to make serious money in TAMA 38 over the next few years.

What can go wrong?
Like most construction projects in Israel, one of the main concerns is delays in getting a building permit. However AIC only participates in projects that are well advanced and pre-approved to receive a permit. AIC’s lenders are also protected if real estate prices drop in the market. It is very rare that a TAMA project gets delayed, mainly because many of the residents continue to live in the building during the construction process, and they help to make sure that it moves along quickly.

Why invest in a TAMA project rather than buying an apartment?
When you buy an investment property (apartment) in Israel, your rental income will be offset by property taxes, maintenance, finance costs, management fees, etc. At best you might earn 2 or 3% per year – plus, you can expect to get a call that the A/C unit needs to be replaced or there is a major leak in a pipe! It’s a hassle to own. Perhaps your apartment will appreciate 5 – 10% per year but when you sell, you’ll pay capital gains tax. With a TAMA loan, you earn 15% per year. No hassles, worries, and much less tax at the end. Not least, you are helping Israelis live in safer and nicer homes.
TAMA is simply a smarter investment today. And also, if you desire, you can purchase one of the new apartments at a discounted price!

How can I find out more about participating in a TAMA project?

Watch the video on our website: and then call or email us to hear about our most current projects.

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American Israel A.L.D. Construction Ltd.
USA (607) 241-2595 / Israel 053-831-0270



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