Investing in TAMA 38

Your investment/loan in our TAMA 38 projects are safe, relatively short, and provide an excellent return

How Investment Works?


Our Heter Iska. Heter Iska is a legal document that allows the Jewish people to deal with interest payments.

Frequently Asked Questions

  • The DEVELOPER (“yazam”) initiates and controls the project. Generally the developer signs up the tenants (apartment owners), or buys a pre-signed contract from a 3rd party. The developer prepares all aspects of the application and acquires all of the permits. The developer hires the kablan (builder) and supervises all aspects of construction, sales and operations.
  • The KABLAN is the actual construction company (builder). The kablan is hired and managed by the developer to complete both the strengthening of the building and construction of the new apartments. The kablan is not a partner in the project. The developer generally maintains a supervisor on-site to oversee the kablan
  • The MANAGING DIRECTOR (MD) (or co-developer) is the company that finds, negotiates and packages the deal on behalf of the lenders. The MD generally partners with the developer in supplying capital and management services to the project. American Israel Development (AID) is generally the Developer or CO-developer in our projects. If we are COdeveloping, it means that we have partnered with another developer. In this case, both developers are very involved in all aspects of the project.

NOTE : the perspective of these FAQs is that AID is acting as the Managing Director, on behalf of the lenders.

  • Each project is generally set up in a new Israeli limited corporation (LendCO). The sole purpose of this SPC is to hold and manage the investment. Sometimes the SPC holds multiple projects.
  • The sole shareholder of this SPC is American Israel Development (AID). AID manages the project on behalf of the lenders (investors) and has responsibility for any liabilities.
  • The investors are “lenders” to the SPC (they are not shareholders - only creditors). Lenders have no liability.
  • Each lender has a loan agreement with the SPC for a fixed rate of return and term.
  • If AID is co-developing, the SPC enters into an agreement with the co-developer company. This agreement outlines all of the rights and obligations of both parties.
  • The shares of the project SPC (ProjectCO) are pledged to the lender group as collateral for their loans. These shares carry all of the collateral and security that has been pledged for the project.
  • The Lenders advance funds to a project bank account. The funds are distributed directly to the project based on milestones and benchmarks, with the supervision of the managing director, AID.
  • The SPC lends money to the project to fund expenses
  • During the construction phase of the new apartments, the developer starts to pre-sell apartments. These proceeds are used to pay for construction costs or to re-pay loans (first bank, then lenders).
  • The kablan (builder) can be paid his fee either in cash or by designating certain apartments in the building for him to retain or sell (a “combination” deal) In this case the developer monitors and controls the timeframe and price that the kablan can sell the apartments.
  • After all costs of the project are paid, and the bank (or lending institution) is re-paid, the SPC receives back the balance of it’s outstanding loan plus the total bonus (interest) owed to it.
  • Even if the project is late, the loan becomes due on a fixed date. At that time the loan is either extended, or the developer refinances the project and pays back the loan.
  • These funds are then distributed back to lenders as per their loan agreement with the SPC.
  • After the lenders are paid back in full, then the developer may take profits from the project.
  • Generally in a TAMA project, it takes about one year to sign up the apartment owners in a building. There are significant costs to creating renderings, floor plans, feasibility studies, legal advice, etc. The developer bears these costs. (depending on size of building, costs vary from about 300,000 to 500,000 nis)
  • In some cases, the developer purchases the rights to a building that has already been signed up by another developer or a real estate agency. (payment for rights to a signed project can range from about 500,000 to well over 1,500,000 nis for a large project)
  • Once a building is signed up, there are significant costs to preparing the engineering, architectural and design plans, preparing and filing permit applications and legal and financial work. These are called “soft costs”. In many cases the developer funds these costs and is reimbursed when the project commences, or the investors fund these costs when they come into the project. (generally about 500,000 – 1,500,000 nis).
  • In a typical TAMA project, the private lenders advance the first 25 - 30% of capital to cover the costs of approvals, (and/or acquiring a project) and initial construction to strengthen the building. Once the strengthening renovations are completed, generally a bank or other lending institution (keren) advances the next 70 - 75% of the capital for construction of the new apartments.
  • Generally the developer begins pre-selling apartments during construction. Proceeds from pre-sales can reduce the capital requirements of a project. However as the new apartments get closer to being finished, they can usually be sold for a premium, so a developer may wait to sell some apartments.
  • Generally lenders earn a fixed bonus (interest) amount for their loan. Loan terms range from about 24 – 36 months. The bonus (interest) is about 9% - 10% per year, depending on size and duration of loan. However if a loan is repaid early, the effective yield can be higher.
  • Bonus (interest) is calculated only on funds that are actually loaned. Bonus is not paid on funds that are committed, until they are actually loaned. Bonus paid is calculated as simple interest, not compounded (ie. lenders are not paid interest on their interest that is earned, but not yet paid). Bonus begins to be calculated with funds are received by AID.
  • If loans are not re-paid by the contracted date, see FAQ on default situation.
  • Generally lenders earn bonus as interest income in Israel, however in certain situations the income can be distributed to lenders in other ways.
  • Lenders are paid out the balance of their loan and all of the bonus at the end of the term. However in some situations there could be interim loan re-payments to lenders.
  • The SPC withholds taxes as per government regulations, as applicable to each lender.
  • Lenders sign a loan agreement with the SPC.
  • The structure of the SPC is designed to minimize tax and other liabilities for lenders and maximize security.
  • There is a possible mechanism to allow lenders to use their loan proceeds towards the purchase of an apartment.
  • Neither the SPC, nor AID can give tax advice to any individual lender.
  • Terms vary between projects and lenders.