The developer who prefers to build outside Tel Aviv: "We are focusing on apartments of up to 3 million shekels"

Ishai Rot, CEO of Shoval Engineering Group, began his career in the real estate industry at the age of 18 as a broker. Later, he went through roles in the worlds of marketing and sales, entrepreneurship, business development, and construction — stations that allowed him to get to know the industry from different angles. About 13 years ago, he joined Shoval, was a partner in establishing the group's entrepreneurship arm, and later advanced to the position of CEO.

Today, Shoval operates both as an entrepreneurship group and as a construction company, and recently expanded its operations with the acquisition of the Yitzhak Stern company in a deal worth more than 200 million shekels.

In an interview, Rot addresses the decision to deepen involvement in the construction field precisely during a challenging period, the state of the housing market, and the areas where he identifies demand, and explains why Shoval prefers to focus on projects outside Tel Aviv. He also addresses the sharp decline in Shoval's stock since the IPO and the gap, according to him, between the company's performance and the stock's performance.

Entrepreneurship vs. Construction

"We created a large purchasing power for concrete, iron, ceramics"

In a period when companies in the industry are reducing risks, you chose to acquire the construction company "Yitzhak Stern". What was the reason for the acquisition?

"Shoval was founded 41 years ago as a construction company. Until a few years ago, we carried out projects for others, mainly in non-residential areas — we built several BIG complexes, tens and hundreds of thousands of square meters of logistics warehouses, office buildings, and more. 13 years ago, I came to Shoval, after serving as the marketing and sales manager of Yitzhak Stern, and we established, together with Moshe Miller, the controlling shareholder, the group's entrepreneurship company. At the same time, we began to engage in urban renewal, acquire land within the framework of 'Price for the Tenant' and regular deals, and build residential projects for ourselves.

"Over the years, we also established a construction arm for residential purposes, which operated mainly for our projects and those of our partners. Along the way, many entrepreneurial companies approached us and asked us to carry out projects for them, but we rejected the requests because we were not prepared to carry out work for other entrepreneurs.

"About a year ago, Moshe Miller said that there were many requests and that construction companies are a very sought-after factor in the market, so we decided to establish an arm that would carry out work for others. We understood that establishing such an operation from scratch would take time — from setting up a tender department and recruiting employees to learning how to work with other entrepreneurs. Therefore, we looked for an existing company.

"That's how we reached Yitzhak Stern, a company I know well and where I worked in the past. It is a good, excellent, and profitable company, whose owners, Asaf and Amnon Stern, wanted to sell it. They were looking for a company with similar DNA. Both companies have a similar managerial and organizational culture, and in the end, we reached an agreement on the deal.

"One of the advantages of the move is also the purchasing power that is created. When we purchase concrete, iron, ceramics, or other materials as a larger entity, our bargaining power against suppliers increases. In addition, both companies have long-standing relationships with contractors and suppliers."

Unlike entrepreneurial companies that choose to build only for themselves, Shoval declares that it will continue to provide construction services to external clients as well. In an era when construction costs are volatile and fragile, how do you manage the risk of a general contractor in other people's projects without getting hurt?

"We choose good entrepreneurs, and also those who know the contractor's mind.

"For example, if you come to a client today and tell them: 'Listen, because of the war, I have had a price increase of three to four million shekels', they will know to come and give this money to keep the contractor. Especially if it is a contractor who works with them from project to project, as a turnkey contractor or as a general contractor. They know how to keep the construction company, and we see that this is also what happened in Yitzhak Stern's reports.

"Another thing is the advantage that comes from size. When there is a shortage of manpower, subcontractors want to work with stable and serious companies, with high payment ethics. This way, you can also control the contractors better, because they want to work with you and not with others. This is exactly what happened during the war as well."

Strong areas

"Acre works well, and the Krayot too"

Do deals like yours herald a wave of mergers and acquisitions where only the giants that have access to capital will survive and swallow the smaller players?

"First of all, we are already seeing deals of companies being acquired and merged, sold and bought. It's already happening. On the other hand, we actually see the market in a state of improvement, it depends very much on which areas.

"We work in areas that were less affected. We see this in our reports and in the projects themselves. For example, in our project in Acre, we were left with about 20 housing units out of 300, and we only have to deliver the project next year. That is, most of the apartments have already been sold and we have no cash flow, execution, or other problems."

Meaning, projects that are further away from Gush Dan?

"Correct, and we also win projects within the framework of 'Price with a Discount'. We like these projects, because 50% or 60% of the project, and in the case of Haifa today even 80%, is already sold on paper. Therefore, the risk level is very low.

"We now have a project on the slopes of Haifa, near the Sammy Ofer Stadium, called Shoval Touch. It has 402 housing units, and we are currently at the stage of choosing apartments within the framework of 'Price with a Discount'. About 80% of the project is intended for those eligible and is already sold on paper, so we have about 80 apartments left for the free market."

Where are the opportunities in the market today geographically? Which cities work well?

"Acre works nicely, the Krayot work nicely. In Yokneam, of course, there are no apartments left, and there are almost no projects in Yokneam either."

In Yokneam, do you also link it to Nvidia that is going to enter the area?

"In Yokneam, our project was established even before the establishment of the new Nvidia headquarters was announced, but I think that their activity will give a significant boost to Yokneam and the surrounding area. Alongside this, we are identifying a nice awakening in Haifa as well, in several of our projects. We are expected to open additional projects in the field of urban renewal that have already received approved plans."

And how are you with Tel Aviv? Are you staying away from it on purpose?

"Except for one project that we have there together with two other partners, on HaRakevet Street, we are not that active in Tel Aviv. We have urban renewal projects in Givatayim and Ramat Gan."

Why actually?

"I think that in projects where the apartment price is up to 2.5-3 million shekels, it is easier for people to make the purchase, and that is the reason we are focusing on this range. We like to sell apartments that are more accessible to a wide audience, so that the buyer can put up the required equity and know that they will be able to meet the mortgage repayments later."

Sales

"Every apartment receives a contractor loan"

You presented a jump in sales in the first half of 2026: 216 housing units compared to 73 in the corresponding period. To what extent does the growth reflect real demand, and to what extent does it stem from the increasing use of contractor loans, which accounted for about 79% of free market sales in the second quarter?

"We ensure that every apartment of ours receives a contractor loan, and the bank is the one that does the underwriting. That is, the buyer needs to put up their own equity, usually 10% or 15%, and then the bank, through us, provides the contractor loan. But the bank checks the buyer in a real way - it checks that they have sources, and if tomorrow morning they need to complete the deal, that they have training funds, pensions, or locked money. From our point of view, this lowers the risk level significantly."

And yet, it can be said that the market is still in a freeze. What do you think can drive sales?

"There is a very important issue here, and that is the purchase tax on second-hand apartments for investors. The state is making a very serious mistake by not lowering the tax, and I am not saying this because I want to sell apartments, but because I am looking at my daughters. I have three daughters, and I think about the fact that in a few years they will need to buy apartments.

"I, for example, want to start paying for an apartment for my eldest daughter, and I cannot, because I have to pay 8% purchase tax. So what is better for me? To buy a property in Larnaca, or somewhere else, transfer the money there, and there the banks also provide me with loans and interest and everything. It's a pity, come on, lower the purchase tax, keep the money so it doesn't escape outside Israel and create deals within the country.

"I think the next government should go for it. The real estate market will also start to grow back, and people who want to have apartments for their children in a few years, thanks to this thing, the children will have a place to live. It will release the bottleneck.

"It will also increase tax revenues, and it will also help people trade their apartments and move forward."

The stock

"The current price does not reflect the performance"

You took Shoval Engineering public in January 2025, a not-so-simple period in the real estate industry, and since then the stock has also fallen by about 30%, what do you think is behind this?

"Our stock at the current price does not reflect the performance of our company. We see our reports, and I think we are among the excellent companies in the industry. The management culture here is very orderly. We do not take projects that are at very high risk. Second, we are a construction company, we control the execution and control the expenses.

"I think it has more to do with investor sentiment. If we make a cross-section of all the real estate companies that exist, you will see that they have all been eroded by tens of percent, not just us. I believe and want to believe that we will be in a completely different place within a short period of time."

Could it be that the timing of the IPO was also a bit complex? Because after all, 2025 was not a simple year for the industry.

"No. After the IPO, our stock really went up nicely. It's just that the period of the war caused the investing public to be afraid, and rightly so. But still, our results speak for themselves."

Safety

"I arrive at the sites and am personally involved"

A final question: Since the beginning of the year, we have witnessed dozens of deaths in work accidents. How do you ensure the safety of the workers at your sites?

"First of all, safety for us is like Sayeret Matkal. I, as the CEO of the group, the first thing on my table is the issue of safety. I am personally involved, arrive at the sites, receive reports on a daily basis, and whoever does not work according to the company's safety procedures - leaves the site. We have safety officers who accompany the entire group, and we are very, very strict on this issue.

"My theory is simple: you arrive in the morning at the gate healthy and whole, and that's how you should leave. We are not worth a million shekels or 50 million shekels if a work accident occurs. We also started the 'Stars' program and I think it is very important that the state supports it."