Surprise in Carasso Real Estate reports: 76% of buyers waived financing deals
The company sold 60 apartments in the last quarter, and in its contract one can see the distribution of customer types: most pay linearly, even if they received an exemption from the index. Contractor loans account for only 6%. Does this mean that the market knows how to sell apartments without 10/90 conditions with an exemption from the index?
Carasso is one of the prominent real estate companies in the housing market, especially when it comes to Tel Aviv. The slowdown in Tel Aviv is trickling down to the rest of the market. There is a situation of atmosphere here — when real estate in Tel Aviv falls, it pulls the housing index down. It changes the atmosphere.
How many apartments did Carasso Real Estate sell in the shadow of the slowdown? According to the report for the second quarter, the company admits that in order to increase the volume of unit sales, and like most real estate companies in the economy, it offers financing benefits and contractor deals, such as exemption from linking the consideration to the index, and more convenient payment terms. Carasso, let us recall, sells apartments mainly in the center and not in the periphery — Kiryat Ono, Tel Aviv, and also Holon and Bat Yam — these are the main cities (besides another project in Jerusalem) where it builds.
In addition, the company allows for a payment spread, such as paying only 15%-20% of the purchase price near the date of signing the purchase agreement and paying the balance of the consideration near the date of apartment delivery. Carasso also grants contractor loans, but it profits from this. Besides the down payment, it receives another 20%-30% of the purchase price, and thus up to 50% of the money is already with it. This is a material figure — when the company receives "live money," it reduces its financing expense side.
In the current quarter, the company sold 60 apartments for a total volume of about 223 million shekels (including VAT) — about 3.716 million shekels per apartment. According to the breakdown, the volume of sales under good financing conditions is 54 million shekels — about 24% of total sales. Out of this amount, about 20 million shekels with a full exemption from the index.
Contractor loans are estimated at 14 million shekels — only 6.2% of the volume. However, and this is surprising, the company tends to collect payment in a linear manner in most cases — without convenient payment terms. About 170 million shekels out of 223 million shekels, about 76% of total sales, was done in a linear manner. In about a third of the cases, it gave an exemption from the index.
In total, in the current quarter, it distributed an exemption from index linkage in the amount of about 76 million shekels — in about 93% of the signed contracts (the granting of the exemption benefit is for 40% of the sale price, while the remaining 60% are exempt from linkage by law).
Here are more important numbers from the report: Revenues from rent and maintenance in the current quarter amounted to about 23 million shekels, similar to the corresponding period last year. The rise in the index and the real increase in rental prices led to an increase in rental income in the various properties, which was offset mainly as a result of a decrease in rental income in the Rival complex, resulting from the gradual evacuation of tenants, in accordance with the company's plan to evacuate a significant part of the complex by the end of 2026.
Carasso Real Estate has residential projects in the process of construction and marketing in demand areas in Israel. Today it has 2,524 apartments for marketing. It sold about 1,000 apartments for a financial volume of about 3.1 billion shekels — about 3.1 million shekels per apartment.
How much does the company earn from the residential sector? Revenues from the sector in the current quarter reached 175 million shekels compared to about 155 million shekels in the corresponding period last year. What is the reason? There was an increase in revenues from various projects whose execution progressed. The company recognizes revenues from the sale of apartments in accordance with IFRS accounting rules, i.e., on the basis of sales and the progress of the construction of the apartments.
The gross profit margin in the reporting period and in the corresponding period last year (excluding gross profit of associated companies) is about 17% in the current quarter compared to about 20% in the corresponding quarter. The decrease is mainly due to a significant financing component in the signed contracts, i.e., contractor loans, which reduced the gross profit. The gross profit margin in the entrepreneurial real estate sector in Israel in the current quarter is about 12% and amounted to a gross profit of about 20 million shekels, compared to a gross profit margin of about 18% and a gross profit of about 28 million.
