Agricultural Land Versus Residential Land: What the Difference Is, and Why It Matters
What sets a plot's designation, what is allowed on agricultural land, how likely rezoning really is, and the warning signs to know before buying land.
Two parcels that look identical on the ground can be completely different in value and in permitted use. What separates them is the planning designation, not the appearance, the size or the location. Understanding that difference is the foundation of every investment decision in land.
What Determines the Designation
The designation is set by the outline plans and detailed plans (ta'ba) that apply to the area, and not by the sale agreement or by what the seller says. You check the designation by block and parcel (gush ve-chelka) with the local planning and building committee, in the Planning Administration's "Tochnit Zamin" planning information system, and on the local authority's geographic information sites. You can also order a planning information file from the local committee. This is public information, and it is the first step in any examination of land.
What Is Permitted on Agricultural Land
On land designated for agriculture the permitted use is agricultural, and residential construction on it is not permitted by default. It is important to know that a great deal of the agricultural land in Israel is not privately owned but leased from the Israel Land Authority (Rama'i), in which case further restrictions apply: transferring the rights generally requires the consent of the Israel Land Authority and may give rise to a liability for consent fees, and some agricultural lease agreements are not long-term leases but periodic contracts renewed from time to time. These are material differences from the purchase of privately owned land.
The Additional Layer of Approval
Beyond the ordinary planning institutions, a plan applying to land that has been declared agricultural land also requires the approval of the Committee for the Preservation of Agricultural Land and Open Spaces (Valkachash"p), which operates under the Planning and Building Law. This is an independent, additional tier of approval, which lengthens the process and adds uncertainty to it.
Change of Designation: Possible, But Not Guaranteed
The designation of agricultural land can be changed to residential, and this does indeed happen. But it is a public planning process, requiring the deposit of a plan, consideration by the planning institutions and sometimes also a response to objections. It can take years, and there is no certainty whatsoever that it will be approved. A thorough check by a professional is required.
Why It Matters to the Price
The price gap between agricultural land and land approved for construction reflects exactly that risk. Agricultural land sells relatively cheaply because what is actually being sold is a prospect and not a right.
What Happens When the Designation Does Change
On privately owned land, the approval of a plan that raises the value of the land is a betterment event and gives rise to a liability for a betterment levy (hetel hashbacha) at a rate of half of the increase in value, payable to the local committee. The levy is not paid when the plan is approved but on the realization of the rights, meaning a sale, the grant of a building permit or actual use of the new rights, so it follows the property until realization. On land leased from the Israel Land Authority for agricultural purposes the arrangement is materially different: the lessee is generally not liable for a betterment levy, but neither does the lessee benefit from the appreciation, because the land reverts to the Israel Land Authority against compensation, and it is the Israel Land Authority that transfers a substitute payment to the local authority. The difference between the two situations is the difference between an investment that carries a prospect and one that does not, which is why this is one of the first checks to carry out.
FAQ
By block and parcel, with the local planning and building committee and in the Planning Administration's "Tochnit Zamin" planning information system. You can also order a planning information file from the local committee. This is public information, and there is no need to rely on what you have been told by the seller or the marketer. In a significant transaction it is customary to add to this a review by a lawyer and by a real estate appraiser.
No. There are buyers who understand exactly what they are buying, price the risk correctly, hold the land for years and, once the designation changes, profit substantially. The problem is not the purchase of agricultural land as such, but buying it at a price that prices in a change of designation that has not yet been approved, or on the mistaken understanding that the change is guaranteed. It is also important to check whether the land is privately owned or leased from the Israel Land Authority, because the economic picture is entirely different in each case.
Even after a change of designation, the land is not necessarily ready for building. In most cases a detailed plan, a consolidation and subdivision procedure, the carrying out of development works and the issue of a building permit are still required. A plot on which you can build here and now is a different asset from land whose designation has been changed on paper, and that is reflected in the price.
If you are dealing with a similar situation and would like to review the specifics of your own case, you are welcome to contact me by phone at 054-4417869 or by email at leon@sverdlov.co.il.
The content of this guide is general information only, intended to explain the legal background in accessible language. It does not constitute legal advice and is not a substitute for individual legal advice that takes the circumstances of the particular case into account. Nothing set out here should be relied upon for the purpose of making decisions or taking action. The law, the case law, the amounts and the deadlines may change from time to time, and every case is judged on its own facts. © All rights in the content of this guide, including its wording, its structure and its editing, are reserved to the Law Office of Leon Sverdlov. The content may not be copied, reproduced, distributed, published, translated or used for commercial purposes, in whole or in part, by any means whatsoever, without the prior written permission of the firm.
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