After the TABA, we reach a milestone that often decides whether a renewal project happens at all: the designation (hachraza). It governs the project's tax benefits, the handling of refusing residents — and in practice, much of the project's economic feasibility. Understanding it helps developers, owners and investors plan with confidence.
What is the designation process?
A legal stage in which a defined complex is declared an urban-renewal complex (pinui-binui, or reinforcement under TAMA 38/the Shaked track) — granting the project statutory status and unlocking tax benefits and other incentives.
The two main designation tracks in pinui-binui
- The taxation track (at a developer's request): the developer applies to the Government Authority for Urban Renewal to designate the complex for tax purposes — unlocking the significant tax benefits that create the project's economic feasibility.
- The municipal track: the local authority initiates and applies for the designation — bringing government support, resources, professional tools and tax benefits, and enabling wide-scope projects tuned to the community's needs.
Why the designation matters — seven effects
- Legal, planning and economic certainty — a clear framework that raises every party's confidence.
- Tax benefits for the owners: appreciation-tax exemption on selling the existing rights to the developer (per the statutory conditions) in exchange for the new apartment; purchase-tax exemption on receiving the new apartment; and typically zero-rate VAT on it.
- Tax benefits for the developer: purchase-tax relief on acquiring the rights, income-tax reliefs and expense offsets, VAT reliefs and deferral on the exchange apartments and construction services, and betterment-levy reliefs — often the difference between a project that pencils and one that doesn't.
- Faster advancement — designated complexes often receive priority at the local authority and the planning institutions.
- Institutional support — professional, legal and planning assistance from the Government Authority and the municipality.
- A stronger special majority and tools against unreasonable refusers: the majority may apply to court to compel a refuser without a reasonable ground to join — and to charge them compensation for the delay's damages.
- Better access to financing — designated projects read as government-backed, easing public and private funding and accelerating the developer's sales.
The statutory conditions for requesting designation
- Planning: a detailed plan deposited for objections by the competent institution, enabling demolition or densification of at least 24 existing units, toward building the greater of double the existing units or at least 70 units.
- Pinui-binui agreements: the developer signed with a special majority — owners holding at least 66% of the complex's apartments, at least 60% in every building, and more than 50% of the attached common property.
- The municipality's position: the local authority consented to the designation (or the conditions of s.14(a1) of the Government Authority for Urban Renewal Law are met).
The designation's five steps
- 1Initiating the project — by the owners or a developer, and assembling the special majority.
- 2Filing the application with the Government Authority for Urban Renewal — the complex's details, the proposed development plan and the required documents.
- 3Examination and preliminary approval — the Authority reviews the economic, planning and social feasibility; a preliminary approval can be requested for the tax benefits, allowing reporting to the Tax Authority to defer the tax-liability date (the preliminary approval does not guarantee designation).
- 4The designation itself — published in the official records, announcing the complex's new status.
- 5Approvals and execution — permits, guarantees, conditions precedent, relocation, demolition and construction.
The bottom line
The designation gives the project a legal and planning frame — and the tax benefits that make it possible: for investors, a lower-risk, higher-certainty environment; for owners, not only a new apartment but a renewed neighborhood and rising value. Understanding the critical stages — the designation chief among them — is the key to leading the project with confidence and wisdom.
Your new apartment's future begins here. With deep legal expertise and rich renewal experience, we walk with you at every stage — your interests protected, the project moving, and you getting the most from the process.
The above is initial information only and does not constitute legal advice or a substitute for it. Consult an attorney specializing in the field before taking any action.
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General information — not legal advice.