Quick Answer: TAMA 38 (National Outline Plan 38) is Israel's national urban renewal program that allows developers to reinforce or demolish and rebuild older apartment buildings in exchange for adding new floors. As an apartment owner, you gain a larger or renovated unit — but the process involves complex legal agreements, majority voting rules, and real tax consequences. Foreign and non-resident owners have full rights to participate but face practical hurdles around signing documents from abroad and understanding Hebrew-language contracts. Always appoint an independent Israeli attorney before signing anything.

If you own an apartment in an Israeli building constructed before 1980, there is a reasonable chance you have already been approached by a developer — or soon will be — with a proposal to upgrade, reinforce, or completely rebuild the structure under a scheme known as TAMA 38 or Pinui-Binui. The proposal will typically promise you a larger apartment, an elevator, an added parking space, and a reinforced structure, all at no cost to you.

For diaspora families who inherited Israeli property, for foreign nationals who purchased an apartment years ago, and for non-resident investors, these offers can seem either attractive or alarming. Understanding what TAMA 38 actually is — what rights it gives you, what obligations it places on you, and what the process involves — is the first step toward making an informed decision.

1. What Is TAMA 38?

TAMA 38 stands for Tochnit Mitar Artzit 38 — National Outline Plan 38. It was approved by the Israeli government in 2005 in response to engineering studies showing that a large portion of Israel's older apartment building stock would not withstand a significant earthquake. Rather than requiring building owners to fund reinforcement themselves, the government created a legal and planning mechanism that gives developers a financial incentive to do the work: in exchange for reinforcing an old building, the developer receives the right to add additional floors or units and sell them on the open market.

The key legislation and regulatory framework includes the National Outline Plan 38 itself (and its amendments creating the reinforcement and demolition tracks), the Planning and Building Law 5725-1965, the Land Law 5729-1969 together with the Strengthening of Shared Buildings against Earthquakes Law 5768-2008 (which set the owner-consent rules), the tax exemptions in Chapter Five-5 of the Real Estate Taxation Law 5723-1963, and, for Pinui-Binui, the Evacuation and Construction (Compensation) Law 5766-2006.

Which buildings qualify: TAMA 38 applies to residential buildings whose original building permit was issued before January 1, 1980, the point at which Israeli Standard 413 on earthquake-resistant design took hold. A licensed structural engineer must certify that the building does not meet that standard; without the engineer's report, the local planning committee will not process the permit application. Before a developer approaches you, you can check whether a permit application is already pending for your building in the local planning committee's online permit file.

Important note on timing: TAMA 38 has been wound down. The National Planning Council set its formal national expiry for October 1, 2023, and in most cities it was kept alive only temporarily, until the municipality's replacement plan was approved and in any case no later than May 2026, and only where the city filed a replacement plan in time. In its place, cities now run building-level renewal through local plans prepared under Section 23 of TAMA 38 or through city-wide replacement plans. The "Shaked alternative" (Amendment 136 to the Planning and Building Law) is a statutory fallback track for buildings those plans do not cover. Pinui-Binui continues as before. Projects that obtained a TAMA 38 permit, or filed a qualifying application, before the cutoff in their city continue under the old rules, and many thousands of units are still under construction. If a developer offers you a "TAMA 38" deal today, ask your attorney to confirm which plan the permit will actually be issued under. That plan determines your building rights, the betterment levy position and the tax exemptions.

2. TAMA 38/1 (Reinforcement) vs. TAMA 38/2 (Demolition and Rebuild)

TAMA 38 evolved over time into two distinct tracks, which work very differently for existing apartment owners:

TAMA 38/1 — Reinforcement and Addition

Under this track, the existing building is retained and reinforced. The developer adds structural reinforcement to the foundations and frame, installs an elevator, adds protected rooms (mamad) to existing apartments, and typically adds 1.5 to 2.5 floors of new apartments at the top of the building to sell. Existing residents remain in their apartments throughout most of the construction (though work is noisy and disruptive). In return for signing the agreement, existing owners typically receive:

  • A protected room added to their apartment
  • An expanded balcony or additional square footage
  • A new elevator
  • Reinforced building structure (the stated purpose of the program)
  • A parking space or storage unit (where feasible)

The developer funds everything and makes profit from selling the new apartments added to the top of the building.

TAMA 38/2 — Demolition and Complete Rebuild

Under this track, the existing building is demolished entirely and a new, larger building is constructed in its place. Existing owners must vacate their apartments (the developer pays temporary rental costs), and upon completion each owner receives a new apartment in the rebuilt structure. The new apartment is typically larger than the original — often by 12 to 25 square meters — and is newly built to modern standards.

The developer's profit comes from selling additional floors or units beyond those allocated to the original owners. This track is more disruptive but delivers more substantial benefits to owners and better results for the neighbourhood.

In Practice: The "replacement rent" the developer pays while you are displaced under TAMA 38/2 or Pinui-Binui is one of the most negotiated — and most underestimated — elements of the agreement. Developers typically offer a lump sum or monthly payment based on a formula tied to the official appraisal of comparable apartments. But in Tel Aviv, Jerusalem, and other hot markets, the apartment you must actually rent while construction runs for 3–5 years costs considerably more than the formula produces. A two-bedroom apartment in central Tel Aviv that the developer's formula values at NIS 5,000/month may be impossible to rent for under NIS 8,000–10,000/month in that neighborhood. Negotiate the replacement rent clause to reflect real market rates, include an annual CPI escalation, and specify that if construction is delayed beyond the agreed period, the developer must continue paying rent until handover. This single clause can be worth hundreds of thousands of shekels over the duration of a long build.

3. Pinui-Binui: Full Urban Renewal of Entire Areas

(Pinui-Binui — literally "evacuation-construction") is a larger-scale urban renewal mechanism that applies not to a single building but to entire residential complexes or neighbourhoods. While TAMA 38 operates at the building level (a single block of flats), Pinui-Binui involves coordinating multiple adjacent buildings simultaneously, enabling a developer to create an entirely new residential compound with shared infrastructure, green spaces, and amenities.

Pinui-Binui is governed primarily by the Evacuation and Construction (Compensation) Law 5766-2006 and the Real Estate Taxation Law 5723-1963, which provides the key tax exemptions that make the scheme economically viable for owners.

Key differences from TAMA 38:

  • Scale: Covers multiple buildings or an entire designated area, not a single building
  • Majority threshold: Once two-thirds of the owners have signed (the original 80% threshold was later lowered), an owner who unreasonably refuses can be sued by the others for the loss the refusal causes
  • Tax benefits: Owners who exchange their apartment under a qualifying Pinui-Binui scheme are exempt from betterment tax on the deemed gain — a very significant benefit for long-held apartments with large embedded capital gains
  • Timeline: Much longer than TAMA 38 — full Pinui-Binui projects can take 7 to 15 years from agreement to delivery of new apartments
  • Government designation: An area must first be officially designated for Pinui-Binui by a local committee; not every location qualifies

4. Rights of Apartment Owners

This is the section that most foreign and non-resident owners need to understand before a developer contacts them.

Do you have to sign?
No — you cannot be compelled to sign a TAMA 38 or Pinui-Binui agreement simply because neighbours want to proceed. However, once the required majority of owners have signed, the legal framework gives courts the power to intervene in certain circumstances:

  • TAMA 38/1 (reinforcement): owners of two-thirds of the apartments, holding two-thirds of the common property, can ask the Condominium Inspector (Mefakeach al Batim Meshutafim) to authorize the works over a minority's objection, under the Land Law and the 2008 Strengthening Law
  • TAMA 38/2 (demolition and rebuild): the threshold was 80% until 2023, when it was lowered to two-thirds for buildings with at least four apartments and more than two owners. In buildings of six or more units, one owner's votes are capped so that a single large holder cannot carry the majority alone
  • Pinui-Binui: once two-thirds have signed, an owner who unreasonably refuses can be sued for the loss the refusal causes, under the Evacuation and Construction (Compensation) Law 5766-2006
  • This mechanism is intended to prevent one or two holdouts from blocking a project that benefits the majority
  • However, these orders are not automatic. The Inspector or court weighs the objecting owner's circumstances, and an owner with a genuine commercial or personal reason to refuse can contest the application

What you are entitled to negotiate:

  • The specific improvements to your apartment: square footage added, balcony, parking, storage, floor choice of replacement apartment
  • Rental compensation while your apartment is unavailable (for TAMA 38/2 and Pinui-Binui)
  • Moving costs (both out and back in)
  • A completion guarantee from a bank or insurer (absolutely essential — see Section 8)
  • Compensation for disruption, noise, and dust during construction (for TAMA 38/1)
  • Timeline commitments with financial penalties for delay

Your right to independent legal representation: You have the right to appoint your own attorney — separate from any lawyer the developer or building committee may engage. In standard Israeli practice the developer covers the reasonable legal fees of the owners' attorney as a project cost. Get that commitment in writing before you appoint counsel, and treat a developer who insists that owners use the developer's own lawyer as a warning sign.

A typical TAMA 38/2 or Pinui-Binui transaction proceeds through the following stages:

  1. Developer approaches the building. A developer or promoter contacts apartment owners, usually through informal meetings or letters, to gauge interest. This is not a legally binding stage, but whatever is discussed may later form the basis of expectations.
  2. Tenants' committee formed. Owners elect a building committee to represent them in negotiations. This committee is not a substitute for each owner having individual legal representation — particularly for major decisions.
  3. Developer submits a term sheet / heads of agreement. The developer proposes the broad terms: what each owner will receive, the construction programme, the financial guarantees. This is the stage where individual owners should appoint their own attorneys to review and negotiate.
  4. Detailed agreement drafted and signed. A full legal agreement is drafted, typically running to dozens of pages. It covers every owner's specific entitlements, the developer's obligations and guarantees, payment milestones, dispute resolution, and the arrangements for vacating and returning. This agreement must be signed — and properly notarised where owners are abroad — by each participating owner.
  5. Planning permit obtained. The developer applies to the local planning committee for a building permit. This process can take 1 to 3 years and may involve hearings, objections from neighbours, and conditions. The planning permit is a precondition for construction to begin.
  6. Construction phase. For TAMA 38/2 and Pinui-Binui, owners vacate and the developer demolishes and builds. The developer pays rent throughout. For TAMA 38/1, owners remain in place during construction.
  7. Handover of new or upgraded apartments. Before anyone signs the handover protocol, an independent building inspector (bodek mosmach) should go through the apartment and list every defect in writing. Defects recorded at handover are far easier to enforce than ones raised later. Owners abroad can have the inspector attend together with their attorney. The developer then repairs within the statutory warranty periods of the Sale (Apartments) Law 5733-1973, and the new apartment is registered in the owner's name at the Land Registry.

6. Tax Implications for Owners

The tax position of owners participating in TAMA 38 or Pinui-Binui is one of the most important — and least understood — aspects of these transactions. The core principle is that exchanging your old apartment for a new or enlarged one does not automatically trigger taxation, but the position is more nuanced than that.

TAMA 38/1 (reinforcement track):

  • Receiving added square footage, a mamad, balcony, or parking space constitutes a deemed sale of part of your apartment's building rights, for which you receive value (the improvements) in return
  • Chapter Five-5 of the Real Estate Taxation Law (Sections 49LB onward) exempts that sale from betterment tax, provided you are paid in "building services" (reinforcement, an elevator, parking, enlargement of your unit) rather than cash, and the reinforcement is actually carried out. A separate provision (Section 49LG1) covers the demolition track. These are time-limited provisions that the Knesset has repeatedly extended, most recently to May 2026, so your attorney must confirm they apply to your signing and permit dates. Any cash payment on top of the works falls outside the exemption
  • However, if you sell your apartment after a TAMA 38/1 project completes, the higher value may affect your betterment tax calculation on the gain
  • Purchase tax consequences also arise in some cases; consult your attorney before signing

TAMA 38/2 (demolition-rebuild track):

  • Exchanging your existing apartment for a new, larger apartment is treated as a transaction for tax purposes
  • Under Tax Authority rulings, if the new apartment is received in lieu of (and replacing) the old one, the transaction qualifies for betterment tax deferral or exemption in many cases — but the specifics depend on the size differential, the owner's overall ownership of Israeli real estate, and whether residency exemptions apply
  • A tax opinion from an Israeli tax lawyer before signing is strongly recommended

Pinui-Binui — the biggest tax benefit:

  • Owners who exchange their apartment in a qualifying Pinui-Binui area are eligible for a complete exemption from betterment tax under section 49 of the Real Estate Taxation Law
  • This exemption can be worth hundreds of thousands of shekels for apartments with large embedded capital gains — particularly relevant for diaspora families who inherited apartments purchased decades ago at a fraction of today's values
  • The exemption applies only if the transaction qualifies under the strict statutory conditions, including the designation of the area and the terms of the exchange agreement

Municipal betterment levy (hetel hashbacha): This is a separate charge from betterment tax. It is a levy of 50% of the increase in value created by a planning decision, payable to the local planning committee. Section 19(b)(10) of the Third Schedule to the Planning and Building Law exempts the value attributable to TAMA 38 building rights. Rights granted beyond that, for example under a local Section 23 plan or through a variance, can still be levied. Your agreement should say expressly that the developer bears any levy charged on the project.

Capital gains for non-residents: If you are a non-resident and the project results in any taxable event, Israeli betterment tax at 25% applies to real gains. Double-taxation treaties may provide some relief — see our guide on Betterment Tax on Israeli Real Estate.

7. Special Considerations for Foreign and Non-Resident Owners

Foreign nationals and non-residents participate in TAMA 38 and Pinui-Binui on the same legal footing as Israeli residents — the law makes no distinction. In practice, however, there are several issues specific to owners living abroad:

Signing documents from abroad: The transaction agreement, any planning-related powers, and registration documents must typically be signed by every apartment owner. If you are outside Israel, you will need to sign before a notary public in your country of residence and have the documents apostilled (or authenticated for countries not party to the Hague Convention). Alternatively, you can grant a power of attorney to your Israeli attorney to sign on your behalf. Plan for this at the outset — delays in obtaining a signature from abroad frequently hold up entire projects.

Communication barriers: Developer representatives, building committees, and planners primarily operate in Hebrew. Key deadlines, meetings, and decisions may be communicated in Hebrew only. Ensure your Israeli attorney provides regular English-language updates and that you are copied on all significant correspondence.

Temporary rental arrangements: For TAMA 38/2 and Pinui-Binui, the developer pays rent for your apartment while you are displaced. If your apartment is currently tenanted, the lease arrangements and the developer's obligations towards your tenant must be carefully addressed in the agreement. Israeli tenant protection law applies, and evicting a sitting tenant to enable demolition requires proper procedure.

Currency and remittance: If the transaction results in a taxable event or you receive any cash payment alongside the apartment exchange, the proceeds are subject to Israeli currency control rules. The Bank of Israel requires documentation for transfers abroad. Engage an Israeli accountant alongside your attorney for any transaction that generates actual cash.

Estate planning implications: If you own the apartment together with other family members — as commonly happens with inherited property — all co-owners must agree to participate. A dissenting co-owner cannot be overridden by the other co-owners. If the apartment is owned by a foreign company or trust, additional tax and corporate law considerations apply.

Illustrative scenario (hypothetical): A Canadian couple who inherited a 1960s apartment in Ramat Gan from a grandparent received a developer's proposal for a TAMA 38/2 demolish-and-rebuild project. The proposal offered a new 95 sqm apartment in replacement of their current 62 sqm unit, plus NIS 4,500 per month in displacement rent for an estimated 30-month construction period. The couple appointed their own Israeli attorney — separately from the building committee's lawyer — who identified that the agreement as drafted did not include a bank guarantee for the replacement apartment's value as required, only a developer's personal undertaking. The attorney also negotiated inclusion of a "most favoured nation" clause. When the project stalled and a new developer later took over with improved terms, the Canadian owners received an additional 7 sqm upgrade and a parking space under the MFN clause — terms not available to the nine owners who had signed the original agreement without independent counsel. The lesson: always appoint independent Israeli representation in TAMA transactions, and have the developer's commitment to cover those fees put in writing.

8. Risks and Red Flags

TAMA 38 and Pinui-Binui projects have a mixed track record in Israel. Many have delivered exactly what was promised; others have stalled, failed, or left owners in difficult situations. Here is what to watch for:

Developer insolvency risk: This is the most serious risk for owners who have vacated their apartments or signed over rights. If the developer becomes insolvent mid-project, owners may find themselves without their original apartment, without a replacement, and with limited recourse. The mandatory protection mechanism is a bank guarantee or insurer guarantee for each owner, covering the value of the apartment being given up plus the replacement apartment. Never sign a TAMA 38/2 or Pinui-Binui agreement without this guarantee in place — or at minimum a binding commitment that it will be provided before any rights are transferred. The Sale (Homes) Law 5733-1973 provides some protections for replacement apartments, but a direct bank guarantee is stronger.

Planning permit delays: Projects can be held up for years in the planning stage. Some developers obtain owners' signatures and then fail to secure permits — either because the local committee rejects the plan or because the developer lacks the resources to pursue it. Ensure the agreement includes a drop-dead date by which planning permission must be obtained, with owners free to exit if not met.

Scope creep and diluted benefits: Agreements sometimes start with attractive offers that are gradually revised as the project progresses. Anything promised — apartment size, specification, parking, completion date — must be in writing in the binding agreement, not merely discussed at a meeting.

The "apartment committee lawyer" problem: Some developers steer owners toward a single lawyer to represent the entire building, presenting this as simpler and cheaper. In reality, the building committee's lawyer is often not fully independent of the developer. As a foreign owner, you are particularly vulnerable to this dynamic. Always appoint your own attorney. Standard practice is for the developer to cover those costs, so there is no financial reason not to.

Hold-out premium: As the required majority approaches, the last few holdouts sometimes receive better offers than early signers. This is not necessarily unfair — but early signers should ensure that their agreements include a "most favoured nation" clause entitling them to equivalent improvements if better terms are later offered to any other owner in the building.

In Practice: The "apartment committee lawyer" problem is particularly acute for foreign owners. In a typical building, the developer will offer to cover the legal fees of a single attorney representing all owners collectively. They present this as a convenience. In reality, that attorney's client is the building committee — not you individually — and a committee that includes a majority already eager to sign has interests that may conflict with yours as a foreign owner with a tenanted apartment, an estate dispute over title, or a need for a longer displacement payment. Non-resident owners have the most to lose and the least ability to monitor the process. Insist on independent legal representation at the developer's cost in writing before any document is presented for your signature, and do not rely on verbal assurances that the developer will reimburse you later.