Kardan Nadlan: What Do 80/20 Deals and Contractor Loans Really Say About Sales Quality?

Sales Did Not Break, But Sales Quality Did Weaken

The main article argued that the core tension at Kardan Nadlan is not whether demand exists on paper, but whether backlog, inventory, and debt can turn into cash without stretching the equity base even further. This follow-up goes one layer deeper into that same question. It is not about how many apartments were sold. It is about the terms on which they were sold, and what that says about cash conversion.

The answer is fairly sharp. The 2025 sales count looks reasonable. Sales quality looks less clean. The company sold 134 units in 2025 versus 145 in 2024, and the fourth quarter recovered to 52 units after just 25 units in each of the second and third quarters. On a first read, that looks like only a mild decline and even a late-year recovery. But on the same page the company notes that the average 2025 selling price per square meter, NIS 26,242 versus NIS 23,298 in 2024, is calculated without buyer benefits such as contractor loans and 80/20 campaigns. In other words, neither the price figure nor the sales pace fully tells the economic story.

What matters more is that the filing does not leave this at a generic level. In the table of projects under execution, the company discloses that in four projects alone, Holiland, Matzada, Karmei Gat, and Uziel, cumulative financing concessions of about NIS 24.2 million were granted through year-end 2025 across 137 units. Against 212 units sold through year-end 2025 in those same four projects, that means about 65% of the cumulative sales there relied on contractor loans or 80/20 deals. That is no longer a marginal footnote. It is a material layer in sales quality.

Three points anchor the right read:

• The average selling price per square meter rose by about 12.6% in 2025, but it is not a net price. The company itself says it excludes financing benefits granted to buyers.
• The filing explicitly discloses about NIS 24.2 million of financing concessions in four key projects. This is not a negligible edge case but a mechanism supporting a meaningful share of sales.
• These terms push cash outward. In 80/20 campaigns, buyers pay only 20% at signing and the balance at delivery, and the company itself links these structures to collection risk, cancellation risk, and tighter financing flexibility.

That chart is the heart of the issue. Unit sales fell by only about 7.6%, while the reported price per square meter rose. But because the price is calculated before the economic benefit granted to buyers, that increase cannot be read as clean evidence of pricing power. Some of it may be real, but it clearly does not tell the whole economics of the transaction.

Where The Incentives Actually Sit

The strength of the filing is that it does not leave the discussion at slogan level. In the footnote to the execution-project table, the company spells out, project by project, how many units were sold through contractor loans and how many through 80/20 campaigns, and also quantifies the financing or economic benefit granted. That finally allows the issue to be measured rather than merely discussed.

These figures change the reading in several ways.

First, the concessions are concentrated exactly where the 2026 to 2030 story matters. Holiland and Matzada alone account for about NIS 19.6 million out of the NIS 24.2 million disclosed. These are not side projects. They are two of the places from which the company is supposed to extract revenue, surplus cash, and cash generation over the coming years.

Second, the company’s wording that these campaigns were used only “to a limited extent” looks less comforting once measured at project level. In Karmei Gat, all 18 units sold through year-end 2025 were sold through 80/20 deals. In Uziel, 18 out of 21 units sold through year-end 2025 relied on 80/20 or contractor loans. Even if management wants to frame the issue as limited at the total-portfolio level, at the project level where disclosure exists, this is clearly a meaningful sales tool.

Third, these concessions are not the same as a formal price cut, but they are still an economic price. The company itself writes that the payment flexibility embeds an economic benefit for the buyer in the apartment price. That is why two statements cannot both be taken at face value without adjustment: that the average price per square meter rose, and that there is no need to neutralize the cost of financing benefits when judging sales quality. The benefit is precisely the part that sits outside the reported price metric.

The Issue Hits Cash Conversion Before It Hits Reported Profit

The key point is not whether these campaigns are “good” or “bad,” but what they do to cash conversion. An 80/20 structure brings demand recognition forward and pushes cash collection out. The company explicitly defines it as a structure in which the buyer pays 20% at signing and the remaining 80% only at delivery, unlike a normal schedule where payment progresses with construction. In contractor-loan structures, the developer subsidizes the interest on a bullet loan taken by the buyer. That eases the buyer’s short-term burden, but increases the developer’s financing cost and liquidity risk.

There is another layer that is easy to miss. In the discussion of construction-input-index exposure, the company explains that when it lets buyers defer the bulk of the payment to delivery, as in 80/20 campaigns, a larger share of the consideration becomes linked to the construction-input index. On the surface that sounds like a hedge. But in the same discussion the company adds that when it also grants index protection or a cap on indexation, that protection becomes smaller. So even on the revenue side there is no automatic clean hedge. The result is a sale in which cash is pushed outward while costs keep moving in the meantime.

Two projects illustrate the gap between a sale and a collection very well:

In other words, lower-quality sales show up first in the cash bridge. They do not have to create an immediate income-statement problem, and they do not mean the contract is flawed. But they do mean the 2025 sales count says less about near-term liquidity than it appears to say on a first look.

That is exactly why the company itself ties the issue to cancellation risk and financing risk at the payment date. In its risk discussion, it says that 80/20 campaigns and contractor loans create exposure mainly through possible cancellations if apartment prices fall or if the buyer lacks financing options at the payment date. The company does argue that its exposure is limited, partly because most contractual delivery dates are still far away, because of past experience, and because banks underwrite buyers in contractor-loan deals. But that is precisely the point: even in the company’s own more relaxed framing, sales quality is not only a demand question. It is a financing-path question all the way to delivery.

Once Midroog Looks At The Sector, This Stops Looking Like A Side Note

The Midroog report adds an important layer because it takes the issue out of the company’s internal framing and places it inside the broader sector backdrop. The message there is very clear: 2024 was a year in which new-apartment sales in Israel were materially boosted by broad developer financing campaigns, and Midroog explicitly frames that broad use of financing promotions as a credit-risk focus for the sector.

In the same report Midroog also notes that banks have already reduced the scale of contractor campaigns relative to earlier periods, that new-apartment sales in the first nine months of 2025 fell to 25.1 thousand units versus 32.6 thousand in the comparable period, and that new-apartment inventory reached a record of about 83.6 thousand units by the end of October 2025, equal to 29.2 months of supply. So even outside Kardan Nadlan, the market is no longer reading financing campaigns as a harmless marketing tactic. It is reading them as a way to preserve sales pace in a more difficult market.

That is exactly what makes this issue material now. When the company says these campaigns were granted “in line with the market trend,” that is true. But when the whole market moves from a period in which financing promotions supported sales to a period in which regulators, banks, and rating agencies are already flagging them as a risk point, the question is no longer whether Kardan Nadlan is unusual. The question is whether the sales it counts today will convert to cash tomorrow with the same quality implied by the gross number.

There is also an awkward timing layer. The company itself notes that on March 23, 2025, the Supervisor of Banks published a draft temporary directive imposing limits on deferred-payment sales and bullet or balloon financing, which under the wording quoted in the filing was meant to remain in force through end-2026. In the company’s own wording, that trend may limit payment-term flexibility and affect the timing of collections in the relevant projects. That matters because it connects the quality of 2025 sales directly to the conversion test of 2026 and 2027.

Bottom Line

Kardan Nadlan’s 2025 sales are not fictitious. The contracts are real, and the company did manage to sell 134 units in a relatively weak year for the sector, with a visible rebound in the fourth quarter. But anyone reading that number as clean evidence of demand or pricing power is missing the more important economic layer: in several key projects, the sales pace was supported through contractor credit and 80/20 campaigns, and the cumulative cost disclosed in just four projects reached about NIS 24.2 million.

That matters because sales quality is tested not only at signing, but at delivery and collection. When a deal pushes 80% of the consideration to delivery, or when the developer subsidizes the buyer’s interest burden, the unit count looks cleaner than cash conversion. So this follow-up does not contradict the main article. It sharpens it. If the equity base is already under pressure from inventory, land, and debt, then sales supported partly by financing concessions do not solve the capital problem. They mainly buy time.

The company’s next test is not whether it can report another decent unit-sales figure. It is whether these contracts reach delivery, full collection, and a remaining margin after the cost of the concession. That is where it will become clear whether 2025 was a genuinely strong sales year, or an expensive year of deferred cash.