Gabay Group: Was 2025 Sales Velocity Driven by Real Demand or by Customer Financing Support?

Not Whether Demand Exists, but Who Is Funding the Pace

The main article already argued that Gabay's 2025 bottleneck sits in the balance sheet, not in the size of the project pipeline. This follow-up isolates the sales engine itself. When residential sales hold up in a softer market, is that evidence of clean end-demand, or evidence that the company is partly financing the transaction for the buyer?

The short answer is that this is not a binary choice. Demand does exist. No sale agreements were cancelled during 2025, and from January 1, 2026 through shortly before the report date only one agreement, worth about NIS 2.8 million, was cancelled. But the sales pace clearly leaned on payment and financing support that the company itself describes as marketing models: CPI-linkage waivers, 80%-20% and 85%-15% payment schedules, and at times developer-backed loans. That is no longer a minor commercial detail. It is a mechanism that helps move apartments, pulls cash receipts forward, and shifts part of the economic cost into pricing quality, margin quality, and risk.

The most important point is that this support was material rather than marginal. In the board report, the company says that in 2025 it sold 112 residential units worth about NIS 379 million, of which 73 units worth about NIS 243 million were sold on non-linear consideration terms. It also states that sales on favorable financing terms accounted for about 64% of free-market sales. That means the 2025 sales pace should not be read as a clean demand datapoint. It should be read as demand that was materially supported by financing relief.

This chart highlights a point that is easy to miss on first read. The business description provides a second lens on the same issue: after excluding the 13 units that were sold and delivered, 65 of the remaining 99 units, worth about NIS 216 million, were still sold on non-linear consideration terms. In other words, the issue is not confined to deals that already closed and delivered. It also sits inside the layer of sales that still needs to translate into future revenue and cash.

What the Sales Model Actually Does to Profit Quality

The accounting matters here because it captures the economic substance. The company does not treat these financing terms as a small marketing expense on the side. Its accounting policy says that when the payment schedule gives the buyer a significant financing benefit, for example a 20%-80% structure where most of the payment arrives only at completion, the transaction price is adjusted to strip out the financing component. Put differently, not all of what looks like apartment revenue remains apartment revenue.

That is exactly what happened in 2025. The company quantified about NIS 11 million of significant financing component embedded in the deals signed during the year on favorable payment terms. Of that amount, about NIS 4 million already reduced revenue recognized in 2025 based on the stage of completion. That is not a huge number relative to total sales, but it is analytically important because it proves that the company did not just make life easier for customers. It also gave up part of the economics of the transaction.

Note 23 reinforces that reading. Finance income from significant financing components in sales contracts reached NIS 3.873 million in 2025, after NIS 3.832 million in 2024 and only NIS 0.76 million in 2023. So this is no longer a one-off accounting footnote. It is part of the way sales are increasingly flowing through the income statement.

This is the core of the continuation thesis. These sales are not fake. But they are less clean. The nominal apartment price is partly reshaped by financing support, the income statement is split between revenue and financing effects, and gross margin on first read no longer tells the full story.

There is another subtle but important point in the filing. For projects already under execution where marketing has started and a significant financing component exists, the company deducts that financing component from price per square meter and revenue only for units already sold. For unsold units, and for many projects still in planning or held as land reserves, disclosed economics remain based on business plans and do not reflect any future financing support because the company says it cannot estimate in advance what incentives it may need to offer. That matters for forward-looking margin quality. If market conditions in 2026 still require these kinds of concessions, part of today's disclosed project economics on unsold inventory may prove too optimistic.

Working Capital Relief, but Not a Full Transfer of Risk

The easy mistake is to look at these sales models only through pricing erosion. That is incomplete. The company also gets a real benefit from them. It receives a higher share of the sales proceeds near contract signing, which lowers project financing cost because the interest rate on the contractor loan is lower than the interest rate on project credit. In that sense, these payment terms are not just a marketing tool. They are also a working-capital tool.

But this is exactly where the quality issue sits. The company itself says that these models help market apartments, yet at the same time increase dependence on bank financing, raise financing expense and financial risk, and may hurt profitability, especially during unstable periods or project delays. So the company is buying two things at once: a better sales pace today, and greater dependence on financing conditions tomorrow.

Risk transfer is only partial as well. On the one hand, the underwriting of the buyer's repayment ability is done by the lender providing the contractor loan, not by the company itself. That reduces Gabay's direct exposure to pure customer credit screening. On the other hand, if the buyer fails to pay the remaining consideration, the company can enforce or cancel the agreement and keep the contractual compensation, but it may also need to repay the contractor loan that was extended to the buyer and place the apartment back into inventory for resale. The company says this would be a temporary cash-flow effect as long as apartment values do not decline. That is an important qualification. It means the risk does not disappear. It changes form: less pure credit risk, more timing, cash-flow, and resale-price risk.

It is also notable that actual interest payments related to contractor-loan campaigns in 2025 were described as immaterial. So for now, the economic cost of sales support shows up less as immediate cash bleed and more as lower revenue quality, higher financing dependence, and noisier forward margin visibility. That is exactly why the headline sales line is not enough here.

So Was This Real Demand or Financing-Supported Demand

The headline question is sharper than the filing itself allows. These were not fictional sales, and buyers did not disappear immediately. There are signed contracts, initial receipts, and a low cancellation rate. But this was also not the same quality of demand the company would have had if most sales were closing on standard payment terms without financing support. When the company itself shows that about 64% of free-market sales were made on favorable financing terms, the right interpretation is that 2025 sales velocity was materially supported by those terms.

That leads directly back to the main article. If the balance sheet is the active bottleneck, the sales models provide short-term relief on the cash-receipt side, but they do not solve the underlying issue. They help preserve marketing momentum and improve early cash inflow, but in exchange they weaken pricing quality, pull financing components into the accounting of the deal, and leave a meaningful portion of future project profitability dependent on what concessions will still be needed for units not yet sold.

What matters in 2026 is therefore not just how many units will be sold, but on what terms they will be sold:

• Whether the share of sales on non-linear terms remains near 2025 levels or starts to fall.
• Whether the significant financing component in new deals keeps growing faster than sales.
• Whether the gap between on-paper project profitability and actually recognized revenue widens as more units are sold.
• Whether cancellations and re-sales remain negligible even if the market stays soft or project timelines slip.

Bottom Line

Gabay's 2025 sales pace was not driven only by "real" demand, but neither was it only a marketing illusion. Demand is there, yet too large a share of that demand was supported by customer financing relief for the pace to be treated as fully clean. That matters because in residential development, growth achieved through commercial concessions is not equivalent to ordinary growth. It can preserve momentum and even improve near-term cash receipts, but it does so at the cost of lower revenue quality, greater financing dependence, and less certainty around the true profitability of the inventory that still remains to be sold.