Amram: What flexible contracts and contractor loans are really doing to sales quality

What This Follow-Up Is Isolating

The main article already established that the Amram story has shifted from revenue to cash. This follow-up isolates a narrower layer: open-market sales quality. The question is no longer whether the company signed contracts. It is on what terms it signed them, who is carrying the financing burden, when the cash actually arrives, and how much of the economic price has already been stripped out of reported revenue before the cash-flow statement even enters the discussion.

Three non-obvious points sit in the same place. First, the 2025 sales decline was not broad-based. It was concentrated in the open market: 451 units versus 1,051 a year earlier, while government-backed programs sold 644 units versus 658. Second, within that decline, flexible contracts took a larger share of all contracts, while the company still carried NIS 36 million of bank interest tied to contractor-loan campaigns. Third, those signed sales did not convert into the same pace of cash: contract assets and receivables jumped to NIS 579.4 million from NIS 227.6 million, while operating cash flow before land purchases swung to a NIS 300.0 million deficit from a NIS 519.3 million surplus.

That is exactly why open-market sales volume is not the same thing as demand arriving on normal terms. Sometimes the sale depends on a bank that underwrites the buyer and advances funding. Sometimes it depends on deferred payment without company underwriting. Sometimes it sits inside a contract that still gives the buyer an exit right if a planning milestone is not reached on time.

Less Open-Market Demand, More Commercial Flexibility

The 36% decline in units sold in 2025 can look, at first glance, like a normal slowdown for a residential developer. That is too shallow a read. The damage was concentrated almost entirely in the slice where sales quality matters most: the open market. The company itself says 2024 was unusually strong, helped by demand deferred from earlier periods, expectations for rate moderation, and the use of sales-supporting financing tools. So the comparison with 2025 is not just a move from a strong year to a weaker one. It is also a move from a year in which open-market activity was already being helped by softer terms, to a year in which the dependence on those tools remained visible.

The important number here is not only 451 units. The important number is what happened around them. The company says non-flexible contracts represented about 75% of all contracts in 2024, including government programs such as Price Target and Price Reduced. In 2025 that ratio fell to about 65%. In other words, even if one accepts that 2024 was an unusually strong base, the result is still clear: a bigger share of signed contracts was done on more flexible terms.

The breakdown of incentives in projects where incentives were granted sharpens that point. In 2024, about 44% of the incentives were flexible contracts totaling about NIS 745 million, while about 56% were contractor loans totaling about NIS 958 million. In 2025, about 53% of the incentives were flexible contracts totaling about NIS 572 million, while about 47% were contractor loans totaling about NIS 505 million. The absolute volumes fell, but the story did not. The mix shifted toward flexible contracts, which means the company itself was giving up more payment rigidity.

That is the difference between “there were sales” and “there were good-quality sales.” When the open market works on ordinary terms, the contract captures both demand and the buyer’s ability to pay. When the contract becomes more flexible, the company buys the buyer more time, but also transfers more of the risk and the financing burden onto itself.

IFRS 15 Shows The Cost, But Does Not Remove It

Not every incentive carries the same kind of risk. Amram itself separates two very different models.

Contractor Loans

In contractor loans, there is bank underwriting, and the company stresses that the bank tests the buyer’s repayment capacity not only for the contractor loan but also for the mortgage expected at delivery. The company also says it collects, on average, about 52% of the purchase price near and before contract signing. In other words, this is commercially cleaner than a flexible contract. But it is still costly.

In 2025, the company paid roughly NIS 36 million of interest to mortgage banks as part of the contractor-loan campaigns it promoted in marketed projects. The board report states explicitly that under IFRS 15 these amounts are treated as a reduction of revenue, as consideration payable to a customer or a sales incentive, and not as a finance expense. So the cost of selling does not sit only in cash flow or in the financing line. It already cuts reported revenue and gross margin.

There is another subtle point here. The 2025 contractor-loan volume of about NIS 505 million also includes loans granted in 2025 for contracts that were signed in 2024. That means the economic burden of a promotional sales campaign does not necessarily end in the year the contract is signed. It can keep weighing on later periods.

Flexible Contracts

Here the risk looks different. The company explicitly says that when it comes to flexible contracts it does not perform its own underwriting for apartment buyers. That is a sharper issue than contractor loans, because in this case there is no external bank screen standing between the company and the buyer.

The accounting treatment is different as well. The company examined whether a significant financing component existed in flexible contracts, and in projects where the share of flexible contracts was relatively high it identified such a component. It therefore reduced transaction prices for accounting revenue recognition and, on the other side, recorded finance income. That means the contractual price and the accounting revenue are no longer the same number. Part of the consideration leaves revenue and moves into the financing line.

The key point follows directly from that: signed sales volume cannot be read as if all of it was created on normal terms. In some transactions the company subsidizes the buyer’s financing and gross margin gets hit. In others, it identifies a significant financing component and shifts part of the contractual price out of revenue and into finance income. In both cases, sales quality is weaker than a superficial reading of unit sales suggests.

The margin line reinforces that message. Gross margin fell to 20.8% from 26.6%, and the company lists four main drivers: mix, more subsidized-program sales, more projects in early stages, and higher labor and subcontracting costs. But it also explicitly adds the expansion of marketing campaigns during the war, which increased the impact of carrying contractor-loan interest. That is not a footnote. It is already part of the economics of the sale.

A Signed Contract Is Still Not Cash

This is where the picture becomes much sharper. If the goal is to understand why open-market sales are not the same as demand on normal terms, it is not enough to stop at the sales table. The balance sheet and cash-flow statement matter just as much.

Contract assets and receivables jumped to NIS 579.4 million from NIS 227.6 million. The company explains that the increase mainly reflects construction progress running ahead of buyer payment schedules. At the same time, contract liabilities to customers fell to NIS 505.6 million from NIS 571.7 million. That is not caused only by financing incentives, but it is exactly the kind of picture that appears when accounting revenue moves faster than cash collections.

The same shift is visible in cash flow. Operating cash flow before land purchases moved from a NIS 519.3 million surplus in 2024 to a NIS 300.0 million deficit in 2025. The board report ties that to higher building inventory, a roughly NIS 174 million change in contract assets and contract liabilities, and about NIS 167 million of interest paid that was not charged through profit and loss. That is no longer just a margin question. It is a question of how much cash remains after the company pushes sales forward.

The revenue-and-advance schedule adds another layer. As of year-end 2025, the company estimates revenue recognition from signed sale contracts of about NIS 947.5 million across the first three quarters of 2026, against expected customer advances and payments of only about NIS 342.8 million. The fourth quarter is supposed to be much more back-end-loaded, with expected receipts of NIS 613.8 million versus recognized revenue of NIS 302.5 million. This is forward-looking company guidance, but it illustrates the point clearly: even after the contract is signed, the revenue path and the cash path do not move together.

Cancellations: Not Every Sales-Quality Risk Is A Credit Issue

Anyone trying to measure sales quality only through the question of whether the buyer will ultimately repay is missing another important layer: cancellation rights. In 2025, 21 apartment sale agreements were cancelled for a total amount of about NIS 57.7 million, excluding VAT. By the report date, another 7 contracts had been cancelled for about NIS 21.3 million.

That breakdown matters precisely because it is not telling one single story. The majority of the 2025 cancellations were not presented as buyer credit failures. They were linked to a contractual condition in Project ALFA: if a building permit is not received within 24 months from signing, buyers have the right to cancel. In other words, sales quality is not measured only by the buyer’s ability to pay. It is also measured by whether planning milestones arrive on time, and whether the contract is built so that the buyer can walk away if they do not.

In that sense, cancelled agreements do not contradict reported sales volume. They are part of the same question: what exactly was sold? If the company sells a unit with a planning condition or with a softer payment schedule, the sales volume still exists. But the degree of finality is lower.

Conclusion

The mistake in reading Amram’s 2025 numbers is to think that every decline in open-market sales is just a demand problem, or that every signed contract automatically proves demand remained healthy. The real story sits in the middle. The open market weakened sharply, and the company responded with commercial and financing tools that preserved a certain pace of signings, but changed the quality of revenue, the pace of collections, and the degree of finality in the contracts.

Contractor loans are not the same as flexible contracts. They include bank underwriting and the company collects an average of about 52% of the deal price near signing. That makes them commercially cleaner. Still, they cost Amram NIS 36 million of interest in 2025, and that cost already reduced revenue and gross margin. Flexible contracts are sharper. There is no company underwriting, and in some projects they already forced Amram to identify a significant financing component and reduce transaction price for revenue purposes.

Current thesis: Amram’s 2025 sales were not lower-quality only because fewer open-market units were sold. They were lower-quality because a larger share of them relied on softer terms that dilute revenue, delay cash, and leave more exit points open along the way.

The strongest counter-thesis is that the company is doing exactly what a large residential developer should do in a weak period: using a commercial toolbox, leaning on subsidized programs, carrying sales momentum forward, and protecting business continuity until the open market normalizes. That is a serious argument, especially because the company itself says 2025 may partly reflect a return to a more balanced marketing pace. But for that argument to hold, 2026 needs to show more sales on more normal terms, less reliance on flexible contracts, and the beginning of a real closing of the gap between revenue and cash.

What will change the market reading in the near term is already clear: not only how many units are sold, but how many of the contracts are flexible, how costly contractor-loan interest remains, whether contract assets keep expanding relative to customer advances, and whether the cancellation pattern stays unusual. That is the real test of sales quality.