Was Hagag's 2025 Record Sales Pace Really High Quality

The Question Behind The Record

The main article argued that Hagag's 2025 sales record still had to pass the cash-conversion test. This follow-up isolates the question that comes one step earlier: before asking whether sales turn into surpluses, it is worth asking what quality those sales had in the first place. In residential development, a unit sold on 20/80 terms, with index relief, or on a path that can later shift into a developer-loan structure is not economically the same as a unit sold on normal payment terms.

The short answer is that the record was real, but not clean. 2025 was better than 2024 on one clear axis: developer loans almost disappeared. But the company still relied heavily on commercial relief. NIS 507 million of sales were done on 20/80 terms, NIS 1.031 billion on linear-payment schedules, and NIS 646 million of contracts carried relief from construction-input indexation. Hagag stepped back from the most aggressive 2024 model, but it did not return to normal selling terms.

That matters most in FIRST. The project produced a real sales engine, 132 signed units and a 40.1% marketing rate by year-end 2025, rising to 155 signed units by the filing date. But the same engine was working while the product was still moving. During 2025, 18 subscription applications were canceled in FIRST because planning changed as the project advanced, and 3 of the company's 4 canceled sale transactions during the year were also in FIRST. This is not weak demand. It is simply not fully clean demand either.

The Relief Did Not Disappear, It Changed Form

The filing gives a fairly direct quantitative answer. In 2024, the company relied on three marketing models: about NIS 255 million of 20/80 sales, about NIS 250 million of developer-loan sales, and about NIS 262 million of linear-payment sales. Almost all of those sales, NIS 698 million, or 91% of the contracts, also received index relief.

In 2025 the mix changed, but not into full normalization. Developer-loan sales almost vanished, down to only about NIS 6 million. That is a real improvement because this is the most aggressive structure, explicit interest subsidization and buyer financing that the developer helps carry. But 20/80 did not disappear. It still represented about 33% of total sales, and in absolute terms it actually rose to about NIS 507 million. Linear-payment sales jumped to about NIS 1.031 billion, or 67% of the sales mix. Index relief also remained material. It fell from the extreme level of 2024, but still reached NIS 646 million, or 42% of 2025 contracts.

That chart matters because it blocks an easy misread of 2025. If the reader focuses only on the collapse in developer loans, it is easy to conclude that sales quality returned to normal. That is not what the numbers say. They say something narrower: Hagag cleaned up the most aggressive part of the mix, but kept a deep layer of commercial relief through deferred payments and index relief.

There is a deeper point here, and it is about underwriting rather than only pricing. The company explicitly says that in developer-loan transactions it relies on the underwriting performed by the financing bank. But in other structures, such as 20/80 and index-relief deals, it does not conduct its own independent underwriting of apartment buyers. That is not a technical footnote. It means that the move away from developer loans did not eliminate the sales-quality question. It shifted it from an overtly subsidized financing model into a softer commercial model where the company still makes the purchase easier without presenting a strict in-house credit screen.

From the company's perspective, the defense is understandable. It says that if a buyer fails to complete the agreement, it can enforce the contract, cancel it, forfeit agreed compensation, and resell the unit. Legally and accounting-wise that may be true. But it is still not the same quality as a sale where the buyer pays on normal terms, remains exposed to indexation, and is screened more strictly at the outset. The right description of 2025, then, is not a clean sales peak. It is a peak achieved on softer terms than the headline suggests.

FIRST Proved Demand, But Also Revealed The Friction

It is impossible to understand Hagag's sales record without FIRST, and impossible to understand sales quality without looking directly at FIRST. The project in Sde Dov generated the pace: 132 signed units by the end of 2025, a 40.1% marketing rate, and 23 more units signed after year-end by the filing date, taking the total to 155. As a commercial achievement, that is strong, especially for a project won only in March 2025 and still before a full permit.

But this is exactly where the counter-data matters. During 2025, 18 subscription applications were canceled in FIRST because of planning changes as the project advanced. In addition, 3 of the company's 4 canceled sale transactions during the year were also in FIRST, again because of material changes in apartment design. True, 2 of those canceled units, totaling about NIS 17 million including VAT, were resold during the period. That softens the immediate damage. But the fact that the product was changing while the sales machine was running, and that this led both to canceled applications and canceled transactions, is precisely why it is hard to call the pace fully clean demand.

That chart sharpens the right point. FIRST does not look like a project that struggled to sell. On the contrary, it sold quickly. But it does look like a project sold while still in motion. By the filing date, the company still had 35 additional applications in FIRST totaling about NIS 292 million that were in negotiations but had not yet become binding sale agreements. So even after 155 signed units, part of the visible momentum still rested on a pipeline that had not fully closed.

That makes FIRST a two-sided signal. On one hand, the filing really does show that Hagag can generate demand in a flagship project, at high prices, and at unusual speed. On the other, the same filing shows that part of that demand relied on very aggressive marketing, moving design definitions, and a meaningful layer of applications that were not yet legally binding. This is selling power. It is not yet full proof of clean demand.

Why The Headline Needs An Asterisk

The most important part of this follow-up sits in the footnotes. The company's main sales table is presented on contractual sale prices, meaning without stripping out the significant financing component in projects where financing benefits were granted. At the same time, the company states that out of 335 housing units marketed from January 1, 2025 through the filing date, 55 units totaling about NIS 416 million were only registration applications, with no certainty they would become binding agreements.

That means the record-sales headline is a good marketing headline, but not a clean measure of economic sales quality. It includes both prices that were not normalized for financing support and a layer of demand that was not yet legally locked in.

There is an even sharper point. The company itself says that in FIRST certain buyers were given a choice between a linear-payment schedule and a developer-loan structure. If those buyers later opt for the developer-loan route, the company's developer-loan volume could increase by about NIS 506 million including VAT, and contract consideration with those buyers could rise by about NIS 72 million including VAT. In other words, even after the 2025 numbers were already presented, the company acknowledged that the mix was not fully closed.

That is the key datapoint. It says the improvement in 2025 sales quality was real, but still conditional. If FIRST keeps selling with a broader shift into developer-loan financing, part of the apparent 2025 cleanup will look, in hindsight, like only a temporary mix effect.

Bottom Line

So, was Hagag's 2025 record sales pace really high quality? Relative to 2024, yes. In absolute terms, not yet. The company made an important shift by nearly removing developer loans from the current-year mix, and FIRST clearly proves that Hagag has real selling power. But the record still leaned on large-scale 20/80 structures, widespread linear-payment plans, material index relief, no independent underwriting in the main eased-sale tracks, and a flagship project that sold quickly while its design was still changing, with canceled applications and canceled deals along the way.

If "high quality" means buyers taking the product on normal terms, with cleaner customer risk and a stable product definition, the filing does not support that conclusion. If it means Hagag has a real ability to sell large volumes at high prices even in a difficult market, the filing clearly does support it. The filing supports only the second answer.

That also defines the next 2 to 4 quarter test. For the read on sales quality to improve, three things need to happen together: the share of sales with index relief needs to keep falling, the FIRST application pipeline needs to keep converting into binding agreements without a renewed rise in developer loans, and the cancellation rate needs to stay limited after the design stabilizes. If that happens, the 2025 sales record will start to look like a healthy base. If not, it will remain a record partially bought with terms.