When Alon walked into my office that morning, the tension in his eyes was easy to spot. He had just returned from Bulgaria on an overnight flight, and the stormy conversation he had had with his local partner was still echoing in his head.
“I can't figure you out,” he began. “Are you with me or against me?”
“Alon,” I replied quietly, “this isn't the first time we've worked together. You know I'm always on your side. But you need to understand that there is a fundamental difference between selling an apartment to an Israeli and selling one to a Bulgarian.”
When financial models meet cultural reality
Alon, a veteran developer in the Israeli market, bought a building under construction near a popular ski resort in Bulgaria. The plan was simple: complete the construction, sell some of the apartments to Israeli investors and the rest to the local market. But now he faced a problem: his business model relied on collecting 50% of the payment when the contract was signed - a model that simply does not work in Bulgaria.
“If they won't pay 50% on signing, how will I finance completing the construction?” he asked in frustration.
According to a 2024 PwC study, differences in payment habits in international real estate markets are one of the five leading causes of failure in cross-border projects. The study found that 73% of Israeli developers operating in Eastern Europe encounter challenges stemming from these differences in their first year of activity.
The truth about payment terms in Eastern Europe
“Alon,” I explained, “in Bulgaria the business culture is different. Local buyers are used to paying 10-30% on signing the contract, with the rest paid according to construction progress. The final payment is made only when you hold 'Act 16' - the local occupancy approval.”
A 2024 Ernst & Young survey reveals that in Eastern European countries, 67% of real estate transactions are based on a staged payment model tied to construction progress, as opposed to the high-advance-payment model customary in Israel. The study emphasizes that developers who adopt local models see a 41% increase in the pace of sales compared with those who insist on their own market's terms.
“Norman Foster, the prominent British architect and developer, told me at one of the recent conferences: 'Real estate is not only about location, but also about timing - cultural timing. Whoever understands the local rhythm, profits,'” I shared with Alon.
Trust and security: the strongest currency in a foreign market
Alon's frustration was understandable. “The money is deposited in an escrow account and released to me according to construction progress and the supervisor's approvals - isn't that enough?” he asked.
“Bulgarians place less trust in the escrow account mechanism,” I explained. “They know and prefer the mechanism of a registered caveat (a notice of caution recorded against the property). It's a matter of culture and trust.”
A McKinsey Global Institute study found that 78% of buyers in Eastern Europe prefer property-based security (such as registered caveats) over contractual security. The study emphasizes that projects offering security suited to local preferences generate 32% more sales in the first year.
Robert Kiyosaki, the international real estate entrepreneur and bestselling author, has commented on the subject: “The most successful developers in international markets are those who understand that setting payment terms is not only a financial decision - it is a cultural decision. You need to adapt your business model to the local culture, not the other way around.”
The road to success: flexibility, patience and cultural fit
After a long conversation, Alon began to see the bigger picture. He agreed to examine an alternative financing model, combining a larger share of equity, local bank financing, and perhaps even staged construction.
“Think of it this way,” I told him. “You're not just building a building in Bulgaria, you're building reputation and trust. In a new market, trust is your strongest currency.”
A 2024 Deloitte report indicates that developers who invest in cultural adaptation and in building local relationships see a return that is 29% higher on average than those who do not.
Alon left the office with new insights and a deeper understanding of the challenges - and the opportunities - of operating internationally. Six months later he had already sold 40% of the apartments in the project, most of them to local buyers, and secured supplementary bank financing on good terms.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית