Rent Increases and CPI Indexation: How Much, When, and How to Get It Right

For ordinary tenancies that are not protected tenancies, Israeli law does not cap rent or the size of an increase. What matters is the lease:

• During the lease term – The rent is the amount specified in the lease. It can only be adjusted if the lease itself includes an adjustment mechanism, such as CPI indexation or an agreed increase on a specified date. Without such a mechanism, there is no basis for demanding an increase.


• At renewal or when exercising an extension option – If the lease specifies the rent for the option period in advance, that amount applies. Otherwise, each renewal is a new negotiation, and a new rent can be agreed.

CPI indexation is a lease provision that adjusts the rent in line with changes in the Consumer Price Index, published by Israel’s Central Bureau of Statistics. Its purpose is to preserve the real value of the rent so that inflation does not erode your income.

An indexation clause typically defines:

• The base index – The latest published index available on the signing date.


• The adjustment date – For example, once a year or at each renewal.


• A floor – A provision stating that the rent will not fall below the base amount, even if the index declines.

The formula is simple: Adjusted rent = Original rent × (Current index ÷ Base index).

Illustrative example: The rent is 5,000 ₪, the base index is 100 points, and the index on the adjustment date is 103.2. The ratio is 1.032, making the adjusted rent 5,160 ₪, an increase of 160 ₪ per month.

To skip the calculation, use the CPI indexation calculator on our website: enter the rent and signing date to get the adjusted amount.

• *CPI indexation: How it works: Adjustments based on changes in the index; Advantage: Automatic and transparent; Disadvantage*: Does not necessarily reflect the rental market


• *Fixed increase: How it works: A percentage or amount agreed in advance; Advantage: Certainty for both parties; Disadvantage*: May put the rent above or below market rates


• *Market review at renewal: How it works: Setting a new rent based on the market; Advantage: Accurate pricing; Disadvantage*: Requires negotiation

A good indexation clause is precise and leaves no room for interpretation. It specifies which index applies (the Consumer Price Index), the base index and its date, how often adjustments are made, whether there is a floor, and how the tenant is notified of the new amount. If rent is paid by postdated checks, also specify how the indexation difference will be paid, for example through a separate annual payment. A vague clause leads to disputes; a clear clause makes the adjustment a straightforward administrative matter.

• Check the market – Compare similar apartments in the same neighborhood, using actual rental transactions rather than listings alone.


• Calculate the cost of replacing the tenant – A vacant month, cleaning, painting, and marketing. Sometimes a modest increase and a tenant who stays are worth more.


• Give early notice – Several months before the lease ends, and in writing.


• Explain your reasoning transparently – Present market data or the change in the index. A justified increase is better received than an arbitrary one.


• Leave room for discussion – Sometimes a tenant is willing to pay more in exchange for a longer lease or a small improvement to the apartment.

During the lease term, without an adjustment mechanism, the tenant is entitled to refuse, and the rent remains unchanged. At the end of the term, if no agreement is reached on new terms, the tenancy ends and the tenant must vacate the apartment on time. If they stay without agreement, this becomes a case of a tenant who does not vacate at the end of the lease, subject to the applicable legal rules and remedies.

• Demanding an increase during the lease term without a contractual basis.


• Giving last-minute notice, leaving the tenant no time to decide and you no time to find a replacement.


• Making a steep increase after years without adjustments – Small, regular adjustments are better received.


• Using a lease without an indexation clause – Allowing income to quietly erode over the years.

At Flamingo, rent adjustments are based on market data and communicated to tenants transparently, on time, and in writing. In most cases, we offset our management fees through well-calibrated rent increases and shorter vacancy periods, without losing good tenants along the way.

Want to know what your rent should be today? Try the indexation calculator on our website, or leave your details and we will check it against the market.