Construction Industry Rages Over Ban on Private Recruitment From India and Sri Lanka

 Israel’s construction industry is warning of a potentially severe labor shortage after the Population and Immigration Authority decided to prevent privately licensed manpower corporations from recruiting construction workers from India and Sri Lanka beginning January 2027.

Under a directive issued this week, foreign-worker corporations will be allowed to recruit construction workers through the private channel only from a designated list of countries, including Italy, Brazil, Hungary, Romania, Thailand and Turkey, among others. Workers from India and Sri Lanka will continue to be eligible for recruitment through Israel's bilateral government-to-government programs.

The decision has triggered an angry response from representatives of Israel's foreign manpower companies, who argue that the private recruitment system has become a critical source of skilled labor for the construction sector.

“A Disaster for the Construction Industry”

Eldad Nitzan, chairman of the association representing foreign manpower corporations in the construction sector, said that approximately 60% of foreign workers currently employed in Israeli construction and renovation come from India.

“This decision by the Population and Immigration Authority is a disaster for the construction industry,” Nitzan said. “It will create a severe shortage of workers and lead to higher housing costs.”

Nitzan argued that the private recruitment channel has proved substantially more effective than the bilateral system.

According to figures cited by the industry, approximately 95% of workers recruited through the private channel are successfully absorbed into construction jobs to the satisfaction of contractors. By contrast, the industry claims that roughly 70% of workers recruited through the bilateral channel were found unsuitable for construction work and were subsequently dismissed, with some moving into other sectors such as restaurants and events.

Those figures are industry claims and have not been independently verified by the government.

Government Directive Takes Effect in 2027

The Population and Immigration Authority's new framework will take effect on January 1, 2027.

The approved list for private recruitment includes countries across Europe, Asia and Latin America. India and Sri Lanka have been excluded from the private channel because workers from those countries are covered by bilateral arrangements with Israel.

Israel's own data show that India and Sri Lanka are already established sources of construction labor through bilateral programs. A government report on bilateral agreements lists India and Sri Lanka among the countries providing workers to Israel's construction sector.

Sri Lanka has also continued to conduct professional testing of candidates for construction work in Israel under the bilateral framework. In January 2026, more than 1,100 Sri Lankan applicants participated in practical examinations supervised by Israeli examiners.

Industry Says Private Track Has Brought 70,000 Workers

According to the foreign manpower companies' association, some 220 licensed corporations have collectively brought approximately 70,000 foreign workers to Israel through private recruitment.

The industry says the system has supplied experienced workers at a time when the construction sector has faced an acute labor shortage following the October 7, 2023 attack and the sharp reduction in the number of Palestinian workers entering Israel.

A State Comptroller report earlier this year also highlighted the serious labor shortage in construction and its economic consequences, including delays to projects and billions of shekels in estimated economic damage.

Government Seeks Greater Control Over Recruitment

The government's position reflects a different concern.

Israel has increasingly relied on bilateral agreements to regulate foreign-worker recruitment, with the stated goals of reducing illegal recruitment fees, protecting workers' rights and preventing trafficking and exploitation. The Population and Immigration Authority says bilateral agreements are intended to promote the recruitment of skilled workers while providing greater regulatory oversight.

The new directive therefore represents not simply a restriction on the private manpower industry, but part of a broader policy of steering recruitment toward government-to-government frameworks.

The construction industry argues, however, that the government has not demonstrated that the bilateral channel can supply workers quickly enough or with the skills required by Israeli contractors.

Fear of Higher Housing Costs

Industry representatives warn that limiting access to Indian and Sri Lankan workers could slow construction at a time when Israel is already struggling to maintain housing supply.

Nitzan said the decision could create “chaos” in the construction sector and contribute to higher housing prices.

The concern is particularly significant because construction companies are already competing for skilled workers following the reduction in Palestinian labor and the continuing shortage of domestic workers willing to take construction jobs.

The Jerusalem Post reported that the new policy has already triggered warnings of both a renewed labor shortage and higher housing costs.

Two Competing Recruitment Models

The dispute highlights two fundamentally different approaches to managing foreign labor.

The private model allows licensed manpower corporations to recruit workers directly from approved countries, subject to Israeli regulation.

The bilateral model places recruitment within agreements between Israel and foreign governments, with greater involvement by public authorities in selection and recruitment.

Supporters of bilateral recruitment argue that it provides stronger safeguards against exploitation and recruitment abuses.

The construction industry counters that speed, flexibility and professional matching are essential in a sector where delays can translate directly into higher costs.

Nitzan: “No Other Country Operates This Way”

Nitzan sharply criticized the government's approach.

“No country in the global market operates under such absurd agreements that place such a burden on the private sector,” he said.

He accused the Population and Immigration Authority of repeatedly introducing policies that, in his view, obstruct the private economy and harm the construction industry.

The authority has not publicly adopted the industry's characterization of the policy as an “attack” on construction, and the government has emphasized the regulatory and worker-protection rationale behind bilateral recruitment.

A Growing Test for Israel’s Construction Policy

The dispute comes as Israel tries to solve one of the most serious labor shortages in its construction industry in decades.

The government must now balance three competing objectives: ensuring a sufficient supply of skilled workers, maintaining tight oversight of foreign recruitment, and protecting foreign workers from exploitation.

For the construction industry, however, the immediate concern is more straightforward: whether the state can replace the workers who will no longer be available through private recruitment.

The policy battle is therefore about more than India and Sri Lanka. It is becoming a test of whether Israel can simultaneously maintain strict control over foreign labor recruitment and provide the construction sector with the workforce it needs to keep building homes at scale.