Stake 101
Table of contentsOverview Of Private Real Estate Funds In Saudi Arabia
Picture Saudi Arabia's investment landscape prior to 1971 in two words: decentralized, and unregulated.
However, the establishment of the Public Investment Fund1 changed all that…
Investment activities were primarily driven by individual and spontaneous initiatives. This meant that while there were opportunities, there was also significant unpredictability and limited investor protection.
The Rise Of Private Real Estate Funds In Saudi Arabia
Recognizing the need for a more organized and secure investment environment, the Saudi government took decisive steps in 1971 with the creation of the Public Investment Fund.
This move was aimed at providing a structured and stable framework for both local and international investors.
Growth and Regulation Of Saudi Investment Funds
The introduction of structured real estate funds was part of this broader effort to standardize and stabilize the investment market in Saudi Arabia.
Learn more about Saudi Arabia’s rapid economic growth
Over the past few decades, private real estate funds have become an important option for investors seeking diversified exposure to real estate.
These funds serve as investment vehicles that pool capital to invest in real estate assets, providing a way for investors to participate in the real estate market without direct property management responsibilities.
Market Accessibility & Evolution Of Real Estate Funds In Saudi Arabia
Historically, the Saudi Arabian fund industry was limited to high-net-worth individuals and institutional investors.
However, recent regulatory changes and economic strategies, such as Vision 2030 , have opened the door for broader participation.
The introduction of measures allowing “non-Saudis” to invest in real estate funds, particularly in areas like Makkah and Madinah, exemplifies this shift towards inclusivity.
This regulatory evolution has opened up the market, allowing a more diverse group of investors to participate in real estate funds, which were previously inaccessible.
Mohammed bin Abdullah El-Kuwaiz, chairman of the CMA said: “Some believe that real estate financing through the market is limited to offering and capital increases, but the truth is completely different because the offering and capital increases constitute less than 10 percent of the financing coming through the market, while the largest percentage of financing comes from real estate funds." (El-Kuwaiz, as cited in Al-Mulhim, 2023, para. 4)
As of the third quarter of 2023, real estate funds in Saudi Arabia have reached an impressive $45.3 billion in value, representing a third of all assets under management in the Kingdom.
This surge highlights the sector's pivotal role in the national economy, driven by various financing mechanisms that include real estate investment trusts (REITs) and both public and private investment funds.
Stake’s Role In Facilitating Access To Saudi Investment Funds
Stake’s move into KSA will enable both global and local investors to participate in Saudi real estate funds, which harness recent regulatory advancements to democratize access to these investment opportunities.
Through its digital product, Stake offers units of private real estate funds, carefully curated by trusted professional fund managers to ensure proportionate ownership within each fund.
Stake: Investing In Funds Has Never Been Easier
Stake acts as a mediator, facilitating the connection between investors and the funds. Here’s a high-level explanation of the investment process:
- Fund selection: Stake curates a selection of private real estate funds, each with a specified unit price and minimum investment amount, making high-value real estate accessible to a broader audience
- Investor participation: Investors use Stake’s platform to purchase units in a fund. These units represent shares or portions of the fund, allowing fractional ownership of the fund
- Fund management: The management of the fund is handled by professional fund managers who are responsible for the strategic allocation and management of the fund's assets
- Post-subscription: Once the fund is fully subscribed, Stake’s role transitions to maintaining investor relations and providing updates, while the fund manager takes over the full management responsibilities
Note that: The entire process is governed by regulations from the Capital Market Authority (CMA) of Saudi Arabia, ensuring transparency and adherence to the highest standards of investor protection and fund management
Investing In Funds: The Different Types On Stake
Stake will be offering three primary types of private real estate funds in Saudi Arabia, each catering to different investment strategies and objectives:
- Income-generating funds: These funds focus on acquiring existing assets that generate steady income through rent, distributed to investors as dividends
- Hybrid funds: The acquisition strategy of a hybrid fund involves revitalizing aged real estate assets through renovation, transforming them into lucrative investments managed for sustained growth
- Development funds: These are aimed at financing new developments, with returns generated from the capital appreciation of the property after the sale
Zooming In: Investing In Funds With Stake
Key Benefits of Investing in Saudi Real Estate With Stake
By investing in Saudi real estate through a platform like Stake, investors have the opportunity to be part of one of the fastest-growing economic landscapes globally.
The ongoing urban development, particularly in Riyadh, is expected to drive demand for both residential and commercial properties, further emphasizing the importance of real estate funds.
Stake's unique model, featuring low minimum investment limits, enables individuals to spread their initial capital across various funds in KSA from as low as SAR 500, thus facilitating diversification.
Here’s a simplified example to explain: If two or more funds are available on the platform, investors can strategically allocate their capital—investing in income funds to secure steady returns while also participating in development funds to capture the growth potential of new projects.
This diversification strategy2 lowers investment risk while building a solid portfolio tailored to individual investment goals.
The Future of Saudi Investment Funds with Stake
Private real estate funds represent a growing segment of the investment landscape in Saudi Arabia. As we gear up to distribute the first income-generating fund in Q4 2024, make sure to join us as we pave the way for a new era of opportunity and growth in Saudi Arabia's thriving real estate market.
New here? Download the Stake app today and start your journey to investing in Saudi Arabia.
