Strata, an India-based fractional investment fund in premium real estate assets, is gearing up to set up its regional base in Saudi Arabia – a move seen in line with the new trend of some of the high profile global investors starting to enter the kingdom’s real estate sector in anticipation of big ticket returns.
The Saudi real estate sector is widely seen by industry experts as currently at the tipping point for a big-bang take off for a long-term period.
The Indian fund, which offers high net-worth individual (HNWI) investors the opportunity to part-own stakes in premium commercial real estate assets, will use the proposed base in Saudi Arabia as a gateway for its ambitious entry plans into the GCC market.
Strata sees Saudi real estate as lucrative investment opportunity
“We have taken an in-principle decision on this [setting up base in Saudi] and the details are being currently worked out,” Sudarshan Lodha, founder and CEO of Strata, told Arabian Business.
“We believe the Saudi real estate market is currently at a point where Dubai [real estate market] was 15-20 years ago, and therefore can generate top end returns on investments,” Lodha said, citing the reason for its decision to enter Saudi when Dubai’s property market is witnessing a boom period.
Strata estimates a minimum of 18-20 percent return on investments on a five-year tenure, though Lodha said the actual returns could be much higher.
He said the opportunity for wealth creation will be more in Saudi Arabia now “as the market opportunities there could be for a billion dollar investments annually”.
Lodha, however, said the fund will also be eyeing other emerging real estate markets in the region, including Abu Dhabi, for investments.
“The GCC and the larger Middle East will be one of the top focus regions for our fund,” he said.
Strategically prudent move
Industry experts believe Strata’s move as a strategically prudent one at a time when Saudi government is unveiling major policy and fiscal initiatives, including fully opening up its real estate sector for foreign investments, coupled with the giga projects and economic reforms targeting world-beating economic growth prospects in some of the non-oil sectors in the country.
The Saudi government’s decision making it mandatory for overseas companies to set up their regional headquarters in the country to bid for businesses and contracts is particularly expected to boost the commercial real estate segment there.
They said the country’s stock market is also on a roll now after billion dollar listings by some of the high profile companies such as Aramco, leading to expectations that many of the commercial real estate assets could be listed on the bourses eventually, offering exit options for global investors with several-fold returns.
New fund launches
Lodha said Strata would look at launching new funds with sizes in the range of $100-$200 million for its initial investments in Saudi Arabia and in the region.
He also revealed that they have held preliminary rounds of talks with developers of some of the commercial sector projects in Saudi Arabia. Initially the focus will be on projects in industrial centres, warehouses, data centres and office spaces.
“It [the projects] will be a mixed bag and once we set up our base there and move further on some of these deals, we will be launching our new funds to raise investments,” he said.
Lodha said the Strata business model is to identify projects for investments first and then scout for investors.
“So, our investors would know where they are investing and keep a track on the progress and market valuations of them. They can exit any time, with returns on the basis of the prevailing net asset value,” he said.
In talks with PEs, other investors for fundraising
Lodha also revealed that Strata is currently in the process of hitting the market for fundraising for its proposed expansion plans in the GCC.
“We have already appointed bankers for it,” he said, without disclosing further details.
He, however, said they will be mainly eyeing investors from the Middle East for its upcoming fundraising round.
“The Middle East investors understand the real estate sector more than any else and we are confident of raising a good chunk of capital in this round,” Lodha said, without disclosing the likely quantum. Strata already has some high profile startup entrepreneurs and asset managers such as Nikhil Kamath, co-founder of unicorn retail trading platform Zerodha, and Kotak asset management, as stakeholders in it.
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