The UAE faces a good problem: a booming real estate market and a shortage of buyers. According to Deloitte, rents in Dubai are expected to rise 23% year-on-year in 2024, returning to pre-pandemic levels, while sales are up 18%, a trend that is set to continue for the next few years.
Some of this demand is no doubt spreading to neighboring Abu Dhabi, which is why its sovereign wealth fund, Mubadala Investment Company, recently participated in a $14 million Series A funding round raised by Dubai-based Stake, which was led by Middle East Venture Partners and included participation from Aramco’s Waed Ventures and private investment platform Republic.
The company plans to bring its fractional real estate investment platform to the UAE capital next year and expand to Saudi Arabia in the coming months.
For Abu Dhabi, supporting companies like Stake, which make it easier for people to participate in the real estate market by buying shares in specific properties, is a good approach to encouraging investment in the real estate market. The emirate has long boomed as a destination for people who work in Dubai but find living there too expensive, and it also fits well with Abu Dhabi’s long-term plan to diversify its revenue sources away from oil and gas production.
Stake’s process is simple for real estate investors. They purchase shares in properties that it manages on behalf of shareholders and earn a profit from monthly rental payments. If the property is sold, the investor also gets a share of the profits. Stake also allows investors to sell their shares in secondary markets, called Exit Windows, which open every six months.
Founded in 2020 by Manal Mahmasani, Rami Tabara and Ricardo Brigid, Stake aims to use the new funding to further its international plans, with the bulk of the funds being used to enter Saudi Arabia in the coming months and expand to Abu Dhabi next year. Part of the funds will also be used to offer more options in Dubai, including investing in commercial real estate. The startup has raised a total of $26 million to date.
Stake currently manages over 200 properties from investors around the world. Most of its clients are based in the UAE, with Saudis and Kuwaitis making up the bulk of its international client base. Around 12% of its clients are from the US, Canada and the UK.
Stake has been planning to expand beyond Dubai for some time, initially announcing it would enter Saudi Arabia and Egypt in 2022 but postponed those plans due to economic uncertainty. Earlier this year, the company partnered with U.S.-based private investment platform Republic to attract more international investors.
To attract more international investors, the startup has also partnered with the Dubai International Financial Centre (DIFC) to offer Dubai’s Golden Visa (a 10-year renewable residence visa) to investors who invest at least AED 2 million (approximately $545,000). The program was introduced in 2019 to attract foreign investment in the region, and such initiatives have reportedly helped boost foreign real estate investment in the region.
The company says it pays out about 4% to 7% to its clients through rental income. Tabara, who serves as co-CEO with Mahmasani, told TechCrunch that the company has paid out $4.5 million worth of rental income to clients to date. He added that the average investment in a property is $1,500, and that clients, on average, invest a total of $5,600 through the platform.
Entering Saudi Arabia
Stake claims to have outperformed real estate fractional investment platforms such as Dubai-based Smartcloud, but will be making a fresh start in Saudi Arabia.
Saudi Arabia already has companies like Awaed and Aseel that allow clients to invest in real estate through funds. Historically, only Saudi nationals could own freehold property in the country, so real estate investment companies set up special purpose vehicles to let investors buy properties.
“Saudi Arabia has billions of dollars worth of recently completed and under development properties. [our] “We don’t yet have the experience to offer a similar integrated product within the same app for investments in Saudi Arabia,” Mahmasani said.
Mahmasani said Stake aims to break even in Dubai by the end of this year and be profitable by next year. The startup is also exploring partnerships to allow Middle Easterners to invest in real estate in countries such as the United States.
