A worked, illustrative example of splitting a Saudi allocation between listed equities, REITs, direct property and a private business stake, and how liquidity changes the answer.
A foreign investor building Saudi exposure usually mixes liquid listed assets with less liquid property and private stakes, and the split should follow how quickly the money might be needed rather than which asset sounds most exciting. The example below uses illustrative numbers to show the method: set a liquidity floor, size each bucket, then test what happens when one bucket disappoints.
The situation
A family investor wants to commit SAR 10,000,000 to Saudi Arabia over the next five years. They want some income, some growth linked to Vision 2030 themes, and the ability to withdraw part of the capital within a year if needed. Access routes for listed investments and property ownership depend on their status and must be confirmed with a CMA-licensed broker and REGA.
Assumptions (illustrative)
- Total allocation: SAR 10,000,000 (illustrative).
- Liquidity requirement: at least 30 per cent must be sellable within a few weeks.
- Assumed annual income yield on listed REITs: 6 per cent.
- Assumed annual net rental yield on a directly held property: 5 per cent.
- Assumed dividend yield on a listed equity basket: 3 per cent.
- Private business stake: no income assumed for the first three years.
Step 1: Set the liquid floor
SAR 10,000,000 multiplied by 30 per cent equals SAR 3,000,000 held in liquid listed assets.
The liquidity need is fixed first, because it is the constraint that cannot be negotiated later.
Step 2: Split the liquid floor
SAR 2,000,000 in a listed equity basket plus SAR 1,000,000 in listed REITs equals SAR 3,000,000.
Both sit on Tadawul and can normally be sold quickly, though REIT prices can fall when interest rates rise.
Step 3: Allocate the illiquid remainder
SAR 10,000,000 minus SAR 3,000,000 equals SAR 7,000,000, split as SAR 4,500,000 direct property and SAR 2,500,000 in a private business stake.
The property provides income and a physical asset; the private stake provides growth but no near-term cash.
Step 4: Estimate annual income
Equities SAR 2,000,000 at 3 per cent equals SAR 60,000; REITs SAR 1,000,000 at 6 per cent equals SAR 60,000; property SAR 4,500,000 at 5 per cent equals SAR 225,000. Total SAR 345,000.
Income of SAR 345,000 is 3.45 per cent on the whole SAR 10,000,000, because a quarter of the capital earns nothing yet.
Step 5: Test a bad case
If the private stake is written down by half, the loss is SAR 2,500,000 multiplied by 50 per cent, equal to SAR 1,250,000, or 12.5 per cent of the total allocation.
A painful but survivable loss, because the private stake was capped at a quarter of the allocation.
Step 6: Check the liquidity after a shock
If listed assets fall 20 per cent, the liquid floor becomes SAR 3,000,000 multiplied by 80 per cent, equal to SAR 2,400,000.
The investor can still raise SAR 2,400,000 quickly, so the liquidity target should include a buffer if the one-year need is firm.
What changes the answer
- Higher interest rates tend to weigh on REIT prices and property values because the SAR is pegged to the US dollar and local rates follow US policy.
- A vacant month on the direct property cuts its annual income by roughly one twelfth.
- A private stake that needs a follow-on round could require more capital than the SAR 2,500,000 planned.
- Currency does not move against the US dollar under the peg, but it can move against the euro, sterling or other home currencies.
- Transaction costs, including the Real Estate Transaction Tax on a later property sale, reduce the net proceeds on exit.
What the numbers tell you
- Fix the liquidity requirement before choosing assets, not afterwards.
- Cap the private business stake at a share you can afford to see halved.
- Headline yields on individual assets overstate the yield on the whole portfolio when some capital earns nothing.
- Listed REITs offer property exposure with liquidity, at the cost of market price swings.
- Revisit the split each year as the private stake either proves itself or does not.
Limits of this example
Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.
If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.
Frequently Asked Questions
Should a foreign investor start with Saudi stocks or Saudi property?
Listed shares and REITs are usually the easier first step because they are liquid, divisible and do not require managing a physical asset, although access depends on your status under the current CMA framework. Direct property suits investors who want income and control and can accept illiquidity, and ownership now depends on the zones and conditions set under the 2026 rules through REGA.
What share of a Saudi allocation should go into private companies?
There is no correct share; it depends on your liquidity needs and appetite for loss. A practical test is to ask how much you could see halved without changing your life or your other plans, and to keep the private allocation within that amount. Private stakes also often need follow-on capital, so leave room for it.
Are Saudi REITs a good way to get property exposure?
Saudi REITs listed on Tadawul give access to income-producing property with the ability to sell quickly, which suits investors who value liquidity. The trade-off is that prices move with the stock market and with interest rates, and each REIT's quality depends on its assets, leases, debt and manager. Read the fund documents and reports rather than choosing on yield alone.
Have a Property Question?
Domira can help you navigate property, financing and investment decisions in Saudi Arabia. Speak with our team for an initial consultation.
