Dubai-based bank Rasmala Investment will launch a real estate fund of up to $100m in August targeting mid-income residential developments in Saudi Arabia.

The primary focus of the fund will be developments in Riyadh because of the city’s young demographics and growing population.   

The fund will be in the range of between $75-100m and will use the proceeds for land acquisition and construction-related costs.

It will be open to investors across the GCC and will be privately placed, with the sponsors of the fund contributing to about 10 per cent of the seed capital.

Rasmala is targeting an average internal rate of return (IRR) of about 20 per cent per annum on the fund.

“While other real estate markets across the Middle East and North Africa (Mena) region have seen a slowdown in both development activity and investment over the past 18 months, interest in Saudi Arabia has remained strong from both local and overseas investors,” notes real estate services firm Jones Lang LaSalle in its June 2010 report.

The report notes that the kingdom is currently facing a shortage of housing units due to a rapidly growing indigenous population that is being complemented by a rise in expatriates, which now comprise 28 per cent of the total population.

Rasmala is looking to launch other real estate funds in the GCC and Egypt should good opportunities arise in these markets.