India is expected to account for five percent of the total ultra high net worth individuals (UHNWIs) in the world by 2025 with the country's share in the total number of billionaires expected to rise to six percent, Knight Frank Wealth Report 2016 has said.
This is a huge surge considering India's share of world's UHNWI population stood at a minuscule 1 percent in 2005. Knight Frank defines UHNWIs as those with $30 million or more in net assets.
"Looking at the past numbers, we believe by 2025, India will account for 6 per cent of global billionaire population and 5 percent of UHNWI population," said Knight Frank India Chief Economist and National Director - Research, Samantak Das.
According to the report, India ranks third in the projected absolute increase in UHNWI population over the next 10 years after China, with the US topping the list.
According to Nicholas Holt, Head of Research for Asia Pacific, the growth trajectory of India continues to be a positive story for the region even as China continues to slow down.
"The strength and diversity of the Indian economy will continue to provide entrepreneurial and wealth growth opportunities, with the country set to see a doubling of its UHNWI population over the next 10 years," he said.
Here are the other key takeaways from the report released on Wednesday:
Wealthy up 340% in 10 years, but growth to slow: In the last 10 years, the billionaire count in India jumped 333 percent to 78. In comparison, the global growth was just 68 percent at 1,919. Also UHNWI count over the period rose 340 percent to 6,020 people, compared with the global growth of 61 percent at 1,87,468. According to Das, the rate of growth in the number of Indian UHNWIs over the next 10 years in India will slow down. However, it will still be much higher than the global average. The consultancy pegs the growth rate for India at 105 percent, as against the global rate of 44 percent.
Mumbai houses 18%: At 1,094, Mumbai has the most UHNWIs followed distantly by Delhi where the number is less than half of Mumbai - 545. The financial capital is home for 18 percent of 6020 UHNWIs, while Delhi is for 9 percent. Both the cities are currently ranked 21 and 33 among the 97 cities globally. By 2025, the rankings are likely to move up to 14 and 29, the report said. The number of the ultra rich will also rise to 2,243 in Mumbai and 1,128 in Delhi. Das notes that the rate of growth in the UHNWI population will be marginally higher in Delhi than Mumbai in the next decade. Globally, London remains hotspot for the richie rich followed by New York. Interestingly, Singapore has displaced Hong Kong from the third position.
Residential realty loosing sheen: Average number of residential properties owned by wealthy Indians stands at 4. This is more or less in line with the the global average which stands at 3.7. "In the last 10 years, 31 per cent Indian UHNWIs increased their asset allocations to residential real estate (primary or secondary home), and the number is likely to drop to 22 per cent by 2025," Das said. This may be seen in the context of the demand slowdown in the broader real estate sector due to high prices which have rendered houses unaffordable. Chances are the ultra rich also feels that the returns from the sector may not that great considering the already sky-high prices. On the whole, the wealthy Indians prefer commercial realty over residential segment. In the last 10 years, the UHNWI's investment in commercial realty increased 47 percent in India. However, this too is likely to fall to 41 percent in the next 10 years. Meanwhile, Bengaluru is among top 20 cities globally for investment according to Prime Investment Residential Index, with Delhi and Mumbai ranked 44 and 51 in the list.
Financial instruments preferred: The report pointed out that fine arts and antiques have replaced watches, while jewellery continues to be the most preferred collectible investment, followed by cars and bikes. Financial instruments, however, remain the preferred investment asset class among wealthy Indians.
Philanthropy: Indian UHNWIs' philanthropic activities increased 78 percent in in the past 10 years and the number will be around 94 percent over the next 10 years, the report said. These are much higher than the corresponding global average of 67 percent and 79 percent.