Number of super-rich in India will double in 10 years

Mumbai: While US and Europe still continue to be the favourite places where you can hope to find the world’s rich and powerful, India too is catching up. The number of high net worth individuals in India with net assets of Rs 150 crore or more is expected to more than double over the next 10 years, rising by 137 percent in Mumbai and around 120 percent in Delhi, says the Knight Frank Wealth Report 2013. This will give India - along with China and Japan- the highest number of HNWIs in Asia.

According to the report, the number of HNWIs - individuals with more than US$30million of investible assets - is forecast to rise by 95,000 globally over the next decade, while the number of HNIs in Asia alone will rise by 88 percent in the same period.

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[caption id=“attachment_663752” align=“alignleft” width=“380”] Source: Knight Frank[/caption]

This is the result of high relative growth, with the combined annual GDP growth of Brazil, Russia, India and China being equivalent to the creation of a new economy the size of Italy each year.

“The rise of the Asian global cities is in parallel to what many are now calling ‘The Asian Century’. With the historic shift in economic power towards Asia, its cities are undoubtedly going to become more influential in the coming years,” said Nicholas Holt, Director Research, Asia Pacific, Knight Frank.

Hence, the total number of HNWIs globally is increasing despite the world reeling from the aftershocks of the 2008 global financial crisis. Interestingly, much of this wealth creation is taking place in new economic powerhouses, but London and New York are still considered the most important cities for the super-rich - at least for now.

While the largest concentration of wealth is currently based in the established centres of North America and Europe, there is set to be rapid growth in Asia, Latin America and the Middle East.

“In the next decade we will see the biggest increase in ultra-wealthy individuals in cities such as Sao Paulo, Beijing, and Mumbai,” said Liam Bailey, Global Head of Residential Research at Knight Frank.

Currently, India is ranked number five in the top 10 countries for HNIs with 122 billionaires ( net assets of over Rs 500 crore). However this is expected to increase to 225 billionaires by 2022, an 84 percent increase.

The report ranks Mumbai at the seventh spot with a total of 2,105 HNWIs in the top 30 global cities; while Delhi is at 11th spot with a total of 1,905 super-rich individuals.

And with this rise in HNWIs, investment in property is also likely to rise since prime residential and commercial property in relatively risk-free locations has always attracted investors in times of economic and political turbulence. And it is this flight to safety that is driving up prices in the most sought-after locations. Since supply in desirable locations remains virtually static, and so global capital flows continue to concentrate on a few key hubs.

As safety of investment and returns is high on the priority list of the super-rich, 25 percent of the HNWI population across the globe plans to allocate some part of their investments to real estate this year, said Holt.

In other words, get ready for more price hikes in luxury realty and forget that correction.

However, while New York and London top the list in the cities that matter to HNWIs, Mumbai stands nearly at the bottom - 38th out of 40 - of this list. And this is reflected in the price growth too. After witnessing some degrowth in 2011, prices of prime property in Mumbai (these include areas like Cuffe Parade, Colaba, Malabar Hills) have seen a growth of only 0.5 percent, according to the Prime International Residential Index (PIRI) report. But going ahead, given that real estate is considered an ideal safe haven for India’s wealthy, Knight Frank expects prices in Mumbai to shoot up by another 4 percent by the end of the year and another 10 percent by 2014.

Currently, Mumbai is the 16th most expensive city in the world. The city has moved up from the 36th position last year. As of now Monaco, Hong Kong and Geneva are the top three expensive cities to buy real estate in. In 2013, however, property investment in India will rise, driven by a desire to gain exposure to economic recovery around the world.

Said Samanthak Das, Director, Research & Advisory Services, Knight Frank India: “Even the number of inquiries in India for investing in luxury villas, holiday homes abroad has gone up by 60 percent in 2012. While the inquiries will take time to convert into transactions, the trend of preference for property as investment clearly exists,” said Das.