Wealth held by Indian individuals to double in 5 yrs: Karvy

As per the 2013 private wealth report by Karvy Private Wealth, the overall wealth held by individuals in India is expected to double to Rs 411 lakh crore in the next five years. Currently, the wealth held by individuals in India stands at Rs 202 lakh crore.

Despite the stupendous growth and development in financial markets in the last two decades since liberalisation, Indian individuals still prefer to invest a large amount of their wealth in physical assets (gold & real estate), which stands at Rs 92 lakh crore of individual wealth and the balance Rs 110 lakh crore is held in financial assets.

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Sunil Mishra, ceo, Karvy Private Wealth, said, “Presenting for the first time, a single-view of Indian wealth across financial assets and real assets has been an eye-opener. While value of real estate holding with individuals is very large, 73% of that is in primary homes, and the rest rs 31 lakh crore forms the wealth in real estate. Also, in the coming years, we see a reversal in the trend of very high fresh inflows going into physical assets, as we believe that macro-environmental conditions should bottom out in 2014, and financial assets will start finding favour again. The India story has only taken a break; we are not done yet!”

The division of financial assets is slightly an unanticipated one. Out of Rs 110 lakh crore, fixed deposits and bonds constitute 23%; direct equity constitutes 22.1% and insurance 17.2%. Mutual funds constitute only 3.2% while saving deposits cash and small savings constitute 13.7, 10.4 and 5.1% each.

On the physical assets front, Karvy expects the composition of gold to go down to 22 % from the current 30 % while real estate increase rapidly as people invest in second, third and fourth homes.

"Real estate becomes an investment only with the purchase of second home and right now, data suggests that 86 per cent of Indians have their own home. So as more and more people start having their own homes, we will see a greater number of investments," said Sunil Mishra

This will cause a definite change in the ratio in the physical assets between gold and realty; Karvy expects a shift to 52:48 from the present 65:35

While GDP growth is expected to remain at 5% in FY14, the growth is expected to increase at a faster pace in the next 5 years.