India ranked 12th in global ultra-wealthy population; The number of UHNWIs in the country predicted to grow by a whopping 73 percent in the next five years
Ultra-wealthy Indians seem keen on buying real estate, with as much as 24 percent saying they plan to buy a house in FY20, as per the Knight Frank Wealth Report 2020. The preferred locations are outside India - the UK, United States, Australia, Singapore and the United Arab Emirates (UAE), it said.
As per the report, Asia is set to outperform over the next five years with the number of ultra-high-net-worth individuals (UHNWIs) set to increase by 44 percent. And while America is home to the highest number of UHNWIs, India ranks 12th among the global population.
The number of UHNWIs, with a net worth of over $30 million in India, is predicted to grow by a whopping 73 percent in the next five years, almost doubling the count to 10,354 from 5,986 in 2019.
As far as commercial properties are concerned 26 percent of India’s ultra-wealthy are looking to invest in commercial property within India, and 15 percent are allocating capital for purchase outside the country of residence in the coming year. The preferred destinations for commercial investment include the UK, US, UAE, Singapore and Australia.
Neil Brookes, Head of Capital Markets, Asia Pacific Knight Frank noted that trends are positive despite the coronavirus (COVID-19) outbreak.
"Despite uncertainty in 2020 around the impact of COVID-19, interest for assets remains high with significant capital chasing the limited stock. While some private investors may delay their decisions due to the current climate, we expect secure assets that offer quality income streams to be in increasing demand," Brookes said.
The Indian real estate sector received an equity investment of $6,221 million in 2019 with the office segment receiving a sizeable 47 percent of the total equity investment. Globally, private capital was responsible for $333 billion of commercial real estate purchases in 2019, a 5 percent rise on the previous year, the report added.
Indian UHNWIs prefer equities & bonds
The report also noted that equities and bonds remained the preferred investment assets for Indian ultra-wealthy, while other Asians preferred property investments. There is a 72 percent increase in equity investment allocation by Indian ultra-wealthy in 2019.
According to the Attitudes Survey, part of Knight Frank’s Wealth Report 2020, despite global headwinds, equity investments remained the most attractive asset class for Indian UHNWIs. Among them, 83 percent plan to increase or maintain their allocations in equities, followed by bonds (77 percent), ahead of property (51 percent).
In 2019, for Indian UHNWIs, equities remained the most preferred asset class in the portfolio with 29 percent allocation, followed by 21 percent for bonds and 20 percent in property investments, it added.
On the contrary, other Asian UHNWIs preferred property investments with 28 percent asset allocation, followed by 21 percent in equities, and 19 percent in bonds. Whilst 24 percent of Asia-Pacific UHNWIs are looking to invest in commercial property domestically, 17 percent are allocating capital to cross-border purchases in the coming year.
Comparatively, 26 percent of Indian UHNWIs are looking to invest in properties within the country while 15 percent plan to invest abroad.
Private equity (PE) as an investment class saw an upsurge in the allocation from 4 percent in 2018 to 7 percent in 2019. Nearly 85 percent of Indian UHNWIs are expected to increase or maintain their asset allocation in PE investments.
The report also studies the attitude and preferences of ultra-wealthy for making property investments in 2020. Properties made 20 percent of the asset class for Indian UHNWIs.
Frankfurt, Lisbon top Prime International Residential Index
Frankfurt and Lisbon topped the Prime International Residential Index (PIRI 100) with an annual price change of 10.3 percent and 9.6 percent, respectively. Knight Frank’s PIRI 100 is part of the Wealth Report 2020 and tracks the movement of luxury residential prices in 100 cities and second home markets globally for the 12-months to the end of December 2019.
Among Indian cities, Delhi registered 4.7 percent annual growth, followed by Bengaluru (2.1 percent), while Mumbai saw tepid growth of 0.5 percent.
When it comes to luxury properties, Monaco remains the world’s most expensive city where $1 million can buy you a mere 16.4 square metres of space. Comparatively in Mumbai, you can buy 102.2 square metres (approximate size of a decent two-bedroom flat in the city), the Index said.
Seoul and Taipei are now Asia’s frontrunners with annual growth of almost 8.9 percent and 7.6 percent, respectively. Hong Kong (+2.9 percent) surprised on the upside in 2019, with a mortgage cap reduction and three interest rate reductions mitigating some of the impact of the political volatility. Singapore (+1.2 percent) is firmly back in the spotlight.
Wellness prominent criterion for realty investment
As many as 64 percent property buyers cited the availability and quality of local 'wellness' facilities as a selection criterion for purchasing a home.
"Indian UHNWIs are making changes to their investment preferences, be it impacting their lifestyle or their future wealth. Through the Knight Frank Attitudes Survey, we see the new aspect of 'wellness' as a prominent criterion for investing in real estate assets," the report said."To protect and grow their investments, office sector remains the preferred asset class for private capital investors in India, along with healthcare, and education in second and third place, as investors continue to pivot to alternative asset classes in the hunt for yield, return and diversification," Shishir Baijal, Chairman and Managing Director, Knight Frank India said.