As much as 84 percent of the investable wealth of Indian ultra high net-worth individuals is allocated between equities, real estate and bonds. While investment in equities makes up 34 percent, commercial real estate, either directly or through funds and REITS, sums up 25 percent of their portfolio, according to Knight Frank’s Attitude survey.
Equities at 34 percent constituted the highest proposition of the investable wealth in 2022. A significant proportion of 25 percent was allotted to commercial properties (directly through ownership or indirectly through funds). The rise of commercial asset as an investment category with high allocation is a sign of improved confidence among investors towards India’s growth story, the survey said.
Global and APAC region respondents, largely representing more mature real estate markets, have exposures of 33 percent and 35 percent in commercial real estate through direct owners, funds, and REITs. Seeking stability in an uncertain environment, 16 percent of investable wealth of UHNWIs found allocation in bonds, it said.
Indian UHNWIs own 5 homes; about 10% may buy a new home in 2023
According to Knight Frank’s Attitude survey, on an average Indian super rich own 5.1 residential properties compared to the global average of 4.2 units. Around 37 percent of the total wealth’s allocation is towards primary and secondary homes by Indian UHNWIs of which 15 percent allocation towards residential property is held outside India.
UHNWIs in India have the greatest appetite, owning an average five homes each. This demonstrates the unwavering appeal for residential properties.
The survey said 14 percent of UHNWIs purchased a home in 2022 and about 10 percent are expected to make a new home purchase in 2023.
Among foreign locations, the United Kingdom, United Arab Emirates and the United States are the most preferred locations for purchasing homes. India and Canada round out the top five, said the survey.
Office, logistics and industrial, healthcare and development land are the preferred real estate asset avenues for 2023, said the survey.
“Real estate was the top cited opportunity among 46 percent of Knight Frank’s survey respondents, whether for its attributes as an inflation hedge or due to the benefits of diversification. Many panelists highlighted the opportunity to secure enhanced return profiles a key advantage. Plus, when investing directly, real estate enables greater control and value-add opportunities. One in ten respondents specifically cited looking for attractive valuations and distressed opportunities. That trend isn’t limited to real estate either: equities and the technology sector were tipped by around a third of our respondents,” said Flora Harley, Partner, Residential Research at Knight Frank.
UK remains first choice for property purchases by Indians outside of the country
In 2022, the Attitudes Survey revealed that, UHNWIs have expanded their orientation from APAC to more global markets in EMEA and Americas. For most Indians buying a property outside of India, United Kingdoms (UK) was the first preference with 47 percent respondents showing affinity towards it. This was owing to the fact that UK is a global gateway country and India has business and personal interest in that nation state which has hugely propelled its popularity.
Interestingly, the second spot was taken by the UAE (41 percent), becoming a top destination for Indians to invest. The US (29 percent) and Canada (18 percent) were third and fourth on the list, the survey found.
“As India emerges as a market of opportunity which is expected to remain in growth mode despite an impending global slowdown, wealth held by UHNWIs is expected to grow in 2023. The optimism of ultra-wealthy on wealth generation here is far higher than their global counterparts and this shall serve as the bedrock of investment and consumption decision. The Indian ultra-wealthy have also demonstrated a growing appetite for property compared to global averages and this bodes well for the real estate market,” said Shishir Baijal, Chairman and Managing Director at Knight Frank.
Rise in wealth in 2022 and anticipated for 2023
According to the latest edition of the annual Attitudes Survey, 88 percent of the respondents saw a rise in UHNWI’s wealth in 2022 of which 35 percent respondents said that Indian UHNWIs saw an increase in their wealth in excess of 10 percent in 2022.
Globally, respondents opined that an estimated 40 percent of UHNWI saw a rise in their wealth in 2022 and approximately 15 percent respondents noted no change in wealth status in 2022 against the previous year. While the prolonged economic and geopolitical crisis continued to weigh down most of the prominent economies, India’s resilient economic performance allowed the country to beat global trends in the year of permacrisis, the survey said.
Going forward, the Indian respondents expect wealth of the ultra-wealthy to continue to increase in 2023. While 47 percent expect wealth to increase by more than 10 percent, 53 percent expect wealth to rise by at least 10% over the previous year. Globally, only 69 percent of respondents expect a rise in wealth and about 14 percent also responded to say that wealth will decline.
“With 69 percent of UHNWIs expecting to see wealth growth in 2023 – we are anticipating a substantial shift in portfolio strategy – with a search for value opportunities in the real estate sector playing a much bigger role than in recent years. Downward pressure on property values, due to higher interest rates, has created a window for private capital – especially as we enter this new market phase with historic lows in terms of the stock of best-in-class property in residential and commercial markets,” said Liam Bailey, Global Head of Research at Knight Frank.