INDIA has added over 17,000-dollar-millionaires in 2006, recording the highest growth in high net worth individuals (HNIs) after Singapore. At the end of the year, the number of millionaires in India rose to 1,00,000 from 83,000 in the previous year. This comes in the back of a record 8.8% real growth in gross domestic product, second only to China. Also, there has been a sharp increase in the asset values with the Sensex being among the best performing in emerging markets. According to the 11th annual world wealth report brought out by Capgemini and Merrill Lynch, Singapore, India, Indonesia and Russia witnessed the highest growth in HNI populations. The report is not fully indicative of the wealth among Indians. The net worth taken into account here is the investment in financial assets, which excludes self-occupied housing, but includes real estate investments. It also excludes jewellery and art. “India has been one of the fastest wealth creators. The report reflects the increase in wealth among Indians,” said Pradeep Dokania, MD, global private client, DSP Merrill Lynch. In 2006, investors increased their allocations to real estate, capitalising on the success of commercial real estate and real estate investment trusts (REITs). As the global real estate market has increased transparency and improved liquidity, it has become a less risky investment. Global direct real-estate transaction volumes reached $682 billion in 2006, up 38% from 2005. Global real estate investment (including direct real estate and REITs) totalled $900 billion in 2006 — the strongestever performance by global real estate markets. In 2006, millionaires across the world shifted more money into real estate, at times liquidating some of their alternative investments to fund these real estate opportunities. The trend was most dramatic in Asia-Pacific where a full 29% of their assets were in real estate compared to 16% a year earlier.
The annual report studies arrive at the number of the rich ($1m plus) which are referred to as HNIs and the super rich or ultra-HNI ($30m plus) and it tracks how they invest their money. A study of past reports show the rich are investing more overseas, driven by an expanded awareness of international development, better portfolio performance and risk mitigation. Historically, North Americans have held the largest portion of their assets in domestic markets.
For example, in 2005, 78% of HNI assets were held domestically. In 2006, the number dropped to 73%, as wealthy North Americans increased their allocations to overseas investments in Europe, Asia-Pacific and Latin America. In 2006, as in previous years, North Americans held the most unbalanced portfolios, with 41% allocated to equities, a slight decrease from 43% in 2005. In 2006, North Americans reduced their allocations to alternative investments and shifted to real estate. Following their shortage in office space, North Americans increased their real estate allocations from 12% to 20% of their portfolios. HNIs in Asia-Pacific nearly doubled their allocations to real estate, from 16% in 2005 to 29% in 2006. Consistent investor behaviour, often seen in emerging economies, HNIs in Asia-Pacific tended to invest in tangible assets. The number of dollar millionaires may have gone up significantly in the current year considering the sharp appreciation in the value of the rupee. In 2006, the rupee had appreciated marginally from 45.19 to 41.12 against the dollar. Since then the rupee has firmed up even more and is currently trading at 40.83.
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