More than anything else India’s growing number of wealthy — in the World Wealth Report 2007, the number rose 20.5 per cent and crossed 100,000, making India the home to the world’s second fastest growing wealthy population — shows that in a country known and tagged as poor, prosperity is flowering. It probably has been for a longer time. The difference over the past few years is that there is larger chunk of Indians who are legitimately wealthy. That is, the number of high net worth individuals (HNWI), with recorded wealth of $1 million or more has jumped sharply. That should excite the taxman and it is for him to take it forward.

What should excite readers of this column and those who criticise it as well, is to understand the route to this wealth. The report largely talks about financial wealth, with real estate thrown in. It speaks to us with data what we know in the language of anecdotal evidence. That most of the wealth of HNWIs is stacked away in equities, a full 31 per cent, up 3 percentage points over two years. But the big jump in 2006 has been in real estate, the allocation to which rose 8 percentage points to 24 per cent. Do note that this allocation is ‘investment allocation’, that is, commercial property, RIETS and other investment properties, and excludes the house the wealthy live in.

While academics and experts differentiate between real estate and equities, when I step back, I find the two asset classes behave pretty much the same way. For the purpose of investment, both are risky in their own ways (real estate more so in India, at least till titles are clear and contracts enforceable without the help of goons) and both deliver returns that over the long term exceed risk free returns. For the past three years, as we have seen, property prices have doubled and trebled quite like stocks.

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