Indians Own More Property Than The World's Richest Nations

Did you know that Indians have so much wealth in terms of real estate that they can beat even the richest of countries? The Reserve Bank of India's (RBI) Housing Finance Committee's recent report says so.

On a solid footing

The panel says the 77 per cent of the wealth of an average household in India is invested in real estate. This includes residential buildings, buildings used for farm and non-farm activities, constructions such as recreational facilities, and rural and urban land. In China, real estate accounts for only 64 per cent of people's wealth. In the United States, it is just 44 per cent. Germans on an average hold no more than 37 per cent of their wealth in terms of property.

Even those who are in the lowest rung of the society in India have invested 55 per cent of their assets in property. On the contrary, their counterparts in Germany, Britain and Australia own less than one per cent. However, the report also points out that the metrics vary in each of these places.

For example, in India, the average value of a house owned by an underprivileged person is Rs 22,000 while in Germany it is Rs 15 lakh. In the US, it is Rs 3.70 lakh.

Wealthy Indians, too, have an equally high penchant to invest in real estate than their counterparts in advanced nations who prefer financial assets to property.

The other part of the life

People in advanced economies concentrate more on their retirement corpus. For instance, 23 per cent of assets of an Australian is reserved to help him sail by in this heir dormant phase of life. In the United Kingdom, people allocate 25 per cent of their wealth to tide by the last quarter of their lives. However, in most of these countries, the state has a big role to play. For example, retirement is guarded by state-sponsored benefits and pensions in Germany. So, Germans only need to save small amounts in their private retirement accounts and can concentrate more on financial assets such as government bonds, shares, mutual funds and sight deposits. Retirement benefits in India are close to negligible.

We earn and save for real estate

Global think-tanks keep debating why a country with as many as 125 crore people, many homeless and many yearning for an affordable home, cannot resort to a rental housing policy. The report shows that Indians are obsessed with the concept of property ownership. And, not all of it is bought using banking finance.

The mortgage liability of the Chinese, Americans, British and Australians on an average is estimated to be about 60 per cent. For Germans, it is little lower at 44 per cent. But in India, despite holding 77 per cent of assets in terms of real estate, the mortgage loans account for only 23 per cent.

The RBI report reads: “It suggests a strong investment motivation for real estate purchases, in addition to the usual consumption motivation. Of course, the consumption motivation may also be high in an environment of poor contract enforcement, and suggests that measures to improve the private rental market may have a non-negligible impact on the physical asset share.”

The older we are, the more we own

While we gather that the youth is actively jumping into property investments, data show that those close to retirement account of 95 per cent of people who are the wealthiest in terms of ownership.

“Indian households are exceptional in the international context, as there is seemingly no reduction in their holdings of real estate as they pass retirement age, unlike in countries such as the UK, Australia, Germany, and China. This is probably the consequence of “joint family” households in which multiple-generations co-exist, in which land and residential properties constitute a significant share of bequests and inter-generational wealth transfers,” says the report.

Also read: Nearing Retirement? Here's What You Need To Consider