Even if the Indian economy has been making valiant attempts to recover and get back to 9% GDP growth rate, the growth rate of Ultra High Net Worth Households (UHNHs) in India is a whopping 16 per cent. According to Kotak Wealth Management’s ‘Top of the Pyramid’ report, UHNHs in India have now gone up to 117,000 in from 100,900 last financial year and it expects this number to triple over the next three years. The report, covering the period 2013, attempts to encapsulate the ‘Ready for Change’ mood of India’s UHNHs, in the context of emerging changes across the economic, environment and political landscape of the country. Ernst & Young worked on this report with research and data collected by talking to 150 UHNIs (Ultra High Networth Individuals) across multiple cities as well as luxury service providers such as luxury travel companies, luxury watch companies, jewellery companies, and even wealth management relationship managers
According to the report, UHNIs are now optimistic and willing to take risks, which is reflected in the way they spend. A substantial amount of their spends lies in the realm of Luxury Travel, Philanthropy and Investments.
The report estimates that the net worth of UHNHs will surge at an annual compounded rate of 34 per cent from an estimated Rs. 104 trillion (Rs. 104 lakh crore) in FY 2013-14 to Rs. 408 trillion (Rs. 408 lakh crore) by FY 2018-19.
The report categorises India’s rich in three segments – Inheritors, Entrepreneurs and Professionals. Inheritors and Entrepreneurs prefer re-investing about 20-25 per cent of income into their primary business whereas Professionals prefer savings and personal investments.
The report states that there is a significant increase in spends - growing from 30 per cent of total income in 2012 to 44 per cent in 2013. Spending on Jewellery (16 per cent), Apparel and Accessories (15 per cent), followed by Luxury Travel (14 per cent), indicates family-orientation in expenditure planning.
Geographically, around 45 per cent of current UHNIs reside in non-metro cities and smaller towns and trends show their numbers are increasing over the last few years. There are more UHNIs emerging from non-metro cities and the earlier trend of only metro cities producing billionaires is no longer true.
According to C. Jayaram, Joint Managing Director, Kotak Mahindra Bank Limited, “India’s super rich are moving out of their comfort zones to put more monies in the rare and the risky – exotic food, private equity and even space travel. While exclusivity is the mantra for personal and family expenditures, they are equally interested in giving back to the society by supporting a variety of social causes. ”
“HNIs are now warming up to equities as compared to the lull or sideways movement that we saw for last five years. The perceived risk has subsided and it is more to do with the hope that the country sees in structural reforms the new government will deliver. Today, UHNIs are in strong contact with people globally and we realize India is gaining more traction among emerging markets,” adds Mr. Jayaram.
Murali Balaraman, Partner – Advisory Services, Ernst & Young, added, “The optimism of changing environment is reflected in the aspirations of UHNIs as their spend get more luxurious and investment more exotic. We expect a continued momentum in the positive trend and even further acceleration, with UHNIs being an ever alluring segment.”
The super rich are ready to experiment with their travel now, there is a growing interest in polar expeditions and even space travel. A change in trend on travel the report notes is that UHNIs now take more short duration holidays than a few long stay ones. Nearly 50 per cent of ultra HNIs make at least three luxury trips and about 33 per cent spend over Rs. 25 Lakh in a year for leisure. But this has meant that there is a decline in the average number of days per trip though the corresponding number of trips taken by the ultra-rich has risen.
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I can appreciate that these UHNI\'s have an affinity towards expenditure on Travel, Business and Premium foods but what are the major factors which could attribute to the rise in spending from 30% to 44% which in this case is a substantial amount. My question only is what is the overall contribution to the Economy from these UHNI\'s in terms of GDP, Employment, Taxed amount, Social Development, charitable donations et. al. It is all well and good having this exorbitant wealth but if the overall contribution to the development of a nation is minuscule ... Then what is point of all that money? Just my two cents (paise)on Sep 25, 2014