The number of Indian ultra-high net worth households (UHNH) has increased by 17% to touch around 1.37 lakh in FY15 from around 1.17 lakh last year.
The report estimates that the number of UHNH is set to increase to 3.48 lakh by 2020 with a combined net worth of Rs. 415 lakh crore, driven by new UHNH from e-commerce industry and new avenues of investments which fetch higher returns, states the Kotak Top of The Pyramid Wealth Report 2015 prepared by E&Y.
Further, the net worth of ultra HNHs’ is projected to surge at a CAGR of 26% from an estimated Rs. 128 lakh crore in FY15 to Rs. 415 lakh crore by FY20.
Ultra-high net worth household is one which has a minimum net worth of Rs. 25 crore.
In a press release, C. Jayaram, Joint Managing Director, Kotak Mahindra Bank said, “The ultra HNI landscape in India has transformed dramatically over the last few years. New emerging industries armed with disruptive technology have created space for a different economy, which has propelled the number of young ultra-rich entrepreneurs in India.”
The report says that the rise of the e-commerce industry has led to a new category of entrepreneurs who are young and ultra-rich. This has contributed to the lowering of the average age of ultra HNIs — and nearly half of them are below 40. In fact, analysis of PE and VC investments in FY15 has shown that technology (IT and e-commerce) is the preferred sector, said the report.
“Ultra HNIs have a positive outlook towards the economic environment and there is a rising inclination towards equities over real estate. Further, improved performance of the corporate sector has led to a rise in average salaries with as many as 66% of professionals getting most of their wealth from personal income and real estate investments,” said Murali Balaraman, Partner – Advisory Services, Ernst & Young in a press release.
Besides, the report shows that 44% of ultra HNH population resides in emerging cities and small towns.
Investment preference
The ultra-HNH continued to prefer investing in equity, jewellery real estate. Cities such as Pune and Bengaluru have emerged as preferred destinations for real estate investments. There is a shift towards commercial real estate, driven by higher rental realisations compared to the residential market — 36% of the ultra HNIs that were surveyed for the report showed an interest in commercial properties.
Spending
With exclusivity on their mind, ultra HNIs tend to gravitate towards exquisite craftsmanship in jewellery. Apart from gold jewellery, 40% of ultra HNIs are also interested in diamonds and about 53% of ultra HNIs prefer purchasing jewellery from Indian branded jewellers.
Education
Ultra HNIs also lay great emphasis on their children’s education. While entrepreneurs and inheritors prefer to send their children abroad for education, 41% of professionals prefer educating their children in India. USA and UK are the most favoured education destinations for education. The key parameters in selecting the destination country for educating their children were quality of education, global exposure and safety.
Wedding
Luxury weddings are a distinct part of the ultra HNI lifestyle and destination weddings are hugely popular, with India being a preferred destination. Offshore destinations like Thailand, France and Spain have also emerged as popular destinations. While the UHNIs spend most time on deciding a wedding theme and the location, exquisite cuisines and location décor are the focus areas during the wedding. Fusion food is one of the hottest trends in these luxury weddings.
Key Findings:
- Ultra HNHs increase by 17% to 1.37 lakh in FY15 from 1.17 lakh in FY14
- Equity exposure increased to 45% in FY15 from 38% in FY14; banking, infrastructure preferred sectors
- Business, real estate key investment drivers; commercial real estate preferred
- Maximum spends seen in jewellery
- Majority of Ultra HNIs prefer investment portals to track investments
