Over 79% of HNHs feel estate planning is necessary, says Kotak-CRISIL Top of the Pyramid 2013 report.
Ultra-high net worth households or ultra HNHs are more concerned about their estate planning. Ultra HNHs are those having a minimum average net worth of Rs. 250 million essentially accumulated over the past 10 years.
An overwhelming majority of 79% feel that estate planning is necessary and 27% of total Indian ultra HNHs population prefer to consult financial advisers for their estate decisions, shows ‘Top of the Pyramid 2013’ report published by Kotak Wealth Management and CRISIL. The research highlights the lifestyle and investment pattern of HNIs in India.
The report shows that 21.5% of ultra HNHs prefer to take advice from financial advisor or wealth manager for their real estate investments. Also, 7% of ultra HNHs involve their financial advisers in their key decisions.
The report claims that total net worth of ultra HNHs would reach to Rs 380 trillion by 2017-18, a five-fold increase from around 86 trillion in 2012-13. Also, the number of ultra HNHs would triple in next five years from 1,00,900 at present to 3,29,000 by 2017-18.
Geographical presence of HNHs - Over 54% of ultra HNHs in the country live in the four metros since these cities are the financial epicentres of their respective regions. The other top 6 cities account for 13% of HNHs population whereas the next 40 cities are home to 15% HNHs. The rest 18% are spread across the country.
Spending pattern – In a normal year, the discretionary to non-discretionary spend ratio was around 41:59; however, during a sustained economic downturn, the survey found the spending ratio changed to 33:67.
The confidence of Ultra HNHs in the economy’s ability to rebound swiftly is still low. Hence, their investment to safer asset classes like debt, fixed deposit, gold, luxuries house, real estate have increased. These investors are taking a cautious call on equity. The general feeling among most respondents for equity was that the situation would come back to normal by the end of 2014.
One of the interesting findings in the report is growth in purchase of luxury homes by ultra HNHs to create wealth. Luxury home purchases by ultra HNIs are not only confined to India. They also prefer to buy such properties in places like Singapore, London and Dubai.
Sources of wealth creation – The key source of wealth for ultra-high net worth investors continues to be success in primary business, just as it was in the previous survey, followed by real estate, sale of business and equity. The data shows that 40.4% of wealth of ultra HNHs comes from primary business whereas 14.7% and 7.5% of it are from real estate and equity respectively.
Source: Kotak Wealth Management and CRISIL
