Indian HNI households grow 30% in FY12 By STAFF REPORTER The number of ultra high networth households (ultra HNHs) in India has grown 30 per cent to 81,000 in 2011-12; to more than triple in the next five years to 286,000. Total net worth of Indian ultra HNHs to grow five-fold to Rs 318 trillion by 2016-17. In 2011-12, metros accounted for 53.9 per cent of ultra HNHs in India. Ultra high networth individuals (Ultra HNIs) have not curtailed expenditure on luxury items in the current economic slowdown to maintain lifestyle; caution seen in investments. Exclusivity a key factor in luxury car purchases; SUVs/Crossovers the most preferred car. These are the findings of the second edition of the ‘Top of the Pyramid’ report launched by Kotak Wealth Management and Crisil Research. The report reveals interesting facts and trends about spending, investing and income patterns of India’s ultra high networth households (ultra HNHs) amidst global uncertainty and slowdown in the Indian economy. Additionally, the special focus areas of the report are luxury cars and education. The report states that notwithstanding the economic slowdown the number of Indian ultra HNHs is estimated to have grown by 30 per cent to around 81,000 in 2011-12, and is expected to triple to around 286,000 over the next five years. Consequently, the net worth of ultra HNHs is estimated to surge five-fold from an estimated ` 65 trillion in 2011-12, to ` 318 trillion by 2016-17. Over 50 per cent of them are in the four metros, and the next top six cities account for around 12 per cent. The report says that the slowdown in the economy has not affected the spending patterns of ultra HNIs, with many of them stating that maintaining their lifestyle is an extremely important facet of their social life. Last year, destination weddings were the in-thing; this year these appear to have lost their earlier attraction, since the trend was catching up among other sections of society. Throwing lavish parties for ad hoc events such as business success or launch parties has instead become a new area of spending. The report further highlights that exclusivity is a major driving force behind luxury car purchases, and many a time even established brands/models are not considered because they lack exclusivity or are seen as mass luxury cars. With an increase in the number of youth among the ultra HNIs, the preference for cars that project a youthful image and models that are seen as exclusive is growing steadily. Interestingly, high end luxury cars of Japanese car makers are still preferred for regular use, as they are seen as most suited to Indian roads. SUVs/Crossovers continue to be the most preferred car among ultra HNIs. C Jayaram, joint managing director of Kotak Mahindra Bank, said, “The second edition of the Top of the Pyramid report has thrown up some interesting trends in various behavioral aspects of the ultra HNIs. While, overall, this segment seems to be relatively unaffected by the slowdown in Indian economy, their patterns in spending, investing and savings present huge opportunities to seek professional advice. It is our constant endeavor to offer best in-class products and services to our clients.” Mukesh Agarwal, president of Crisil Research, said, “The fact that so many ultra HNIs said that their spending habits have not changed due to the slowdown is an indication that they do not expect the slowdown to continue for long. However, it would be interesting to see whether the caution that has crept into their investments will spill over into their spending if the economic crisis persists longer than expected. The findings on the importance of exclusivity in luxury car purchases should help luxury product makers to better meet the demands of this highly demanding class of customers.” The economic slowdown has not curtailed the spending of ultra HNIs, but it has induced a very cautious approach as far as investments are concerned. The focus was on capital protection and low-risk instruments such as debt. Investments into real estate have dipped compared with last year; although its share among asset classes remains relatively high since ultra HNIs expect healthy returns over the long-term. But generally the appetite to take risk was subdued, with greater preference on a disciplined rather than an opportunistic approach, particularly in high-risk instruments. A very interesting differentiator emerged between the ultra HNIs in metros and non-metros in the country on education. While ultra HNIs in non-metros were extremely conscious about which brand of school the child should go to, their counterpart in metros factored various other attributes such as curriculum and quality of faculty. ‘Top of the Pyramid’ is based on in-depth interviews with senior personnel at major global luxury brands, wealth managers and product dealers, and an extensive market research with ultra HNIs across ten cities.