top of the pyramid 2013

FOREWORD

The global economic scenario improved, albeit marginally, in 2012 but a full-blown recovery appears to be farther away than what most people

anticipated last year. It is also fair to say that whatever little recovery has taken place is lopsided; things are looking up in the United States,

for instance, but many parts of Europe continue to languish in crisis.

The India story too has become a bit murkier. Ultra high net worth individuals (ultra HNIs) believe today that the turmoil in the economy is more

deep-rooted than what appeared to be the case last year. Some of that crisis of con�dence in the economy’s ability to revive quickly is spilling

over into all aspects of ultra HNI behaviour, including spending and investments. This year, a number of ultra HNIs alluded to the possibility of a

wait and watch attitude on discretionary spends.

Yet – and this is a very heartening aspect for both wealth managers and luxury goods makers – wealth creation continues. The number of billionaires

in the country has gone up substantially and so has their wealth, resulting in a growing need to manage and preserve their wealth better to create a

longer lasting legacy. Consequently, estate planning, a hitherto neglected area, is becoming increasingly relevant for Indian ultra HNIs. It is an issue

that we have explored in some detail in this edition.

True to their nature, ultra HNIs are also �nding new ways to create wealth even in these uncertain times and �nding even newer ways to splurge in

search of exclusivity. The rapid growth in branded luxury home sales in recent years, for instance, is testimony to that. Not only are the ultra HNIs

gobbling up luxury homes in India, they are also looking at foreign destinations such as London and Dubai. In this year’s report, we shed more light

on the trends in luxury home purchases and the factors that drive exclusivity in this segment.

Kotak Wealth Management and CRISIL Research are extremely proud to present this third edition of their path-breaking annual report

'Top of the Pyramid (T.O.P.)’.

As always, happy reading.

C. Jayaram Mukesh Agarwal

Joint Managing Director President

Kotak Mahindra Bank Ltd. CRISIL Research

INSIDE THE REPORT

About the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 01

Executive Brie�ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 04

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06 1. Wealth creation amidst crisis of con�dence in the economy

2. Ultra HNHs in India: Their numbers and their wealth

3. Future of wealth creation in the non-metros

4. The long-term India story: Are we at the cross-roads?

Spending Patterns: Attitudes, Motivation and the Ultra Wealthy Lifestyle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1. The downturn e�ect on ultra HNI spending behaviour

2. Spending patterns in 2012

3. Products they prefer to spend on

a. Luxury watches

b. Jewellery and precious stones

c. Household electronics

d. Apparel and accessories

4. Gifts and Travel

Special Focus: Luxury Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1. Dynamics behind a luxury home purchase

2. Why are more and more Indians buying luxury properties abroad?

3. Key in�uencers in purchase decision

4. How are real estate developers wooing the rich?

Investment Trends: Risk, Return and Wealth Preservation . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 38 1. Sources of income

2. Income allocation

Special Focus: Estate Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 1. Why is estate planning still not very popular among ultra HNIs?

2. Most popular forms of estate planning at present

3. Bright future of estate planning in India

01 | T.O.P. India - Kotak Wealth & CRISIL Research

ABOUT THE REPORT

Global economic growth is more buoyant now compared to the

conditions that prevailed when we came out with our previous

report. A mild recovery is underway in the US, there is a new push to

reinvigorate the Japanese economy and Europe is far more stable now

compared to last year when Greece, Italy, Spain, Portugal and France

came in the grip of the sovereign debt crisis, in varying degrees.

Consequently, wealth creation, which was hit during the previous

year, hit new highs this year. One indicator of this is the number of

billionaires in the Forbes Billionaires List, which hit an all-time high

of 1,426 in 2013, up by 16 per cent over 2012, propelled by resurgent

asset prices. The combined net worth of these individuals has also

gone up by 17 per cent to $5.4 trillion.

The net worth of ultra HNIs in India has also gone up, despite

the dismal economic scenario. However, it is evident from our

conversations with ultra HNIs this year that their con�dence in the

economy’s ability to recover quickly is far less optimistic compared to

the previous year. And that is inducing a degree of caution in their

spending behaviour, an attitude that goes against their grain.

In our previous reports, we have looked at behavioural aspects of ultra

HNIs and answered questions such as the priorities or motives of ultra

HNIs when it comes to spending or investing, their actions as a class,

their mindset and behaviour during times of adversity.

A deep knowledge of ultra HNI behaviour is a prerequisite for both

wealth managers and luxury brand companies to grow their

relationships and expand their businesses. This year, we provide

valuable insights into ultra HNI behaviour with respect to luxury

homes and estate planning. We are con�dent that the learnings

from this year’s report will be as bene�cial as they were last year. This

report continues to build on the foundation that Kotak Wealth

Management and CRISIL Research laid two years ago to track ultra HNI

trends year on year with speci�c reference to the Indian market.

Kotak Wealth Management is a pioneer and leader in the private

banking space catering to 43 per cent of the 100 most wealthy (as per

the Forbes India Rich List - 2012) in India.

CRISIL Research is India’s largest independent research house,

providing comprehensive research coverage to more than 1,200

Indian and global customers.

This report is based on two main strands of research:

1) A series of interviews that were conducted with senior personnel

at major global luxury brands, dealers of luxury brands and

wealth managers.

2) A commissioned market survey conducted by Feedback

Consulting, of 150 ultra HNIs, with conversations lasting up to one

hour. The survey took place between March 2013 and May 2013.

Nearly 49 per cent of the respondents were from the four metros,

while the rest were from other major cities such as Pune,

Bengaluru, Ahmedabad and Chandigarh.

CRISIL Research then undertook an extensive analysis of the results

of the survey and many of the conclusions were validated with our

primary sources.

This report would not have been possible without the co-operation of

all the survey respondents and the interviewees. We thank them for

their invaluable support, the time they put at our disposal and the

insights they o�ered.

About Kotak Mahindra GroupKotak’s evolution is a tale of consistent pursuit of opportunities,

despite a rapidly changing economic and business landscape. Today,

after more than 27 years since inception, it continues to gather

momentum with an unwavering focus.

As we retrace our steps to the initial days of our journey, one particular

day stands out in the crowd – 21st November, 1985. This was when

we identi�ed an opportunity in the bill discounting market. That

opportunity helped shape Kotak Mahindra Group.

We address a rich and globally diversi�ed client base. Within India, our

customers range from small enterprises to the largest corporations

and �nancial institutions; outside India, our customers include the

world’s largest banks and leading corporations. We also work with

governments and policymakers in India and other emerging markets

in the infrastructure domain.

We empower our customers and the markets at large, with

independent analysis, benchmarks and tools. These help lenders and

borrowers, issuers and investors, regulators, and market

intermediaries make better-informed investment and business

decisions. Our o�erings allow markets and market participants to

become more transparent and e�cient – by mitigating and managing

risk, taking pricing decisions, generating more revenue, reducing time

to market and enhancing returns. By helping shape public policy on

infrastructure in emerging markets, we help catalyse economic

growth and development in these countries.

About CRISIL ResearchCRISIL Research is India's largest independent and integrated research

house. We provide insights, opinions, and analysis on the Indian

economy, industries, capital markets and companies. We are India's

most credible provider of economy and industry research. Our

industry research covers 70 sectors and is known for its rich insights

and perspectives. Our analysis is supported by inputs from our

network of more than 4,500 primary sources, including industry

experts, industry associations, and trade channels. We play a key role

in India's �xed income markets. We are India's largest provider of

valuations of �xed income securities, serving the mutual fund,

insurance, and banking industries. We are the sole provider of debt

and hybrid indices to India's mutual fund and life insurance industries.

We pioneered independent equity research in India, and are today

India's largest independent equity research house. Our de�ning trait is

the ability to convert information and data into expert judgements

and forecasts with complete objectivity. We leverage our deep

understanding of the macroeconomy and our extensive sector

coverage to provide unique insights on micro-macro and cross-sectoral

linkages. We deliver our research through an innovative web-based

research platform. Our talent pool comprises economists, sector

experts, company analysts, and information management specialists.

In February 2003, Kotak Mahindra Finance Limited, our Group’s

�agship company, became India’s �rst Non-Banking Finance Company

to receive a banking license from the Reserve Bank of India (RBI).

Thus was laid the foundation of Kotak Mahindra Bank Limited (KMBL).

We are focussing our industry experience and capabilities to cater to

changing customer aspirations.

Our solutions are technology driven, contemporary and comprehen-

sive, spanning consumer banking, commercial banking, corporate

banking, wealth management, retail and institutional equities, asset

management, life insurance and investment banking.

We have come a long way since we began. Kotak now caters to

the diverse �nancial needs of individuals and the corporate sector,

nationally and internationally.

About Kotak Wealth Management Kotak Wealth Management is one of the oldest and the most

respected wealth managers in India, providing solutions to the high

net worth individuals. Kotak Group has over fourteen years of

experience in wealth management, o�ering the widest range of

products and services. Our client base ranges from entrepreneurs to

business families, as well as employed professionals. We provide

�nancial advice and manage wealth for 43 per cent of India's top 100

families (as per the Forbes India Rich List - 2012).

On the investment scenario, we believe that no single asset class tends

to perform consistently over a long period of time. Therefore, an HNI

needs to be given access to various asset classes, investment styles,

themes and tenures. With this philosophy, Kotak has built a formidable

suite of products and services straddling this spectrum. Our o�ering is

customised, based on the client’s pro�le and investment objectives.

This can be done through a transaction-based investment approach

or the asset advisory approach.

The Kotak Wealth umbrella also includes Family O�ce. Family O�ce,

goes beyond investments to provide a host of value-added services

such as Estate Planning Services, tax optimisation, etc.

Kotak Wealth Management is the only Indian Wealth Management

�rm to feature in the 'Top 25 Private Banks' of the world in the category

of 'Best Private Banking Services Overall' by Euromoney Private

Banking Survey 2013.

We have maintained our leadership position, thanks to the macro

environment, in-depth understanding of the client’s requirements and

of the various asset classes. This has resulted in Kotak being in a

position to o�er the widest range of solutions for the client.

Kotak Wealth Management is a part of Kotak Mahindra Bank Ltd.

About CRISIL LimitedCRISIL is a global analytical company providing ratings, research and

risk and policy advisory services.

We are India’s leading ratings agency. We are also the foremost

provider of high-end research to the world’s largest banks and leading

corporations. With sustainable competitive advantage arising from

our strong brand, unmatched credibility, market leadership across

businesses, and large customer base, we deliver analysis, opinions and

solutions that make markets function better.

Our de�ning trait is our ability to convert data and information into

expert judgements and forecasts across a wide range of domains, with

deep expertise and complete objectivity.

At the core of our credibility, built up assiduously over the years, are

our values: Integrity, Independence, Analytical Rigour, Commitment

and Innovation.

CRISIL’s majority shareholder is Standard and Poor’s (S&P). Standard

& Poor’s, a part of The McGraw-Hill Companies (NYSE:MHP), is the

world’s foremost provider of credit ratings.









































wealth managers.









primary sources.


















































T.O.P. India - Kotak Wealth & CRISIL Research | 02























































and Innovation.












































wealth managers.









primary sources.









































































































and Innovation.




professional wealth managers are still not much sought after.

Still, in the years ahead, the reliance on family CAs / lawyers will

decrease because the newer generation of ultra HNIs is more aware

of the nuances of estate planning and the niche products that are

being o�ered by professional wealth managers. As the India story

unfolds in the long term - and the number of ultra HNIs zooms and

their co�ers swell - estate planning is a business that will not only

grow but thrive.


EXECUTIVE BRIEFING

Domestic economic conditions remain dreary but India’s ultra high

net worth individuals (ultra HNIs) are getting richer and many more

are joining the exclusive club. The con�dence of ultra HNIs in the

economy’s ability to rebound swiftly is still low but they are

re-investing a lot more into their businesses vis-à-vis last year. They

are increasing their spending horizons but simultaneously exercising

a degree of caution on ultra high value spends. They say they are less

risk averse compared to the previous year, yet invest a lot more in

debt instruments.

Don’t be Confused. That is the Indian ultra HNI for you, circa 2013.

Making the most of even relatively bad times, getting wealthier each

day and living life to the hilt. According to Forbes magazine, the

number of Indian billionaires has gone up by 7, from 48 in 2012 to 55

in 2013. That, we believe, is just the tip of the iceberg. Over the next

�ve years, we expect ultra high net worth households (ultra HNHs) in

the country to more than triple to over 329,000 households.

So what, one may ask, is di�erent this year? For one, the con�dence of

ultra HNIs in the economy has taken a beating. This year, nearly 90 per

cent of the respondents said that there is a downturn and a sixth of

them are not optimistic of an early recovery. Yet – and that is where

the contrast lies – there has been an increase in the money ploughed

back by ultra HNIs into their primary business. On the other hand,

it is not perhaps so surprising because the primary business is where

they generate most of their wealth. Either way, they are sending a

signal to policy makers.

Last year, most ultra HNIs viewed the slowdown as a temporary blip

and were gung ho on spends. This year, the pessimism on the

economy is inducing a degree of caution in spend. And, that is curious

because it is an attitude that goes against the very grain of ultra HNI

behaviour. Some of them are biding time to see which way the

economic wind is blowing before embarking on high value purchases

such as top-end luxury cars, home mini-theatres etc. Perhaps, they are

just being street-smart because non-discretionary spending continues

unabated on apparel, luxury watches and high-end electronics.

And the list of non-discretionary items is growing.

In recent years, the growth in luxury home sales has been a very good

indicator of the wealth creation underway in the country. An analysis

that we undertook to �gure out what drives ultra HNI purchases of

luxury homes found that the choice of location is the predominant

factor. The luxury home is a status symbol for the ultra HNI and he

goes to great lengths to ensure exclusivity. So, factors such as brand

aspects relating to the architect / developer, architectural signi�cance,

amenities on o�er etc. – anything that o�ers a chance at exclusivity

becomes a swing factor in the purchase. Interestingly, luxury home

purchases by ultra HNIs are not con�ned to India. Driven by greater

globalisation, comparable valuations overseas and investment

considerations, more and more ultra HNIs are purchasing luxury

properties abroad in places such as Singapore, London and Dubai.

To meet this burgeoning demand, developers are resorting to

methods such as whisper marketing and exclusive invitations.

Discipline and capital protection continued to be the line on invest-

ments. Allocation to asset classes such as debt continued to be

signi�cant in 2012. Risk aversion was a shade less as evidenced by the

increase in exposure to real estate. Traditionally, investment in real

estate is seen as medium risk in India, but ultra HNIs are increasingly

capitalising on opportunities such as distress sales as part of their

short-term investments. In that sense, trends this year were not too

dissimilar compared to last year.

Ultra HNIs are also �nding that, in a world of scarce capital, many

countries are actively seeking them out and welcoming them with

open arms. Globally, this is one of the factors instrumental in driving

the estate planning business and ensuring healthy demand for

professional wealth managers and estate planners. On the other hand,

the estate planning business in India is at a very nascent stage.

Because many family-owned businesses are traditionally passed on

to the next generation, the essence of estate planning in India is

on secrecy and trust. Hence, it is the family’s chartered accountant

or lawyer who usually also doubles up as an estate planner and


professional wealth managers are still not much sought after.

Still, in the years ahead, the reliance on family CAs / lawyers will

decrease because the newer generation of ultra HNIs is more aware

of the nuances of estate planning and the niche products that are

being o�ered by professional wealth managers. As the India story

unfolds in the long term - and the number of ultra HNIs zooms and

their co�ers swell - estate planning is a business that will not only

grow but thrive.

Domestic economic conditions remain dreary but India’s ultra high

net worth individuals (ultra HNIs) are getting richer and many more

are joining the exclusive club. The con�dence of ultra HNIs in the

economy’s ability to rebound swiftly is still low but they are

re-investing a lot more into their businesses vis-à-vis last year. They

are increasing their spending horizons but simultaneously exercising

a degree of caution on ultra high value spends. They say they are less

risk averse compared to the previous year, yet invest a lot more in

debt instruments.

Don’t be Confused. That is the Indian ultra HNI for you, circa 2013.

Making the most of even relatively bad times, getting wealthier each

day and living life to the hilt. According to Forbes magazine, the

number of Indian billionaires has gone up by 7, from 48 in 2012 to 55

in 2013. That, we believe, is just the tip of the iceberg. Over the next

�ve years, we expect ultra high net worth households (ultra HNHs) in

the country to more than triple to over 329,000 households.

So what, one may ask, is di�erent this year? For one, the con�dence of

ultra HNIs in the economy has taken a beating. This year, nearly 90 per

cent of the respondents said that there is a downturn and a sixth of

them are not optimistic of an early recovery. Yet – and that is where

the contrast lies – there has been an increase in the money ploughed

back by ultra HNIs into their primary business. On the other hand,

it is not perhaps so surprising because the primary business is where

they generate most of their wealth. Either way, they are sending a

signal to policy makers.

Last year, most ultra HNIs viewed the slowdown as a temporary blip

and were gung ho on spends. This year, the pessimism on the

economy is inducing a degree of caution in spend. And, that is curious

because it is an attitude that goes against the very grain of ultra HNI

behaviour. Some of them are biding time to see which way the

economic wind is blowing before embarking on high value purchases

such as top-end luxury cars, home mini-theatres etc. Perhaps, they are

just being street-smart because non-discretionary spending continues

unabated on apparel, luxury watches and high-end electronics.

And the list of non-discretionary items is growing.

In recent years, the growth in luxury home sales has been a very good

indicator of the wealth creation underway in the country. An analysis

that we undertook to �gure out what drives ultra HNI purchases of

luxury homes found that the choice of location is the predominant

factor. The luxury home is a status symbol for the ultra HNI and he

goes to great lengths to ensure exclusivity. So, factors such as brand

aspects relating to the architect / developer, architectural signi�cance,

amenities on o�er etc. – anything that o�ers a chance at exclusivity

becomes a swing factor in the purchase. Interestingly, luxury home

purchases by ultra HNIs are not con�ned to India. Driven by greater

globalisation, comparable valuations overseas and investment

considerations, more and more ultra HNIs are purchasing luxury

properties abroad in places such as Singapore, London and Dubai.

To meet this burgeoning demand, developers are resorting to

methods such as whisper marketing and exclusive invitations.

Discipline and capital protection continued to be the line on invest-

ments. Allocation to asset classes such as debt continued to be

signi�cant in 2012. Risk aversion was a shade less as evidenced by the

increase in exposure to real estate. Traditionally, investment in real

estate is seen as medium risk in India, but ultra HNIs are increasingly

capitalising on opportunities such as distress sales as part of their

short-term investments. In that sense, trends this year were not too

dissimilar compared to last year.

Ultra HNIs are also �nding that, in a world of scarce capital, many

countries are actively seeking them out and welcoming them with

open arms. Globally, this is one of the factors instrumental in driving

the estate planning business and ensuring healthy demand for

professional wealth managers and estate planners. On the other hand,

the estate planning business in India is at a very nascent stage.

Because many family-owned businesses are traditionally passed on

to the next generation, the essence of estate planning in India is

on secrecy and trust. Hence, it is the family’s chartered accountant

or lawyer who usually also doubles up as an estate planner and

INTRODUCTION


INTRODUCTION

The crisis engul�ng the global economy has eased somewhat since

our previous report (Top of the Pyramid 2012) but it is by no means out

of the woods yet despite the modest recovery of the US economy.

Much of Europe still remains in the throes of a sovereign debt crisis

and the bailout of Cyprus this March is a grim reminder that normalcy

in that part of the world is quite some way away. The BRICS nations are

also not exactly in the pink of health, either.

But if one were to assume, such a woeful economic climate would

have a dispiriting in�uence on the global wealthy, one would not be

more wrong. As the Forbes Billionaires List suggests, the global elite

are growing wealthier and appear to remain largely una�ected by the

economic cycles.

The number of billionaires in the Forbes Billionaires List is at an all-time

high of 1,426 in 2013, up 16 per cent over 2012, propelled by resurgent



This year, gainers outnumbered losers by 4 to 1, which is in sharp

contrast to the previous year, when there were nearly as many gainers

as losers.

* Forbes Billionaires List - 2013 Source: T.O.P. India - Kotak Wealth & CRISIL Research

more wrong. As the Forbes Billionaires List suggests, the global elite as losers.

NUMBER OF INDIANS ON FORBES LIST* NET WORTH ( BILLION)

1996

20042013

3 Indians=212 Billion

9 Indians=1,157 Billion

55 Indians=11,000 Billion


Indians too have done well. According to Forbes, the number of

Indian billionaires has gone up by 7, from 48 in 2012 to 55 in 2013,

notwithstanding the dreary domestic economic environment that

has prevailed over much of last year and so far this year. And more

people will join this crème-la-crème in future. Over the next �ve

years, we expect ultra high net worth households (ultra HNHs) in the

country to more than triple to over 329,000 households.

The de�ning �nding of this year's survey of ultra high net worth

individuals (ultra HNIs) is that a surprisingly large percentage of

respondents believe that a) there is a downturn, b) an early recovery is

not in sight. Nearly 90 per cent of the respondents agreed that there

is a slowdown and around 14 per cent felt that the economy would

recover only by the end of 2014; the timeline for recovery indicated

by about 65 per cent varied from mid-2013 to mid-2014, with a bias

towards the latter.

For economy and industry watchers, that prognosis should be a cause

of concern, coming as it does from people who are either primarily

businessmen or those who manage businesses. It indicates a level of

pessimism about the economy that we did not encounter last year.

To be fair, we had alluded to such a possibility in our 2012 report.

“Conversely, if the India story is either compromised or delayed,

even the unthinkable could start appearing within the realm of

possibility – for instance, the cautious behaviour that is currently

evident on investments could well spill over into spending.”

More importantly, the pessimism of ultra HNIs about the economy

has caused a change in their perception on spending: nearly a third of

our respondents indicated that their spending has been adversely

impacted. This is starkly di�erent from last year, when most

respondents dismissed our query on the downturn with an almost

derisive “What? Downturn!” look.

Although it is tempting to jump to the conclusion that the super

wealthy are cutting down on their spending, that would perhaps

be a hasty and not entirely correct one. Is the subdued economy

hitting luxury spending? Or is it that this year's reaction to the

downturn is a public relations exercise, a politically correct statement

in tune with the times?

The truth probably lies somewhere in between. Last year, one ultra HNI

had remarked: “We are used to a certain lifestyle and it is not easy to

change it, even if there is a slowdown – it is not impacting us so much

that we need to change or cut our lifestyle.”

This year, because of the lingering uncertainty on the economy, many

are not so optimistic. Moreover, many of these ultra HNIs are owners

of businesses that employ thousands. It is, therefore, prudent for

many of them to project a level of austerity in their public and personal

life at a time when the wages of their employees are under pressure

due to the weak economic environment, which has, in turn, a�ected

business revenues and pro�tability. Vikram Pandit took over as the

CEO of Citibank at a time when the bank's �nances and survival were

under a cloud. As the media widely reported at the time, Pandit took

only $1 in salary in his �rst year: it was not because the bank could not

pay him a commensurate salary, but it was Pandit's way of indicating

in those troubled times that austerity begins at the top.

On the other hand, there are some who are postponing discretionary

spend on ultra high value purchases (such as top-end luxury cars,

yachts, home mini-theatres etc.) preferring to wait and watch to see

which way the economic wind is blowing before committing to their

purchases.

It is in this context that one should read the response of 33 per cent of

our respondents who said that compared to the previous year their

spending was down by 20-25 per cent. Here too, the bulk of the impact

is on discretionary spend; spending on non-discretionary items such

as apparel, high-end mobiles and electronics has hardly been

impacted.


But increasing their wealth is only one part of the picture on the

global wealth landscape this year. On certain other fronts, things

have certainly not been very hunky-dory. A de�ning image that

eloquently captured one of the concerns of the global super-wealthy

this year was the meeting in January between one of France's �lm

legends and the Russian president, wherein the former was granted

Russian citizenship. What made the event extremely unusual was

that this beloved son of France is not only one of the most decorated

and awarded icons of French cinema, but is also a very successful

businessman and vineyard owner. It was the gripping �nale to a

tax debate that began last year after the newly elected French

government proposed a 75 per cent tax on the super-rich.

The tale of the French super-rich is not just about the French alone, it

is a story that is unfolding across the globe in varying degrees. In many

parts of Europe and elsewhere, governments are seeking to increase

taxes on the ultra wealthy as part of measures to bolster their sagging

economies. On the other hand, countries such as Belgium, Russia and

Britain are among those that are actively wooing the global wealthy

to relocate to their shores to rejuvenate investment in their territories.

Welcome to the new world! A world where some countries,

desperately seeking scarce capital, are increasingly o�ering attractive

incentives to entice the progenitors of capital to settle in their land

and help it grow, while some others are seeking to increase taxes on

the rich. The global wealthy are de�nitely in the telescopic sights of

policy makers and what unfolds on this front will have a heavy bearing

on future ultra HNI behaviour. It is also obvious that since capital

protection is their prime motivation, ultra HNIs will relocate to areas

that will treat them favourably.

In India, as it became clear that previous estimates of an early

economic recovery were o� the mark, and the government sought

fresh revenue-raising avenues, North Block kick-started a debate

on the desirability of an inheritance tax, igniting concern among

domestic ultra HNIs. Understandably so, because traditionally a large

proportion of India's businesses are family owned and are passed on

from generation to generation.

These concerns apart, the desire to live luxuriously is only increasing

and items that are part of discretionary spending only seem to be

growing due to the heavy, technology-driven lifestyle and the

numerous opportunities that abound to become rich in today's India.

This is not a phenomenon that began last year or the year before. India

has had extremely rich individuals in its ranks in the past too, but they

were few and far between. What really tipped the scales and propelled

a spectacular jump in the number of ultra HNIs in the country was

the domestic liberalisation process during the 1990s. A series of

path-breaking economic and capital market reforms during this period

not only freed the economy, but also stimulated entrepreneurship,

enthused capital and wealth creation.

In the years that followed, growth unfolded at a frenetic pace in the

IT/ITES sectors, millions were drawn into the stock market frenzy that

resulted from liberalisation of the capital markets, and average income

levels rose multifold. As long pent-up aspirations were unleashed,

businesses responded to the explosion in demand for a variety of

products (both discretionary and non-discretionary), which eventually

created millionaires and billionaires.

Today's environment is a sea change from what it was a few decades

ago. Luxury homes at astronomical prices (comparable to luxury

homes in the world's richest residential districts) are today being

constructed in cities such as Delhi, Mumbai and Bengaluru and are

still �nding many takers, which would have been unthinkable a

few years ago. Only a few weeks ago, a property in a prime location

in Mumbai went for as high as ` 118,000 per sq ft, reinforcing the

perception that downturns don't matter where wealth is concerned

and where there is material desire.


In the long term, as India's economy grows further and it moves to

regain its status as a global economic superpower after losing it during

the Industrial Revolution, more and more people will move up the

income bracket due to the steady increase in average income. This will

not only fuel changes in the attitude towards wealth and luxury

living but will also exponentially increase the number of wealthy in

the country.

The Indian Ultra HNHIn our inaugural report, we had de�ned an ultra high net worth

household (ultra HNH) as one having a minimum average net worth of

` 250 million essentially accumulated over the past 10 years, which

as per CRISIL’s proprietary tool ’IDeA’ (Income and Demographics

Analysis) gets mapped to a minimum income of ` 35 to 40 million.

We estimate that the total net worth of Indian ultra HNHs will reach

` 380 trillion in 2017-18 from an estimated ` 86 trillion in 2012-13. This

growth in net worth will be driven predominantly by growth in the

number of ultra HNHs and income growth.

At present, there are no validated estimates of the number of ultra

HNHs in the country. If we consider a household with a minimum net

worth of 250 million, there are more than 100,900 ultra HNHs in India

as of 2012-13. Although this number represents a meagre 0.03 per

cent of the total households in India, it is poised to more than triple to

over 329,000 households by 2017-18.

100,9002012-13(E)

329,0002017-18(P)

growth in net worth will be driven predominantly by growth in the

number of ultra HNHs and income growth.

NUMBER OF ULTRA HNHs TO TRIPLEOVER THE NEXT 5 YEARS TO 329,000

*Also read as ` 380,000 billion#Also read as ` 86,000 billion

Analysis) gets mapped to a minimum income of ` 35 to 40 million.

TOTAL NET WORTH OF INDIAN HNHsTO GROW 4.5 TIMES TO

380 TRILLION BY 2017-18

#` 86 Trillion2012-13(E)

*` 380 Trillion2017-18(P)

3-fold growth in ultra HNHsover the next 5 years


Over half of the ultra HNHs in the country continue to live in the four

metros, which is understandable because these cities are the �nancial

epicentres of their respective regions. The other top 6 cities account

for slightly over 13 per cent and the next 40 cities are home to about 15

per cent. The rest are spread across the country. These numbers will

eventually change in favour of the non-metros but only in the long

term, as the bene�ts of development percolate down to all regions.

Metros

13.0%(Other top 6 cities)

15.0% (11-50 cities)

Metros

54.0%

18.0%(Rest of India)

for slightly over 13 per cent and the next 40 cities are home to about 15

NON-METRO HOUSES ALMOSTHALF OF ULTRA HNHs


Unlike before Independence or in the early years after that, when they were most likely to have been from the upper class or the nobility, the Indian

billionaires of today come from varied backgrounds. This is testimony to the fact that wealth creation through inclusive economic development

is truly a great leveller.

Entrepreneurship is clearly the dominant source of wealth in India, but fast-growing service industries such as technology and �nancial services too

have catapulted many hitherto middle-income group households into the ultra HNH bracket.

Based on our �ndings, using parameters such as source of wealth, motivation for wealth creation, spending behaviour, investing patterns, attitude

towards charity/philanthropy and perpetuation of wealth, we had, in our inaugural report, classi�ed the Indian ultra HNI into three groups:

• Inheritors

• Self-made

• Professionals

What sets these ultra HNIs apart from others is the sheer value and the type of assets they own. It is not often that one gets to build a 27-storey

building for one self, with three helipads or have a 1-acre penthouse nearly a mile above, in the sky.

Inevitably, in keeping with the need to maintain a �amboyant lifestyle, they are very heavy spenders on high quality homes, food, clothing,

education, travel and family vacations.

100,9002012-13(E)

329,0002017-18(P)

Based on our �ndings, using parameters such as source of wealth, motivation for wealth creation, spending behaviour, investing patterns, attitude

towards charity/philanthropy and perpetuation of wealth, we had, in our inaugural report, classi�ed the Indian ultra HNI into three groups:

DECODING THE DNAOF THE

ULTRA HNI

THE INHERITOR THE PROFESSIONALTHE SELF-MADE

Sources of wealth

Entrepreneurship

entrepreneurshipInheritance;

Motives for wealth creation

Self-actualisation

Self-recognition

Wealth preservation

Attitude to charity

Responsible and conscious; gives money and time

Empowerment; rarely gives time

Compassion; gives money, less time

Approach to investing

Professional

Informal

Organised

Attitude to perpetuation of wealth

Wealth is for family, but they mustto merit wealth

Wealth is unconditionally for immediate family

Wealth needs to remain within the extended family

strive

Drivers of spending

Value

Attaining luxurious living

Maintaining luxurious living

In 2012, despite the concerns that they expressed on spending, ultra

HNIs continued to spend the most on apparel, luxury watches and

high-end electronics all of which are non-discretionary spends. But

luxury car makers were struggling with sales and reported a bad year.

However, the downturn has certainly not spoilt the vacation plans of

the ultra HNIs. A signi�cant percentage of non-metro ultra HNIs who

travelled overseas continued to combine their trips with shopping for

their favourite brands, particularly clothes and watches.

In investments, last year’s disciplined approach – with the over - arching

sentiment being low risk and maximum protection – continued this

year as well, which is understandable because there is only a modest

improvement in the economic climate. In 2012, allocation to debt

continued to be signi�cant; real estate too retained its �avour.

A majority of the respondents said that they would continue with the

same approach next year as well, but may increase their exposure to

real estate. Traditionally, investment in real estate is seen as medium

risk in India but what our survey this year also suggests is that people

are increasingly capitalising on opportunities such as distress sales as

part of their short-term investments. Clearly, this is a re�ection of the

low con�dence that they have in an early economic recovery.

An encouraging phenomenon this year was the gradual improvement

in business con�dence. Although the economic climate remains

subdued and businesses are still hurting due to consumer caution and

weak demand, there has been an increase in the money ploughed

back by ultra HNIs (both Inheritors and Self-made) into their primary

business (over 30 per cent in 2012 compared with around 24 per cent

in 2011). Unlike last year, a majority of the respondents said that

they had ploughed back over 30 per cent of their income into their

primary business.

Last year, we had looked extensively at two segments, luxury cars

and education. We had found that in both cases although the Indian

ultra HNI is extremely conscious of the uniquely Indian setting that

he lives in, he is also increasingly thinking like his global peers. Thus,

exclusivity is the most important criterion be it their choice of car

or school for their children.

This year, we analysed luxury homes and found that the choice of

location is the single-most important factor driving the ownership of

a luxury home. The choice of location is paramount because a luxury

home is a status symbol and represented exclusivity. Among the

Inheritors and the Self-made, the preference is for a customised villa,

whereas the Professionals are keen on a readymade villa / bungalow or

a penthouse in a multi-storey tower in an upmarket locality. This was

followed by brand aspects relating to the architect / developer and the

amenities on o�er. Interestingly, many Indians are also increasingly

purchasing luxury properties abroad in places such as Singapore,

London and Dubai. Financing purchases of luxury homes is not very

popular. In fact, exclusivity is the name of the game even on marketing

luxury real estate. Developers resort to whisper marketing, exclusive

invitations and other techniques akin to what the world’s most

exclusive clubs do to get members (For details, see special focus

on luxury homes).

We also looked closely this year at estate planning. Estate planning,

we discovered, is at a very nascent stage in India. In fact, even the

practice of writing Wills is not widespread among the wealthy!

Because many family-owned businesses are traditionally passed on to

the next generation, the premium is on secrecy and trust; hence, it is,

traditionally, the family’s chartered accountant or lawyer who also

doubles up as an estate planner. Nevertheless, we believe that the

reliance on family CAs / lawyers may be decreasing as the ultra HNI

becomes more aware of the nuances of estate planning and the niche

products and services that are being o�ered by professional estate

planners. (For details, see special focus on estate planning).

As we had opined last year, it is tempting to dismiss the economic

travails of the short and near term as by-products of global economic

integration and continue to harp on the bright long-term picture for

India. Clearly, the events of the last two years have severely dented

the con�dence of the business class in policy makers. “I feel the

country requires uni�ed political cohesion or vision to move in the

right direction towards economy. The political will is missing,” one

respondent noted in this year’s survey.

It is important that liberalisation of the economy is further intensi�ed

so that India can again regain the con�dence of both domestic and

foreign investors, and the economy can bounce back and sustain a

higher growth spiral. This will, in turn, vastly increase opportunities for

more people to become rich and join the ultra HNI club.

The last two years have laid threadbare many of the problems

besetting economic progress, be it policy logjam, delays in project

clearances etc. If policy makers do not grasp the bull by the horns

now, there is a danger that the hope and hype that was generated

about India both globally and domestically in the boom years from

2003 to 2008 will remain just that: hype.


In 2012, despite the concerns that they expressed on spending, ultra

HNIs continued to spend the most on apparel, luxury watches and

high-end electronics all of which are non-discretionary spends. But

luxury car makers were struggling with sales and reported a bad year.

However, the downturn has certainly not spoilt the vacation plans of

the ultra HNIs. A signi�cant percentage of non-metro ultra HNIs who

travelled overseas continued to combine their trips with shopping for

their favourite brands, particularly clothes and watches.

In investments, last year’s disciplined approach – with the over - arching

sentiment being low risk and maximum protection – continued this

year as well, which is understandable because there is only a modest

improvement in the economic climate. In 2012, allocation to debt

continued to be signi�cant; real estate too retained its �avour.

A majority of the respondents said that they would continue with the

same approach next year as well, but may increase their exposure to

real estate. Traditionally, investment in real estate is seen as medium

risk in India but what our survey this year also suggests is that people

are increasingly capitalising on opportunities such as distress sales as

part of their short-term investments. Clearly, this is a re�ection of the

low con�dence that they have in an early economic recovery.

An encouraging phenomenon this year was the gradual improvement

in business con�dence. Although the economic climate remains

subdued and businesses are still hurting due to consumer caution and

weak demand, there has been an increase in the money ploughed

back by ultra HNIs (both Inheritors and Self-made) into their primary

business (over 30 per cent in 2012 compared with around 24 per cent

in 2011). Unlike last year, a majority of the respondents said that

they had ploughed back over 30 per cent of their income into their

primary business.

Last year, we had looked extensively at two segments, luxury cars

and education. We had found that in both cases although the Indian

ultra HNI is extremely conscious of the uniquely Indian setting that

he lives in, he is also increasingly thinking like his global peers. Thus,

exclusivity is the most important criterion be it their choice of car

or school for their children.

This year, we analysed luxury homes and found that the choice of

location is the single-most important factor driving the ownership of

a luxury home. The choice of location is paramount because a luxury

home is a status symbol and represented exclusivity. Among the

Inheritors and the Self-made, the preference is for a customised villa,

whereas the Professionals are keen on a readymade villa / bungalow or

a penthouse in a multi-storey tower in an upmarket locality. This was

followed by brand aspects relating to the architect / developer and the

amenities on o�er. Interestingly, many Indians are also increasingly

purchasing luxury properties abroad in places such as Singapore,

London and Dubai. Financing purchases of luxury homes is not very

popular. In fact, exclusivity is the name of the game even on marketing

luxury real estate. Developers resort to whisper marketing, exclusive

invitations and other techniques akin to what the world’s most

exclusive clubs do to get members (For details, see special focus

on luxury homes).

We also looked closely this year at estate planning. Estate planning,

we discovered, is at a very nascent stage in India. In fact, even the

practice of writing Wills is not widespread among the wealthy!

Because many family-owned businesses are traditionally passed on to

the next generation, the premium is on secrecy and trust; hence, it is,

traditionally, the family’s chartered accountant or lawyer who also

doubles up as an estate planner. Nevertheless, we believe that the

reliance on family CAs / lawyers may be decreasing as the ultra HNI

becomes more aware of the nuances of estate planning and the niche

products and services that are being o�ered by professional estate

planners. (For details, see special focus on estate planning).

As we had opined last year, it is tempting to dismiss the economic

travails of the short and near term as by-products of global economic

integration and continue to harp on the bright long-term picture for

India. Clearly, the events of the last two years have severely dented

the con�dence of the business class in policy makers. “I feel the

country requires uni�ed political cohesion or vision to move in the


right direction towards economy. The political will is missing,” one

respondent noted in this year’s survey.

It is important that liberalisation of the economy is further intensi�ed

so that India can again regain the con�dence of both domestic and

foreign investors, and the economy can bounce back and sustain a

higher growth spiral. This will, in turn, vastly increase opportunities for

more people to become rich and join the ultra HNI club.

The last two years have laid threadbare many of the problems

besetting economic progress, be it policy logjam, delays in project

clearances etc. If policy makers do not grasp the bull by the horns

now, there is a danger that the hope and hype that was generated

about India both globally and domestically in the boom years from

2003 to 2008 will remain just that: hype.

SPENDINGPATTERNS


SPENDING PATTERNS

Downturn e�ect: Non-discretionary spend rises; caution creeps into discretionary purchasesThe popular adage ‘What’s good for the goose is good for the gander’

is certainly not applicable to the spending habits of an ultra HNI.

Here, exclusivity is the name of the game.

As an ultra HNI moves up the pecking order within the rare�ed ultra

HNI surroundings, his items of non-discretionary spend tend to rise

quite disproportionately.

These two factors together drive what are perhaps the two

fundamental categories of ultra HNI purchases: luxury products and

luxury experiences.

Luxury products include top-end cars such as a Lamborghini, Rolls

Royce, Aston Martin or a luxury watch such as Patek Philippe, Breitling,

Panerai or Oris.

On the other hand, a luxury experience could be, for instance,

a customised stay at any luxurious resort in Machu Pichu in Peru or

even an exclusive safari complete with all the luxury paraphernalia,

deep in the jungles of South Africa.

So it was understandable that last year most respondents dismissed

the possibility of any scaling down on their spending because the

economic climate both globally and domestically was subdued. Not

too many expected the economic downturn to continue for long and

were treating it as just a passing phase.

This year, the response was not as decisive, revealing a far greater

degree of uncertainty on the economy. Ultra HNIs have not stopped

buying gold or diamond jewellery, apparel, luxury watches, high-end

mobiles and electronics. But in this year’s survey more people,

compared to last year, seemed to allude to the possibility of

consciously postponing high-end discretionary purchases (private

home theatres, top-end cars, yachts, aircraft etc.) until they get the

sense that an economic recovery is well underway.

Last year, in percentage terms, spending as a proportion of income

was up nearly 6 percentage points to 28.3 per cent. Re�ecting the

caution on spend, particularly on discretionary purchases, this year

that proportion is 29.1 per cent, only a modest 1 percentage points rise.

The Self-made spent more in percentage terms, but not by much:

the di�erence with both Inheritors and Professionals was only a few

basis points.

Last year, both Inheritors and Self-made increased spending by cutting

back on investments in primary business and philanthropy, whereas

the Professional did that by dipping into his savings. This year, there

is a sea change in this regard. Among Inheritors and Self-made,

investment into primary business has gone up substantially. In fact,

as a proportion of income (31.2 per cent), it is the highest ever in the

three years since we began this annual survey. Both the Inheritors

and the Self-made have done this largely at the expense of

investments in personal wealth. Understandably, for the Professional,

the proportion of investments in personal wealth is far higher (slightly

over a quarter of their income) because investment into primary

business is not a signi�cant activity for them. For the economy, the fact

that the ultra HNIs, most of whom are entrepreneurs or business

families, are reinvesting into their business is certainly an encouraging

sign in view of the sharp decline in private sector investments in the

last couple of years. It is perhaps an early signal of the turnaround

in private sector investments.

Change in spending habitsAn interesting �nding this year is the Professional appears to be very

clear on how much he wants to spend: Across the three years of our

survey, we found that his proportion of spend as a percentage of

income hovers around 28-29 per cent.


Unlike the Inheritor and the Self-made, the Professional is not as

overwhelmingly consumed by the desire to generate and accumulate

wealth for his progeny. Professionals place a far greater premium on

good education and hard work and encourage their children to

achieve success on their own.

Therefore, if required, the Professional dips into other heads such as

savings and investments for personal wealth to maintain his lifestyle.

This was very evident last year when the Professional’s proportion of

savings dipped by nearly 3 percentage points.

By contrast, the proportion of spend is far more erratic for both the

Inheritor and the Self-made: on an average, it has varied from 20-22

per cent in 2011 to over 29 per cent in 2012.

Instead, what the Inheritor and the Self-made appear to have

maintained fairly constant across all three years is investment into the

personal business. Clearly, this is because their earnings are generated

primarily from their businesses. Both the Inheritors and the Self-made

reinvest around a third of their income back into their business.

This year’s survey also buttressed our previous �nding that the

Professional is far more inclined towards charity than the others.

We found last year that the Professional’s savings shrank nearly

3 per cent even as his contribution to charity / philanthropy rose.

This year too, the Professional allocated close to 6 per cent of his

income to charity, nearly the same as last year’s levels.

To sustain their high-end lifestyle, ultra HNIs as a class continued

to spend a signi�cant portion of their overall expenditure on

domestic and international branded wear, customised holiday

packages, luxury watches, jewellery, household electronics, diamonds

and precious stones.

A third of the respondents suggested that their spending had been

adversely hit by around 20-25 per cent. In fact, during a downturn

all categories indicated that they spent less on luxury purchases

(discretionary spend, which normally includes premium cars,

international designer apparel, international travel etc.) By contrast,

non-discretionary spending has hardly been impacted.

ABOUT 1/3 rd OF ULTRA HNIs INDICATEDCHANGE IN SPENDING PATTERN IN 2012

34.6%

65.4%

17.2%

82.8%

23.3%

76.7%

Charity

Others

Savings

65.4

Growing Wealth

32.2%

67.8%

27.7%

72.3%

32.8%

67.2%

Investment

Expenses

Yes No


In a normal year, the discretionary to non-discretionary spend ratio

is around 41:59; during a sustained downturn, our survey found, that

changed to 33:67. Again, the Professional is far less likely to postpone

luxury purchases even in a bad year, compared with the Inheritor and

the Self-made.

DiscretionaryNon-discretionaryWill not spend / unlikely to spend

Exclusive holidaypacks

31.8% 53.0% 15.2%31.8

Apparel/Accessories

35.0% 51.0% 14.0%

Luxury watches

36.1% 45.9% 18.0%%

Others

31.4% 34.2% 34.4%

Jewellery/Diamonds/Precious stones

36.1% 49.6% 14.3%36.1

Home decor/Electronics

29.9% 61.0% 9.1%

Normal timesDownturn

29.9

Discretionary

Non-discretionary

66.8%58.8%

41.2% 33.2%

LIFESTYLE SPENDING CONTINUESEVEN DURING DOWNTURN

NON-DISCRETIONARY SPENDS REMAIN UNABATED


Even during a downturn, apparel and electronics continue to be the most sought after avenue to spend for the ultra HNIs.

APPAREL / ACCESSORIES EMERGES AS KEY SPENDING AVENUE

Luxurywatches

7.7%


Exclusive holiday

7.2%

Apparel/AccessoriesApparel/Accessories


52.3%

Apparel/Accessories

Others

12.6%

12.9%


7.3%



The number of ultra HNIs who prefer to shop in India, even for global

luxury brands is also growing steadily. As most luxury brands are now

available in India, there is less reason to shop abroad, particularly for

ultra HNIs in the metros. The availability of luxury brands declines as

one moves away from the metros, so a lot of ultra HNIs from the

non-metros combine overseas vacations or business trips with

shopping for their favourite international products (which happens to

be international designer apparel).

As more foreign luxury product manufacturers set up shop in India,

concerns regarding quality and variety of the products are also slowly

fading. But the rupee dollar rate is also an important determinant in

whether to make purchases in India or overseas. Last year, the rupee

was very weak against the dollar, and that played a part in deciding

whether to buy luxury products abroad or in India.

Source: T.O.P. India - Kotak Wealth & CRISIL Research

shopping for their favourite international products (which happens to

be international designer apparel).

INDIA: PREFERRED SHOPPING DESTINATION WITH IMPROVED ACCESS TO LUXURY BRANDS

IndiaAbroad


Exclusive holiday

56.1%

Luxury watches


56.1%

Luxury watches

50.0%

50.0%

OthersOthers

64.4%

43.9%

35.6%


Apparel/Accessories

Apparel/Accessories

67.0%

74.9%


Jewellery/Diamonds/Jewellery/Diamonds/Precious stones

74.9%

Home decor/ElectronicsElectronics

72.7%

33.0%

27.3%

25.1%


Gifts and travelThe ultra HNI continues to spend on immediate family, close friends

(through gifts) and celebrations of family occasions. Among the items

of spend on immediate family, diamond and gold jewellery continues

to be the most popular followed by cars and clothes. In addition to

luxury watches, mobiles are becoming increasingly popular as gifts to

close friends.

Despite the staggering rise in gold prices during the year, gold

continues to be bought primarily for beauti�cation purposes. It is no

secret that, since time immemorial, Indians of all hues and shades

have been enthralled by gold jewellery and continue to be the large

consumers on the planet of the yellow metal in jewellery form.

JEWELLERY IS THE MOST GIFTED ITEM TO FAMILY MEMBERS

Source: T.O.P. India - Kotak Wealth & CRISIL Research*Others include: Apparel, Electronics, Gift vouchers, Household accessories*Others include: Apparel, Electronics, Gift vouchers, Household accessories

Mobile

Others

Cars andbikes

Tour/Trip Voucher

Watch

Jewellery

Flat/Villa

42.6%

16.5%

15.5%

14.4%

3.4%

1.7%

5.9%


Family occasions such as birthdays, weddings and anniversaries,

business launch or success parties etc. continue to be celebrated in a

big way. Even for exclusive small-a�air parties people are increasingly

seeking expertise to make it a success. The concept of using event

managers for family functions is gaining in popularity but only

gradually (see chart below). One reason for this is that for small family

functions (such as birthdays) most ultra HNIs get in touch directly

with celebrity performers / party hosts who may either be direct

acquaintances or friends. Due to the scale of the party, the entire

arrangement may not be handed over to a professional event

manager on professional terms. Instead, the celebrity / friend manages

the show himself. But here too, considering the social peer pressures

that the ultra HNI operates under, it is only a matter of time before

professional event managers make greater inroads.

AdhocRegular


62.0% 38.0%

48.0% 52.0%

45.0% 55.0%

58.0% 42.0%

53.0% 47.0%

54.0% 46.0%

62.0

55.0%

Anniversary

Wedding or weddingrelated ceremonies

Business/Professional success

Launch party

Birthday offamily member

Celebrityparticipation

Source: T.O.P. India - Kotak Wealth & CRISILResearch

YesNo

professional event managers make greater inroads.

YesNo

75.0% 25.0%

35.6% 64.4%

38.1% 61.9%

44.7% 55.3%

37.0% 63.0%

22.4% 77.6%

22.7% 77.3%

35.6%

25.0%

%

Others

Anniversary

Wedding or weddingrelated ceremonies

Business/Professional success

Launch party

Birthday offamily member

Celebrityparticipation


AdhocRegular


TYPES OF EVENTS ORGANISED BY ULTRA HNIs EVENT MANAGERS GAINING HIGHER GROUND


The ultra HNI is an avid traveller, be it for business or leisure or when

possible for both. In last year’s survey, we had noted that vacationing

was a top priority for them because many of them have slogged it out

in the workplace to reach the heights that they have.

Unlike the Inheritors or the Self-made, who own businesses and

perhaps employ others in large numbers to run them, workplace

burnout is an indisputable aspect of life that the Professionals

confront. A greater number of Professionals, compared with both the

Inheritors and the Self-made prefer exclusive luxury holiday packages

to take a much-needed break from the workplace and drown away

their worries.

As a pastime, travelling is closely followed by dining out and reading.

The ultra HNIs travel overseas once or twice a year. On an average, the

Professional sets apart 1-2 weeks for travelling and vacationing with

family; nearly 2/5th of Inheritors and Self-made said that they

vacationed for about a week in a year. The most preferred destinations

for Inheritors and Self-made are beaches and weekend getaways

close to their place of stay whereas islands or mountaineering / treks

are the top preferences for Professionals. The downturn has certainly

not spoilt the vacation plans of ultra HNIs; only 13 per cent of our

respondents said that it had.


Inheritors and the Self-made prefer exclusive luxury holiday packages

to take a much-needed break from the workplace and drown away

their worries.

respondents said that it had.

VACATION PLANS UNCHANGED:BEACHES CONTINUE TO BE MOST PREFERRED VACATIONING LOCATIONS

Islands

14.3%

Weekend Getaways

16.8%

Spa Vacations

4.0%

Others

9.6%

Beach locations

22.7%

Mountains / Treks

10.4%

Religious / Spiritual destinations

7.9%

Shopping destinations

14.3%


Among overseas destinations Europe, New Zealand, Australia, and

South Africa are favourite vacation destinations. Europe, primarily

Spain, Italy, Switzerland and New Zealand are popular vacation spots

for adventure sports, while South Africa tops the list for wild life or

safari experiences.

Amongst beaches, Mauritius is the most popular destination.

Interestingly, many ultra HNIs said that they were as keen to visit

tourist destinations in India as those abroad. Popular weekend

getaways in India are Ooty and Coorg for ultra HNIs based in the

South and Ladakh, Darjeeling, Shimla, Jaipur and Udaipur among

ultra HNIs in the North and the East.

One of the fastest growing segments in luxury spending is the

concept of a luxury experience. A luxury experience dovetails

exclusive customised services such as spas, safaris, exotic island tours

and underwater vacationing at leisure destinations such as Machu

Pichu in Peru or the Maldives. A number of luxury product makers

are tapping into this need for exclusivity and o�ering ultimate luxury

experiences such as visits to the premium car plant to see the status

of the car that the ultra HNI has ordered and combine it with a

special event such as adventure sports / river rafting etc at nearby

luxury locales.

SPECIAL FOCUS: LUXURY HOMES


SPECIAL FOCUS: LUXURY HOMES

As one of the world’s oldest civilisations, India has a very rich and

ancient heritage as far as luxury homes are concerned. Ancient written

records of various Chinese and Arab travellers during medieval times

and British historians (when the British ruled India) describe in marvel-

lous detail the stunning grandeur, ornate architecture and multitude

of riches that adorned the royal palaces and the almost godly life that

the rich and the rulers led in those days. The erstwhile palaces in

Jaipur, Udaipur and Mysore – whose magni�cence and architectural

splendour thrill many visitors even today, and many of which have

today been converted into �ve-star luxury hotels – are stunning

examples of the luxurious tastes that India’s ancient rich had.

Even today, some of the most expensive and luxurious buildings on

the planet are in India – two private residences located in Mumbai

have been valued by credible sources as among the world’s most

expensive properties. Some more residences that are aimed at

rivalling the existing ones in terms of sheer size and luxury are

currently under construction in the city.

Vis-à-vis the past, though, one aspect is very di�erent today. Unlike

the vast tracts of land that the ancient rulers utilised to set up their

luxurious abodes and indulge in their most lavish tastes, there are

no vast open spaces available in prime locations in the country for

today’s ultra HNI even if he or she could a�ord to buy them.

One way in which India’s ultra HNIs have overcome that handicap

and still tried to establish exclusivity (which is at the core of their

behaviour) is going skywards. This is a growing trend among top

industrialists and the cream of the ultra rich in cities such as Mumbai

and Bengaluru, home to some of the country’s top entrepreneurs

and business families. Huge penthouses, high up in the sky or

multi-storied towers housing just one family with di�erent �oors

dedicated for di�erent purposes (such as parking area, gymnasium,

library, swimming pool, dining and reception area, lounge and party

area, etc.) are increasingly becoming the norm rather than the

exception.

In their search for the exclusivity that sometimes eludes them at home,

an increasing number of ultra HNIs are also scouting and buying

luxury homes overseas. Whatever the reason and wherever the

purchase, the guiding factor is exclusivity, which in turn subsumes

two aspects:

• Location

• Branding

We have analysed both these aspects in greater detail and also

explored the reasons that are driving more and more ultra HNIs to buy

homes overseas.


Location: The foremost dynamicThe single, most important dynamic driving the modern Indian ultra

HNI’s purchase of a luxury home in India is location – every other

consideration relating to size, furnishing, architecture and interior

decorations is relegated to the background compared to this aspect.

For ultra HNIs it is not just about owning a luxury home, it is also

about the exclusivity that the address a�ords.

So every city has its prime localities where the ultra HNIs throng to buy

residential property and �aunt their lifestyle. In Mumbai, the places

where the high and the mighty would give almost anything to own a

property include Cu�e Parade, Napeansea Road, Carmichael Road,

Altamount Road, Malabar Hill, Worli and Bandra. Some of the other

most expensive residential localities in the country are Aurangazeb

Road, Amrita Shergill Marg and Safdarjung Enclave in New Delhi,

Surjapur and Koramangla in Bengaluru, Boat Club Area and T-Nagar in

Chennai and Alipore in Kolkata.

For the right location, the ultra HNIs are sometimes willing to pay

staggeringly high prices, irrespective of the general state of city’s

property market. For instance, according to media reports, a sea-facing

duplex in Worli was sold for around ` 43 crore, valuing the property

around ` 1.18 lakh per sq ft. That made it one of the most expensive

per-sq-ft apartment deals the country has ever seen and came at a

time when the country’s realty market is in general limbo.

Exclusivity in location, for the ultra HNI, need not mean only the

location. In Mumbai, for example, along with the location, a sea-facing

view is the most sought after. Conversely, a location loses some of its

sheen if the sea-facing view is lost; in Mumbai, some luxury buildings

in normally sought-after areas are now becoming unattractive

because their sea view is being blocked by new, taller skyscrapers that

are coming up in the vicinity.

No matter which city they live in (metro or non-metro) and whatever

their age group, the overwhelming sentiment associated with the

ownership of a luxury home is the same. A luxury home is a status

symbol to tell the world that one has arrived. For nearly half of the

Inheritors and the Self-made, owning a luxury home was a status

symbol. “I would like to own a home in World One (Mumbai) as it is a

very exclusive residential tower. Having a house there gives great

status value,” a Mumbai-based ultra HNI said.

By comparison, investment plays on the Professional’s mind a lot more

compared to the others and fewer Professionals harped on the status

symbol. Only 30 per cent of the Professionals said it was a status

symbol whereas another 20 per cent said it was an investment.

“I associate a house in terms of investment. Capital appreciation is

key,” one Delhi-based Professional remarked.

about the exclusivity that the address a�ords. most expensive residential localities in the country are Aurangazeb

WHAT DOES A LUXURY HOMEMEAN TO AN ULTRA HNI?

25.0%

Location

18.0%

Interiors

16.0%

Size

15.0%

Exclusivity

13.0%

Architectural significance

% 8.0%

Automation

%

AutomationAutomation

5.0%

Price


So every city has its prime localities where the ultra HNIs throng to buy

residential property and �aunt their lifestyle. In Mumbai, the places

where the high and the mighty would give almost anything to own a

property include Cu�e Parade, Napeansea Road, Carmichael Road,

Altamount Road, Malabar Hill, Worli and Bandra. Some of the other

most expensive residential localities in the country are Aurangazeb

Road, Amrita Shergill Marg and Safdarjung Enclave in New Delhi,

Surjapur and Koramangla in Bengaluru, Boat Club Area and T-Nagar in

Chennai and Alipore in Kolkata.

For the right location, the ultra HNIs are sometimes willing to pay

staggeringly high prices, irrespective of the general state of city’s

property market. For instance, according to media reports, a sea-facing

duplex in Worli was sold for around ` 43 crore, valuing the property

around ` 1.18 lakh per sq ft. That made it one of the most expensive

per-sq-ft apartment deals the country has ever seen and came at a

time when the country’s realty market is in general limbo.

Exclusivity in location, for the ultra HNI, need not mean only the

location. In Mumbai, for example, along with the location, a sea-facing

view is the most sought after. Conversely, a location loses some of its

sheen if the sea-facing view is lost; in Mumbai, some luxury buildings

in normally sought-after areas are now becoming unattractive

because their sea view is being blocked by new, taller skyscrapers that

are coming up in the vicinity.

No matter which city they live in (metro or non-metro) and whatever

their age group, the overwhelming sentiment associated with the

ownership of a luxury home is the same. A luxury home is a status

symbol to tell the world that one has arrived. For nearly half of the

Inheritors and the Self-made, owning a luxury home was a status

symbol. “I would like to own a home in World One (Mumbai) as it is a

very exclusive residential tower. Having a house there gives great

status value,” a Mumbai-based ultra HNI said.

By comparison, investment plays on the Professional’s mind a lot more

compared to the others and fewer Professionals harped on the status

symbol. Only 30 per cent of the Professionals said it was a status

symbol whereas another 20 per cent said it was an investment.

“I associate a house in terms of investment. Capital appreciation is

key,” one Delhi-based Professional remarked.

LUXURY HOME EMBARKS A STATUS QUOTIENT

58.6%

4.3%

13.0%

24.1%

A status symbolAn investmentStyle statementOthers


Majority of the ultra HNIs already reside in a luxury home in an

upmarket area within the city. However, Professionals do not have

much a�nity in having their luxury home within the city unlike the

Inheritors and the Self-made.

Nearly half of the Inheritors and the Self-made said that their luxury

home should be in an upmarket locality within the city. In sharp

contrast, nearly 35 per cent of the Professionals wanted it to be an

upmarket area, but outside the city limits; about 20 per cent preferred

an upmarket area within city limits. A majority of Pune’s ultra HNIs too

preferred an upmarket area outside the city limits.

MAJORITY PREFER A LUXURY HOME WITHIN THE CITY

45.2%

20.7%

6.7%

20.7%

Upmarket within the cityUpmarket outside the city limitsA remote placeA place in the heart of the cityExotic location

6.7%


Branding closely follows location as key driverAfter location, comfort and independence are the most important

factors when purchasing and designing the interiors of their home.

“Plus providing some peaceful surroundings (not the noise and buzz of

the city). It need not be on the beachfront, it can be just a 10 minutes

drive from the beach. In addition, it should o�er the privacy from all

sides. My neighbour should not be able to see inside my house,” one of

the respondents commented.

For Inheritors and Self-made, independence also means freedom to

build; they want to buy land in the place of their choice and then

construct a customised, standalone villa there or even a multistoried

tower as some of India’s wealthiest have done in recent times in

Mumbai and Bengaluru. By contrast, the Professional prefers to buy

a readymade villa / bungalow or even an apartment in a multistoried

complex.

10.0%

48.0%

complex.

ULTRA HNIs PREFER BUILDING A CUSTOMISEDVILLA ON THEIR OWN LAND

%

10.0%136.0%

4.0%

Buy a land and build a customised villa in IndiaReadymade villa / bungalow in IndiaReadymade apartment in IndiaBuy a land and build a customised villa abroadReadymade apartment abroadReadymade villa / bungalow abroad

1.0%1.0%


Thus, building a customised villa on own land emerges as the most

desirable form of luxury home especially amid Inheritors and

Self-made.

The stature of the architect or the developer is particularly important

for the ultra HNI if they are purchasing a readymade villa. Interior

designers who can design the most contemporary yet luxurious

interiors are also in great demand. European designers, particularly

Italian designers, are some of the most sought-after by Indian ultra HNIs.

So, branded designer homes are increasingly gaining prominence

as living in a house designed by an ace architect / designer satiates

the ultra HNI’s desire for exclusivity within their social circles even

while simultaneously spicing up their comforts. Many renowned real

estate developers are, unsurprisingly, catering to this demand by

roping in world-class designers for their exclusive luxury projects.

For example, Lodha, Sunteck, etc. have tied up with renowned

designers such as Armani, Jade Jagger, etc. to o�er unique designs

and craftsmanship.

The micro-focus of ultra HNIs on designers and designer paraphernalia

for interiors also means that they are also clued in on the latest trends

in these areas. So they make their best, informed choices to ensure

that they get the amenities and the lifestyle that they want and ask for

changes wherever needed.

5.9%

41.2%

35.3%

Professional

1.4%

4.2%

38.0%

45.1%

Self-made

5.9%

1.4%

4.2%

35.3%

Professional

Self-made

6.4%

29.8%

53.2%

Inheritor

PROFESSIONALS PREFERREADYMADE VILLA / BUNGALOW

8.5% 10.6%

17.6%

2.8%

changes wherever needed.

ULTRA HNIs PREFER RENOWNED ARCHITECTS / DEVELOPERSARCHITECTS / DEVELOPERS

Architects/ developers/ designers

53.0%

Furnishing

26.0%

ARCHITECTS / DEVELOPERSARCHITECTS / DEVELOPERS

26.0%

Bathroom, floorfittings, etc.

21.0%

Bathroom, floorfittings, etc.

21.0%

Buy a land and build a customised villa in IndiaReadymade villa / bungalow in IndiaReadymade apartment in IndiaBuy a land and build a customised villa abroadReadymade apartment abroadReadymade villa / bungalow abroad


In terms of amenities, a personal swimming pool and a mini theatre are

almost-certain demands of all ultra HNIs across all age groups, cities

and categories. In Aurangabad, Chennai and Coimbatore, the �rst

choice of most respondents between these two choices was the

swimming pool, perhaps because of the hot and humid climate that

prevails in these cities for most part of the year.

Touchpad-controlled smart homes, health spa, multiple parking

space, multiple swimming pools, yoga studio, multiple elevators,

vehicle maintenance facility, a helipad on the roof etc. are among

other amenities that the ultra HNIs like to install in their luxury homes

or mansions.

17.0%

Mini theatreMini theatre

23.0%

Personalswimming

pool/Plunge pool

Private gym

16.0%

9.0%

Outdoorkitchen/Gourmetkitchens

Private gym

9.0%


14.0%

Private spa/Sauna

9.0%


5.0%

A woodpanelledlibrary

Mini theatre Private gym

16.0%

Area toorganise

events andconcerts

MOST PREFERRED AMENITIES IN A LUXURY HOME:PERSONAL POOL, MINI THEATRE


The world is my homePropelled by increasing globalisation and India’s growing integration

with the world economy, there is a small, yet growing tribe of Indians

who are buying luxury homes in other parts of the world. Many factors

are driving this trend.

For one, due to the high density of population and limited availability

of land, privately owning huge tracts of property is today almost next

to impossible in key Indian cities such as Mumbai and New Delhi.

By contrast, expansive tracts of land that can accommodate huge

lawns, courtyards, swimming pools, tennis courts etc. is more easily

available in many American and European cities, due to much better

city planning and lower population density.

An added attraction is that in today’s globalised world – where many

of the ultra HNIs are jetsetters, not only travelling but also sometimes

living in di�erent cities globally – owning a home overseas not only

makes eminent sense but is also a necessity. Most ultra HNIs send their

children abroad for study, so having luxury property in those locations

is convenient so that their children can live and study in the same

kind of luxury that they are used to at home. Due to the rapid spread

of Indian diaspora across all corners of the globe, there is also an

increasing awareness among Indian ultra HNIs of prime luxury

property locations abroad. Many ultra HNIs have close relatives or

friends who are settled overseas; constant, extensive feedback from

them keeps ultra HNIs abreast of key property price trends and

enables them to spot attractive buying opportunities in important

overseas locations.

What makes an overseas luxury property purchase decision easier

today is also the fact that valuations in Indian cities such as Mumbai

and New Delhi are now so high that they are comparable to valuations

in some of the top property locations worldwide. Mumbai, for

instance, is among the most expensive cities of the world. Some global

studies reveal that prices in Mumbai are now comparable to property

prices in US cities such as Los Angeles and Miami, European cities such

as Rome and emerging market locations such as Istanbul, Rio de

Janeiro and Sao Paulo. Many of these emerging market cities are also

fast becoming important centres of �nance and trade either regionally

or globally and ownership of luxury properties in them is an alluring

prospect.

All other things being equal, factors that come into play in the

purchase decision include, among others: the extra lifestyle bene�ts

(such as a clean environment, better managed public infrastructure,

entertainment facilities, health and sanitation) that accrue in cities

such as London and New York; and the safe haven status that some of

these cities o�er (because they have been able to better withstand

global �nancial and economic turmoil).

In fact, there is evidence to suggest that, post the global �nancial crisis,

the trend of buying a second or a third luxury home abroad has only

risen worldwide. This indicates that the global wealthy are increasingly

holding their wealth in tangible assets to o�set risks arising from

global political and economic uncertainty. In India, ownership of real

estate has always been a safe haven play because real estate has

always delivered attractive returns over the long term. Now, the ultra

HNIs are extending their horizons to overseas locations, taking

advantage of the relatively attractive valuations and the other

intangible positives that these locations bring to the table.

Currency �uctuations play an important part in the timing of a

purchase. As far as the rupee is concerned, an appreciation of the

rupee is advantageous for the Indian buyer and vice versa. But ultra

HNIs who hold their money overseas in di�erent currencies, for

operational reasons or otherwise, sometimes take advantage of

volatility or shifts in other major currencies to make bene�cial

purchases. In recent years, one major attraction for buying property in

London has been the depreciation of the pound against the dollar.

Some of the fanciest districts in the world, such as Kensington,

Belgravia or Holland Park in London or prestigious locations such as

the Burj in Dubai and Nassim Road in Singapore are among the most

popular global locations for Indian ultra HNIs to own luxury residential

properties. Needless to say, in line with their social standing, their

homes in these overseas locations too are as tastefully decorated and

as diligently maintained as their primary luxury homes.

Interestingly, from a behavioural angle, the nature of the property that

ultra HNIs seek in these overseas locations di�ers according to

whether you are an Inheritor, a Self-made or a Professional. Inheritors

and Self-made are more likely to purchase land and hire renowned

architects and interior decorators to build customised villas that

incorporate their luxurious tastes. This is something the Professionals

are not very enthused about. In fact, what drives their purchase

behaviour is investment opportunity. Many of the Professionals work

for giant domestic or top multinational corporations in various

global locations. In the course of their stay, they seek out attractive

investment opportunities, although there is a miniscule set among

them that buys a luxurious property in a particular city for a life

post-retirement because of the quality of living that it o�ers.

These overseas properties also serve another very useful purpose: they

serve as vacation pads for family and close friends. Most ultra HNIs

make it a point to visit their second (or third) luxury homes at least

2-3 times a year and spend a week to a fortnight there.

This trend of purchasing property overseas is only set to grow as the

number of ultra HNIs who can a�ord, and want to buy property,

increases in future. The only dampener to this otherwise buoyant

trend is the regulations that governments in many countries are

bringing in on the purchase of second homes and luxury property to

control the rise in residential prices.

97.9%

INDIA

2.1%

ABROAD

city planning and lower population density.

ULTRA HNIs ALSO HEADING OVERSEASFOR LUXURY HOMES

An added attraction is that in today’s globalised world – where many

of the ultra HNIs are jetsetters, not only travelling but also sometimes

living in di�erent cities globally – owning a home overseas not only

makes eminent sense but is also a necessity. Most ultra HNIs send their

children abroad for study, so having luxury property in those locations

is convenient so that their children can live and study in the same

kind of luxury that they are used to at home. Due to the rapid spread

of Indian diaspora across all corners of the globe, there is also an

increasing awareness among Indian ultra HNIs of prime luxury

property locations abroad. Many ultra HNIs have close relatives or

friends who are settled overseas; constant, extensive feedback from

them keeps ultra HNIs abreast of key property price trends and

enables them to spot attractive buying opportunities in important

overseas locations.

What makes an overseas luxury property purchase decision easier

today is also the fact that valuations in Indian cities such as Mumbai

and New Delhi are now so high that they are comparable to valuations

in some of the top property locations worldwide. Mumbai, for

instance, is among the most expensive cities of the world. Some global

studies reveal that prices in Mumbai are now comparable to property

prices in US cities such as Los Angeles and Miami, European cities such

as Rome and emerging market locations such as Istanbul, Rio de

Janeiro and Sao Paulo. Many of these emerging market cities are also

fast becoming important centres of �nance and trade either regionally

or globally and ownership of luxury properties in them is an alluring

prospect.

All other things being equal, factors that come into play in the

purchase decision include, among others: the extra lifestyle bene�ts

(such as a clean environment, better managed public infrastructure,

entertainment facilities, health and sanitation) that accrue in cities

such as London and New York; and the safe haven status that some of

these cities o�er (because they have been able to better withstand

global �nancial and economic turmoil).


In fact, there is evidence to suggest that, post the global �nancial crisis,

the trend of buying a second or a third luxury home abroad has only

risen worldwide. This indicates that the global wealthy are increasingly

holding their wealth in tangible assets to o�set risks arising from

global political and economic uncertainty. In India, ownership of real

estate has always been a safe haven play because real estate has

always delivered attractive returns over the long term. Now, the ultra

HNIs are extending their horizons to overseas locations, taking

advantage of the relatively attractive valuations and the other

intangible positives that these locations bring to the table.

Currency �uctuations play an important part in the timing of a

purchase. As far as the rupee is concerned, an appreciation of the

rupee is advantageous for the Indian buyer and vice versa. But ultra

HNIs who hold their money overseas in di�erent currencies, for

operational reasons or otherwise, sometimes take advantage of

volatility or shifts in other major currencies to make bene�cial

purchases. In recent years, one major attraction for buying property in

London has been the depreciation of the pound against the dollar.

Some of the fanciest districts in the world, such as Kensington,

Belgravia or Holland Park in London or prestigious locations such as

the Burj in Dubai and Nassim Road in Singapore are among the most

popular global locations for Indian ultra HNIs to own luxury residential

properties. Needless to say, in line with their social standing, their

homes in these overseas locations too are as tastefully decorated and

as diligently maintained as their primary luxury homes.

Interestingly, from a behavioural angle, the nature of the property that

ultra HNIs seek in these overseas locations di�ers according to

whether you are an Inheritor, a Self-made or a Professional. Inheritors

and Self-made are more likely to purchase land and hire renowned

architects and interior decorators to build customised villas that

incorporate their luxurious tastes. This is something the Professionals

are not very enthused about. In fact, what drives their purchase

behaviour is investment opportunity. Many of the Professionals work

for giant domestic or top multinational corporations in various

global locations. In the course of their stay, they seek out attractive

investment opportunities, although there is a miniscule set among

them that buys a luxurious property in a particular city for a life

post-retirement because of the quality of living that it o�ers.

These overseas properties also serve another very useful purpose: they

serve as vacation pads for family and close friends. Most ultra HNIs

make it a point to visit their second (or third) luxury homes at least

2-3 times a year and spend a week to a fortnight there.

This trend of purchasing property overseas is only set to grow as the

number of ultra HNIs who can a�ord, and want to buy property,

increases in future. The only dampener to this otherwise buoyant

trend is the regulations that governments in many countries are

bringing in on the purchase of second homes and luxury property to

control the rise in residential prices.


Family consensus is key to purchase decisionThe decision to purchase a luxury home is also arrived at after a lot of

thought. After all, in major Indian cities today, the purchase of a luxury

home can lighten the pocket considerably.

For purchase of luxury residential property, a real estate agent of

repute with a lot of understanding of the speci�c locality and local

market conditions and the ability to network well is still the most

sought after. Then, there are others such as family friends who may

be in the know of a particularly good property, or who may be willing

to sell, or even �nancial advisors/wealth managers who may have

information from their client network.

Whisper marketing or invitation buys are the most common strategies

that builders or their agents employ to market luxury homes. After

all, nothing can arouse the curiosity and interest of a ultra HNI more

than a pitch that he will own something that very few others will.

Often, the ultra HNI does not have to go scouting for a house himself.

“It’s the other way round,” one of them commented, when asked

how he searched for his home. “Known people, some business

acquaintances, and wealth management companies approached me.”

To lure ultra HNIs to their luxury projects, developers try to showcase

legacy in terms of past experience in building noteworthy structures

or association with established brands. New entrants in the market

mainly associate with renowned branding partners, designers etc

to attract attention.

“We are attaching ourselves with ace architects / designers to

attract market attention and establish credibility,” an upcoming

developer said.

Getting the ultra HNIs to �nally purchase a property is also arduous,

patient work, considering that the value of the property will be a

few crores at the very least. “The rich mostly do multiple visits with

di�erent family members before they make a purchase. They are very

interested in who the interior designer is, what amenities we are

o�ering and which country we are importing it from. For interiors,

Italian and some European designers are highly favoured,” one

developer said.

“They (ultra HNIs) look out for exclusivity in almost everything, be it

wood from a speci�c forest area or marbles from Italy within their

homes. In that sense, they want to know the very minute details of

furnishings,” another Mumbai-based builder said.

furnishings,” another Mumbai-based builder said.

REPUTED REAL ESTATE AGENTS MAINLY ADVISE THE ULTRA HNIs

Reputed real estate agentFriends / Family referenceFinancial Advisor / Wealth ManagerLawyers' recommendationAds in Business and property magazinesInternet property listingAds in Business and property magazines

39.0% 21.5%

14.0%

1.6%

14.6%

9.3%


The key decision-maker, however remains the immediate family that

will eventually stay in the house. Some degree of consensus is sought

to be achieved within the family, but the �nal decision remains that of

the ultra HNI himself, at least in case of Inheritors and Self-made. “I am

the sole decision-maker for choosing the property. Dealings are done

in consultation with my lawyers,” one ultra HNI, an Inheritor, stated.

An interesting di�erence here was that over 50 per cent of the

Professionals said the �nal decision was made jointly with their

spouse, only around 20 per cent of the Inheritors and Self-made said

the same. One probable reason for this is that both the Inheritors

and the Self-made are perhaps larger families with more than one

generation of individuals staying together. In the Professional’s case,

it is mostly a nuclear family, both the husband and the wife are more

often employed and highly ranked career professionals.

Surprisingly, nearly 70 per cent of the respondents in Mumbai said that

the �nal choice was theirs alone, whereas in Pune a majority said

that the �nal decision was jointly that of the husband and the spouse.

In Bengaluru, only 10 per cent of the respondents said the decision

was made along with the spouse; around 50 per cent said it was

theirs alone.

Finally, compared to the premium housing segment, �nance

penetration is far lower in luxury homes, which is a bit of a surprise

considering the cost of luxury homes.

This trend is quite unlike that in luxury cars, where even the richest of

ultra HNIs take recourse to loans during purchase to take advantage of

tax bene�ts and depreciation. The Professional, on the other hand,

prefers to take loans to �nance the purchase.

in consultation with my lawyers,” one ultra HNI, an Inheritor, stated.

DECISION-MAKER Surprisingly, nearly 70 per cent of the respondents in Mumbai said that

the �nal choice was theirs alone, whereas in Pune a majority said

that the �nal decision was jointly that of the husband and the spouse.

was made along with the spouse; around 50 per cent said it was

theirs alone.

considering the cost of luxury homes.

This trend is quite unlike that in luxury cars, where even the richest of

tax bene�ts and depreciation. The Professional, on the other hand,

0.7%

26.0%

34.8%

9.6%

22.2%

6.7%

Myself

Me and my spouse

My family and my lawyer

My family and my financial advisor

Others

Myself, my spouse and children

INVESTMENTTRENDS


INVESTMENT TRENDS

Despite global economy blues, 2012 signalled a return to wealth creation The recovery in the US economy, combined with expectations of a

gradual pick-up in global growth and a highly expansionary monetary

policy in most developed countries combined to reduce risk aversion

across most asset classes. Returns from most asset classes either went

up or were stable in 2012, and this encouraging trend continued in the

�rst quarter of 2013 in most markets.

In fact, even though income growth was slower due to subdued

economic growth in most countries and weak demand (that hurt

businesses), wealth creation continued unabated during the year

because returns from almost all asset classes were attractive be it

equities, bonds or commodities.

The pick-up in wealth creation in 2012 was illustrated by the nearly

16 per cent increase in the combined net worth of the billionaires in

the Forbes List 2013. It was quite a contrast to the previous year, when

the combined net worth (Forbes Billionaires 2012) grew by a mere

2 per cent, one of the slowest in the past few years. Moreover, the

number of gainers in the Forbes List 2013 was four times that of the

number of losers, compared with an equal number of winners and

losers the previous year.

Much of this change was due to the performance of various asset

classes. Global equity markets fared well. The Indian market shrugged

o� its dismal performance in 2011 and was one of the best global

performers in 2012, with the Sensex returning 26 per cent and the

Nifty 28 per cent. Other Asian markets too did well in 2012; both the

Hang Seng and the Nikkei gave nearly 23 per cent returns. In the US,

the Dow gave 8 per cent and the Nasdaq 16 per cent.

On a yearly basis, bond yield in global bond markets have been fairly

stable for the past few years, and that trend has continued. In 2012, the

average yield on the US 10-year g-sec was 1.9 per cent, close to the

previous year’s average. In India, the average yield on the 10-year g-sec

was 8.1 per cent, nearly the same as the previous year.

Real estate prices were generally stable with an upward bias in all

major territories including India in 2012. Gold and silver too gave

around 13 per cent returns in India. The price of gold corrected sharply

in the early months of 2013, but domestic prices have been stable for

the past month or so.

Investment trends in 2012The key source of wealth continues to be success in primary business,

followed by real estate and investment in equity. This year, many

respondents also identi�ed income from sale of business as a major

income-earner, but this appears to be only a one-o� phenomenon,

perhaps indicating that some ultra HNIs have chosen this period to

exit unfavourable businesses.

Both the Inheritor and the Self-made asserted that the bulk of their

wealth came from income from primary business and real estate (also

inheritance, in the case of the Inheritor), whereas the Professional

indicated that the biggest contribution was from equity. The Profes-

sional appears to be far more con�dent in his ability to generate

returns even from a lacklustre market. His propensity to take greater

risks in the market is also because he is generally highly educated,

and has the experience and expertise to understand the stock market

better than many others.


SOURCES OF WEALTH

Success in primary businessReal estateEquitySale of businessOthers

Sale of business Others

Equity

Real estate

40.4%

Real estate

14.7%

Sale of business

12.8%

Equity

7.5%

24.6%

Others

24.6%

Success in primary business


Although the economic climate remains subdued and businesses are

still hurting due to low consumer con�dence and weak demand, there

has been an increase in the money ploughed back by both Inheritors

and Self-made into their primary business (over 30 per cent in 2012

compared with around 24 per cent in 2011).

Despite the marginal improvement in business con�dence, many still did not feel con�dent enough about the economic climate. Therefore,

‘low-risk’ and ‘capital protection’ continued to be catchall phrases pertaining to approach to investments this year too. Low-risk instruments such

as �xed deposits continued to be popular with ultra HNIs.

Unlike last year, a majority of the respondents said that they had

ploughed back over 30 per cent of their income into their primary

business, indicating a slight improvement in business con�dence

compared to last year. Compared to last year, therefore, investment

towards growing personal wealth declined in 2012 while allocation to

savings and charity either remained the same or went up marginally.

savings and charity either remained the same or went up marginally.

INCOME ALLOCATION

Expenses

29.1%

28.3%

Investment into primary

business

31.2%

24.2%

Investment for growing

personal wealth

16.0%

24.1%

Savings

15.7%

16.3%

Charity

5.4%

4.4%

Others

2.6%2.7%

2012 2011


During a period of volatility, the foremost consideration behind

investment (including, perhaps, tax planning aspects) is regular

income and protection for the future; growth is a secondary concern.

This is quite unlike the thinking in business where growth and pro�ts,

and not protection is the chief objective.

Nearly 60 per cent of the Professionals and over 70 per cent of both

Inheritors and Self-made said that they are following a disciplined

approach to investments. There were also some interesting regional

di�erences. Among the metros, ultra HNIs in Mumbai and Delhi were

highly risk-averse compared with those in Kolkata and Chennai.

Among non-metros, a high percentage of our respondents (nearly

50 per cent) in Ahmedabad and Lucknow followed an opportunistic

approach despite the volatile market conditions.

“While equity markets have given better returns, we are being

cautious in planning our investments; real estate continues to be

my favourite,” one respondent stated.

Last year, we found that younger, established ultra HNIs (in the 31-40

age group) were more opportunistic than the older ones, who

focussed more on capital protection and adopted a disciplined

approach. With discipline and caution continuing to rule the roost,

many ultra HNIs preferred to adopt a long-term approach to invest-

ments rather than a short-term one that is more characteristic of an

opportunistic investor.

APPROACH TOWARDS INVESTMENTS

Opportunistic

Self-made

Inheritor

Professionals

Overall ultra HNI

Disciplined / Balanced

25.4% 74.6%

29.8% 70.2%

41.2% 58.8%

28.9% 71.1%

Risk aversion came down a little compared with last year but capital

protection still remained paramount. “The last two years or so, my

approach has been defensive. The emphasis has been on capital

preservation than super-normal growth. There is no chasing of

equities but investing only when seen some value,” one ultra HNI

remarked.

Real estate continued to be popular this year also, along with debt.

The Professional invested the most in stocks and shares, followed

closely by �xed deposits and then real estate. Real estate investments

have always delivered good returns in India, so it is generally perceived

to be an attractive medium-risk investment and this is indicated by

data through all the three years.

During a period of volatility, the foremost consideration behind

investment (including, perhaps, tax planning aspects) is regular

income and protection for the future; growth is a secondary concern.

This is quite unlike the thinking in business where growth and pro�ts,

and not protection is the chief objective.

Nearly 60 per cent of the Professionals and over 70 per cent of both

Inheritors and Self-made said that they are following a disciplined

approach to investments. There were also some interesting regional

di�erences. Among the metros, ultra HNIs in Mumbai and Delhi were

highly risk-averse compared with those in Kolkata and Chennai.

Among non-metros, a high percentage of our respondents (nearly

50 per cent) in Ahmedabad and Lucknow followed an opportunistic

approach despite the volatile market conditions.

“While equity markets have given better returns, we are being

cautious in planning our investments; real estate continues to be

my favourite,” one respondent stated.

Last year, we found that younger, established ultra HNIs (in the 31-40

age group) were more opportunistic than the older ones, who

focussed more on capital protection and adopted a disciplined

approach. With discipline and caution continuing to rule the roost,

many ultra HNIs preferred to adopt a long-term approach to invest-

ments rather than a short-term one that is more characteristic of an

opportunistic investor.


Risk aversion came down a little compared with last year but capital

protection still remained paramount. “The last two years or so, my

approach has been defensive. The emphasis has been on capital

preservation than super-normal growth. There is no chasing of

equities but investing only when seen some value,” one ultra HNI

remarked.

Real estate continued to be popular this year also, along with debt.

The Professional invested the most in stocks and shares, followed

closely by �xed deposits and then real estate. Real estate investments

have always delivered good returns in India, so it is generally perceived

to be an attractive medium-risk investment and this is indicated by

data through all the three years.data through all the three years.

CHANGE IN INVESTMENT PORTFOLIO

2012

29.0% 30.0%

2011

35.0% 34.0%

32.0% 29.0%

4.0% 7.0%

Alternate Assets

Real Estate

Debt

Equity


Gold / silver investments remain popular and a healthy proportion

of the total portfolio continues to be invested in these two precious

metals. Highly risky avenues such as derivatives, hedge funds and

structured products are still a no-no with ultra HNIs. Perhaps the

experience with these products (some of which are highly complex)

in 2008, mostly in the developed markets, is still too close to be

forgotten. Art as an investment continues to languish; this year, the

percentage of ultra HNIs who said that they had invested in art was

lower than last year. Ultra HNIs are continuing a similar approach

because many of them now believe that the economy is unlikely to

recover before the endof 2014.

Taken together, these trends indicate a gradual improvement in

business con�dence and increased risk aversion. In a volatile market,

�xed deposits, cash and gold / silver are seen as low risk. Real estate,

ULIPs/insurance, mutual funds, PMS schemes, commodities, bonds

and debentures are medium risk whereas equities, currency,

derivatives and hedge funds are generally perceived to be high risk.

Due to the focus on capital preservation, most ultra HNIs like to retain

close control over their assets and their portfolio management. This is

particularly true of assets that they comprehend, such as real estate,

derivatives, stocks and shares etc. On the other hand, they are likely

to take help from experts on assets that they did not understand;

it so happens that most of these assets in this category are also high

risk such as hedge funds, currency and art, and are therefore less

invested into.

The improvement in wealth was also re�ected in contribution to

charity. After declining last year in percentage terms, contribution to

charity bounced back this year. The percentage of income that has

gone towards charity/philanthropic activity among India’s wealthy

has gone up (5.4 per cent in 2012 versus 4.4 per cent in 2011). Clearly,

the well-publicised drive by a globally renowned billionaire to get the

wealthy to donate substantially to charity appears to be getting

attention. One of the �rst in India to respond to this call was an IT czar,

who announced that he had already transferred a portion of his

wealth to charity. Since then, a few other Indian ultra HNIs – including

the promoter of a South India-based real estate company – have

announced that they will transfer up to 50 per cent of their wealth to

support philanthropic activity.

So, what will 2013 be like? Well, for one, risk aversion is likely

to decrease in 2013. As the economic climate improves further,

indications are that ultra HNIs will reduce their exposure to debt

(primary �xed deposits) and increase their investments in real estate

next year. Inheritors and Self-made also noted that they will increase

their investments into their businesses.

For wealth managers in India, the current period is only a temporary

lull in an otherwise bright future. Once the economy comes back on

track and the investment pie grows, opportunities will continue to

unfold for domestic wealth managers. The number of ultra HNHs

is expected to more than triple over the next 5 years. The current

period can be used by wealth managers to improve their networking,

develop more products suitable for the Indian market and identify

the right clients so that they will be ready to move when the market

turns hot once again.

SPECIAL FOCUS: ESTATE PLANNING


SPECIAL FOCUS: ESTATE PLANNING

Estate planning is a process whereby a plan is created incorporating

an individual's wishes regarding his/her estate and which provides

for e�cient management, preservation and creation of a legacy during

his/her lifetime and after.

Succession planning is getting increasingly complicated and it is

becoming extremely important to plan for preservation and manage-

ment of one's estate. The primary goal of estate planning is to ensure

that the estate of the individual passes to the intended bene�ciaries

at an opportune time, often including e�cient tax and succession

planning and avoiding or minimising court proceedings in succession

matters and obtaining probates.

In the United States, estate planning is a well-developed and widely

used concept and most wealthy families have trusts as a part of their

overall estate and succession plan. In India, on the other hand, many

wealthy families do not yet consider it as an integral part of their

planning and the concept of a professional trustee is still in its

nascent stage.

This big di�erence in the approach to estate planning in both these

countries, where the ultra HNI population is substantive, can be

attributed to the existence of Estate Tax or Inheritance Tax in the U.S.

Inheritance tax, which is prevalent in a number of countries around the

world, is a tax levied on the transfer by virtue of inheritance of the

taxable estate of an individual on his demise.

It is no surprise, therefore, that estate planning is taken very seriously

by the wealthy in the U.S. Some other countries that levy estate tax

or inheritance tax in various forms include UK, France, Germany, Italy,

Belgium and the Netherlands. In fact, many advanced countries levy

an inheritance tax or estate tax.Source: T.O.P. India - Kotak Wealth & CRISIL Research

WHAT IS ESTATE PLANNING?

5.5%

12.6%

29.1%

Allocate property to beneficiaries

Don’t know

Safety for dependents

Reduce Taxes / Legal protection

Plan / Manage portfolio

Planning for future

Avoid property dispute

10.2% 12.7%

15.7%

14.2%


Australia, Russia and India are among a select group of nations that no

longer levy estate tax. In India, estate tax was introduced in 1953 and

it continued for 32 years before its abolition in 1985.

Even today, many of India’s wealthy do not even have a Will, which can

lead to a number of issues at the time of succession of assets on the

demise of the individual. When questioned, most ultra HNIs admitted

to knowing what estate planning is, but we found that their familiarity,

comfort and interaction with professional estate planners was low.

“We �nd it di�cult to convince the ultra rich about estate planning as

they are not comfortable with sharing personal and con�dential

information,” one professional estate planner remarked.

Many ultra HNIs understand that an e�cient estate plan will ensure

smooth succession of their estate to their heirs after their demise,

protection against any possible disputes in the future and ensure that

requirements and needs of dependent and minor bene�ciaries are

taken care of when they are not around. But quite a few of them do not

think that it is a very serious issue. One ultra HNI remarked: “Our family

structure is very linear. There is me, my father and my son. So, estate

planning is not of much importance for us.”

We found that his remarks were echoed across a large section of ultra

HNIs. “Ours is a nuclear family, my husband is a professional lawyer,

succession of my business is a non-issue. So questions of inheritance

and related things do not bother us much. Whatever legal steps

are required are well managed by my husband. I think this (estate

planning) is more relevant with Hindu Undivided Families and

businesses,” another ultra HNI stated.

After being ignored for long, estate planning is now being considered

and discussed by many ultra HNIs, a lot more thanks to a number of

high pro�le cases involving family inheritance that have come in the

public domain in recent years. Many more Inheritors and Self-made

are now seriously considering estate planning to ensure that their

family members do not have to face litigation or other delays for the

succession of their family assets and also to protect and ring-fence

their family assets.

comfort and interaction with professional estate planners was low.

IS ESTATE PLANNING NECESSARY?

78.5%

21.5%

YesNo

Among those who have set up trusts, an overwhelming majority

(more than 3/4th) of Inheritors, Self-made and Professionals have

set up revocable trusts. A revocable trust is one where the settlor or

the creator of the trust has the right to revoke the assets transferred

into the trust. Such trusts are very �exible and help in ensuring smooth

transition of assets without any delays, disruptions or disputes. It can

also take care of an incapacity scenario as the settlor can also be a

bene�ciary of the trust. An irrevocable trust, on the other hand,

provides the added advantage of ring-fencing of assets, if structured

appropriately. Private trusts can also be used to meet philanthropic

objectives.


But even when they decide to undertake estate planning, professional

wealth managers are not always the �rst port of call. The reason, put

simply, has to do with trust. Many of the traditionally wealthy families

(Inheritors and Self-made) continue to depend on their personal

con�dants such as their family chartered accountants or family lawyers

for their estate planning needs because these individuals have their

implicit and enduring trust.

“We have a lawyer who is as good as a family member since two

generations. I do not think an estate planner would be needed as it is

being already managed well,” one of our respondents said.

Among the three categories, it is only the Professionals who admitted

in greater numbers that they had consulted their �nancial advisors on

estate planning structures. But even among them, only 30 per cent

said that they had created a private trust for their family. While among

Inheritors and Self-made, only a small minority has discussed setting

up a trust with their �nancial advisors and an even smaller number

has actually gone ahead and set up trusts.

Estate planning can be taken care of by either Wills and/or trust

structures. A Will is a legal declaration by which a person (the testator)

names one or more people to manage his/her estate (executor) and

provides for the distribution of his property at his demise. On the other

hand, trust involves transferring of one's estate to a Trustee for the

bene�t of certain intended bene�ciaries. A trust provides for manage-

ment of the estate during one's lifetime and also provides for distribu-

tion and management of one's wealth post demise.

implicit and enduring trust.

ADVISORS ON ESTATE PLANNING

HAVE YOU CREATED A PRIVATE TRUST?

YesNo

28.6%

71.4%

28.6%

71.4%

32.6%

27.1%

17.2%

15.1%

8.0%

LawyersFinancial Advisor / BanksChartered AccountantsFriends / FamilyOwn research

Among those who have set up trusts, an overwhelming majority

(more than 3/4th) of Inheritors, Self-made and Professionals have

set up revocable trusts. A revocable trust is one where the settlor or

the creator of the trust has the right to revoke the assets transferred

into the trust. Such trusts are very �exible and help in ensuring smooth


The newer generation of ultra HNIs is certainly more amenable to professional estate planning, our survey indicates. Nearly 50 per cent of the

respondents under 30, for instance, said that they had held preliminary discussions on estate planning.

This is certainly an encouraging sign as it suggests a growing awareness about the need for estate planning among the wealthy in India.

also take care of an incapacity scenario as the settlor can also be a

bene�ciary of the trust. An irrevocable trust, on the other hand,

provides the added advantage of ring-fencing of assets, if structured

appropriately. Private trusts can also be used to meet philanthropic

objectives.

Among the three categories, it is only the Professionals who admitted

in greater numbers that they had consulted their �nancial advisors on

estate planning structures. But even among them, only 30 per cent

said that they had created a private trust for their family. While among

Inheritors and Self-made, only a small minority has discussed setting

up a trust with their �nancial advisors and an even smaller number

has actually gone ahead and set up trusts.

Estate planning can be taken care of by either Wills and/or trust

structures. A Will is a legal declaration by which a person (the testator)

names one or more people to manage his/her estate (executor) and

provides for the distribution of his property at his demise. On the other

hand, trust involves transferring of one's estate to a Trustee for the

bene�t of certain intended bene�ciaries. A trust provides for manage-

ment of the estate during one's lifetime and also provides for distribu-

tion and management of one's wealth post demise.



ADVANTAGES OF ESTATE PLANNING

Consolidation of assetsTaking care of dependent / minor beneficiariesPreventing disputes in the familyEase in successionProtection and preservation of assets

Consolidation of assetsTaking care of dependent / minor beneficiariesPreventing disputes in the family

25.9%

23.7%23.7%

10.5%

16.2%


Last year, there was a lot of public discussion and debate on the

reintroduction of an inheritance tax in India. At a time when the

government tax revenue is under strain, there is avid support for the

idea of inheritance tax from a number of economists, politicians and

other in�uential �gures. Though when and whether this tax will be

reintroduced remains anybody’s guess, these discussions have led to

many families thinking seriously about trust structures.

Though the concept of estate planning is in its nascent stages, it is

quickly gaining importance in the minds of ultra HNIs largely because

of the growing awareness of the subject and its various advantages

and also because with changing times, there is a need to ensure

protection and ring-fencing of assets to ensure that the interests of

family members are protected in the future. Families are also more

open to appointing professional estate planners as their experience

and expertise on these matters will help their family take care of all

their needs in the most e�cient manner.

EXPERIENCE WITH ESTATE PLANNING

SatisfiedNot at all satisfied

Extremely satisfied

28.6%28.5% 28.5%

42.9%

top of the pyramid 2013

Economy & Finance

number of ultra hnis

wealth managers

wealth preservation

ultra hnhs

indian ultra hnis

luxury homes

future of wealth creation

luxury watches