Living it up

They throw lavish parties for birthdays and wedding anniversaries. They head to exclusive locations like Machu Picchu or Bora Bora Islands. They buy vintage spirits and precious stones. They have heard of the downturn but are unaffected by it.

They are India’s uber rich. And, unbelievable as it may sound, they out-number the super-rich in Germany, Switzerland, France and Japan. Mumbai alone is home to 33 billionaires and is among the top six billionaire cities in the world.

According to Forbes magazine, the number of billionaires grew by over a third to 65 in 2013 from 48 in 2012. There were just nine billionaires in 2004 and three before 1996. India also has the largest number of ultra-high net worth women as a proportion of the total ultra-high net worth population globally.

The cumulative wealth of these individuals, led by Mukesh Ambani — the fifth wealthiest man in the world — totalled $231.8 billion in 2013 up from approximately $160 billion in 2012.

Happily, the ranks of the rich is swelling. If, according to a UBS and WorldX Ultra-Wealth Report, there were 7,850 ultra-high net worth individuals in India worth a cumulative $935 billion in 2013, a joint report by Kotak Wealth Management and Crisil Research, “Top of the Pyramid – 2013”, says the number of ultra-high net worth households — each with a minimum net worth of ₹25 crore — will treble to 3,29,000 in the next five years. Accustomed to a lifestyle, the uber-rich continues to spend on branded wear, customised holiday packages, luxury watches, jewellery, electronic gadgets. Even the staggering rise in gold prices has not dimmed the fancy for jewellery.

Real estate is another favourite, with the jump in the sales of luxury homes a clear indicator of the taste and preference. Luxury home is a status symbol for the ultra-rich, with location the primary consideration followed by top architects, interior designers and top-of-the-line fittings.

Luxury home purchases are not confined to India and an increasing number of ultra-HNIs are picking up properties in Singapore, London and Dubai.

On financial investments, discipline and capital protection top the chart. Allocation to asset classes such as debt continues to be significant. Traditionally, investment in real estate is seen as medium risk in India, but the ultra-rich are increasingly capitalising on opportunities such as distress sales as part of their short-term investments.

Further down the wealth pyramid, however, consolidation of capital is the way for many HNIs to keep building on their fortunes. As per the Kotak Mahindra-Crisil report, 33 per cent of respondents to its survey said that discretionary spending was down 20-25 per cent last year. In contrast, in 2012, most ultra-HNIs viewed the slowdown as a temporary blip and were spending blithely.

In 2013, the pessimism about the economy did induce a degree of caution. But many are perhaps just biding their time to see which way the economic wind is blowing before re-embarking on high-value purchases. Interestingly, as per the USB-World X wealth report, over the past three years, India’s wealthy has been the most generous, donating, on average, 10.6 per cent of their net worth.

While being rich is nice, it is also nuisance because the tax department’s lens is always trained on them. If it gets too taxing, the Kotak report warns, the super-rich could relocate to countries that will treat them with kid glove.

The rich are also finding 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 driving the businesses of wealth managers and estate planners.

Estate planning in India is at a nascent stage. With most family-owned businesses as a rule passed on to the next generation, in India estate planning is all about secrecy and trust. Hence, it is the family’s chartered accountant or lawyer who usually doubles up as the estate planner. But that’s another story. The bottomline is that India’s billionaire’s club is no more an exclusive guild but a league that doesn’t hesitate to wear its wealth on its sleeve.

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