On what do India’s ultra rich spend?

Mumbai: Majority of ultra-high networth individuals (UHNIs) in India increased their spending on leisure in 2017 on the back of higher consumer confidence and buoyant equity markets, a Kotak Wealth Management report said on Tuesday.

Ultra high networth households (UHNHs) are those which have a minimum net-worth of Rs25 crore, the report said.

UHNIs allocated 16% of their income to leisure and ad-hoc expenditure. At least 65% of respondents said they had increased their allocation to this category.

Professionals allocated a higher proportion of their income to leisure when compared to inheritors and entrepreneurs reflecting rising pay packages and a desire to upgrade their lifestyles, said the report.

While spending on luxury was buoyant, ultra HNIs were not completely immune to inflation with allocation of income towards household expenses at a sizeable 22% this year. Three out of four respondents attributed this to higher cost of living. The report said that the average age of Indian ultra HNIs continued to fall. About 60% of the super rich surveyed this year were below 40 years compared to 47% in 2016.

“These younger ultra HNIs are at the vanguard of changes in consumption patterns. A robust economy, soaring markets, and strong consumption have contributed to rising disposable incomes, reflected in higher allocation towards leisure and allied activities,” the report said.

“However, elevated prices, especially fuel, seem to have affected allocations to expenses, which were higher this year, even as the share of savings dipped. In line with the growing economy and equity markets, investments towards personal wealth and into primary businesses were higher,” it added.

Rise in the cost of commodities, such as fuel, have contributed to mounting expenses, largely due to the cascading impact, the report pointed.

UHNHs are expected to double to 330,400 by 2022, and their total net-worth is expected to more than double to Rs352 trillion by then.

Most of the ultra HNHs continued to live in metros, while 97% lived in the top-20 cities in India. The number of UHNHs in India increased by 10% to around 160,600 in 2017—at a compounded annual growth rate of 12% over the previous five years.

While 56% of the UHNHs hailed from the four metro cities, 18% of them were based in the next top six cities—Bengaluru, Ahmedabad, Pune, Hyderabad, Nagpur and Ludhiana. More than 50% ultra HNIs said that they have increased allocations into their primary businesses.

The UHNIs invested a significant 13% of their income for growing personal wealth, mainly to capitalise on the growth in the Indian equity markets, while the share of jewellery in expenditure has decreased to about 12%from 17% last year.

Nearly three-fourth UHNIs interviewed considered philanthropy in their annual expenditure plan.

Around 200 such UHNIs were interviewed across 12 Indian cities by market research agency, hired by Ernst & Young.