The number of Ultra High Net Worth Households (UHNHs) is expected to triple and their net worth is expected to swell fivefold in the next five years, said a report titled ?Top of the Pyramid? brought out by Kotak Wealth Management and CRISIL Research. The report analyses earnings, investments and spending patterns of Ultra High Net Worth Individuals (UHNIs) in India.
The number of UHNHs is expected to triple to 2,19,000 while their net worth is expected to hit R235,00,000 crore by FY15-16. A UHNH is defined as one having a minimum net worth of R25 crore (in FY11). The study identifies three distinct profiles of UHNIs in India ? the inheritor, the self-made and the professional, each with their distinctive investment and spending habits. The report says UHNIs display greater risk aversion in personal investments.
While real estate has been the most preferred investment avenue for UHNIs, alternate asset classes are growing in popularity, says the report. ?In a bid to diversify their portfolio, largely comprising traditional assets like realty and equity, UHNIs have begun investing in emerging, alternate assets such as private equity, hedge funds, structured products and derivatives,? said C Jayaram, executive director, Kotak Mahindra Bank. However, he clarified that the growing interest in alternate assets is not backed by an adequate understanding of these asset classes, thus requiring UHNIs to seek professional advice.
The report also highlights the relationship between the growth of the UHNI community and the luxury market in India. ?The increase in net worth and increasing propensity to spend could have an explosive impact on the luxury goods market,? said Roopa Kudva, MD and CEO, CRISIL. She added that the potential market size for the luxury jewellery segment is R22,900 crore and that for the luxury car segment is R14,000-15,000 crore. ?The full realisation of this potential is possible provided luxury brands are able to develop greater points of access, offer wider range and customisation of products to suit Indian customers? preferences,? she said.
The report had other interesting insights as well. For instance, luxury watches still outranked hi-tech electronic gadgets in the wish-list of UHNIs and Inheritors and Self-made UHNIs spent more on jewellery than the Professional UHNIs.