Slowdown. What slowdown? It is business as usual for ultra high net worth households (HNHs) in India. And their spending doesn't seem to have any bounds. The sluggishness in the economy, where GDP growth slowed to 6.5% in FY12, the slowest pace over the past 9 years seems to have no effect on this tribe. For many of these individuals, maintaining their uber lifestyle is an extremely important part of their social life. And they will continue to do so, whatever the cost.
This is music to the ears of any high end retailers or luxury goods manufacturers. Especially since the number of such spendthrift individuals is only set to expand going forward. Their number is estimated to have grown 30% to around 81,000 in 2011-12. This is expected to treble to around 286,000 over the next five years. The net worth of these households is estimated to surge five times from an estimated Rs 65 trillion in FY12 to Rs 318 trillion by FY17. Over 50% of these individuals are in the four metros (Mumbai, Delhi, Kolkata and Chennai). The next top six cities account for around 12% of this population.
Here comes the interesting part. What's top on these high spenders' shopping list? Apparel and accessories are on top on the list, seeing a 50% jump over last year, according to an article in Business Standard. This is followed by vintage spirits/liquor, jewellery and precious stones, and luxury watches. These jet-setters also plan 2-4 international trips every year to elite locations like Machu Pichu, Bora Bora islands, etc. Exclusivity is a major factor behind their luxury car purchases, and very often well established models are not considered as they lack the exclusive factor. What is surprising is that around 65% of these ultra HNI's purchase cars on loans in order to avail of tax benefits.
But, where do these individuals invest their money? They are actually quite staid when it comes to their investing philosophies. It seems like they prefer exotic holiday destinations and liquors versus such financial instruments. Their focus is on capital protection, and they prefer low-risk instruments such as fixed income and avenues within their circle of competence.