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Super-rich grow in style

business Updated: Jun 24, 2011 22:58 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
Sandeep Singh

The signals came early when we saw sales of luxury cars shooting up. And, when glossies invited Indians to buy jewellery watches and take holidays in exotic overseas locations went back and forth, the signals grew louder.

This week, numbers told the story clearly.

The Capgemini and Merrill Lynch World Wealth Report 2011 said that India’s high networth individual (HNWI) population (those with investible assets of Rs 4.5 crore or more) rose by more than 26,000 to 153,000.

India, having pushed behind Spain, now stands 12th in millionaire headcount and is only a few thousands short of Italy and Brazil. The count grew the fastest in India in 2010 as the economy expanded. India’s millionaire growth rate was 20.8%, against a world average of 8.3%.

Where is the money going?

Those managing the money say that while the rich Indians are careful in their investment decisions, they are getting flamboyant in their spending manners.

“Since the equity market has performed poorly over the last one year, a lot of money has gone into fixed income instruments and real estate,” said C Jayaram, ED, Kotak Mahindra Bank. “On the other hand the ultra-HNIs are willing to be a little more flamboyant in their consumption—buying property in Europe, high-end cars etc.”

According to the “Top of the Pyramid-2011” report by Kotak Wealth and Crisil Research, 37.2% of the investments by the folks variously called HNIs or HNWIs went into real estate while 33.1% flowed into equities. Fixed income instruments constituted 20.4% of their investments.

“A lot of money has gone into debt over the last six months as yields have been attractive. However in the slightly longer term of around two years, there has been a steady increase in equity investments,” said Atul Singh, MD, Merrill Lynch Global Wealth Management, India.

Jayaram added that as and when the pressures of inflation and interest rates ease, money will start flowing back into equities.

For the moment, lavish spending is in order.

In the past one year alone, luxury and sports car makers such as Bugatti, Maserati, Aston Martin and Ferrari entered India. Rolls Royce sold 70 of its top-end vehicles in 2010, growing seven-fold in a year.

Indians are also buying up swanky homes in Europe.

“The share of Indians is gradually growing. Indians as of now constitute about 10 to 15% of the buyers in Europe and their number is set to grow fast,” said Ashish Dhume of Europe-Interface, a London-based real estate firm.

Anshuman Magazine, South Asia Chairman at international property consulting firm CB Richard Ellis (CBRE) said higher exposure to Europe and growing Indian wealth will sustain this trend.

Experts say millionaires will grow on as both national income and market capitalisation of stock markets are expected to stay strong.

With inputs from Sachin Kumar and Sachin Dave