India's Wealthy: Where They Invest Their Money

India's wealthy and ultra-wealthy individuals have a variety of investment options available to them, and their preferences vary. According to Knight Frank's Wealth Report 2020, equity investments were the most attractive asset class for India's ultra-high-net-worth individuals (UHNWIs) in 2019, with 29% of their portfolios allocated to this asset class. This was followed by bonds at 21% and property investments at 20%. However, a Hurun India report suggests that India's high-net-worth individuals (HNIs) consider real estate as the safest asset class for personal investment, with 30% of those surveyed planning to increase their investments in this sector over the next three years. Gold is also a popular investment option for India's wealthy, followed by stocks, fixed income, and deposits.

Luxury real estate

India's wealthy are increasingly investing in luxury real estate, both domestically and abroad. This includes high-end apartments and condominiums, as well as holiday homes, farmhouses, and villas.

Mumbai accounts for nearly half of the country's luxury real estate inventory, with prime locations such as Altamount Road, Nepean Sea Road, Worli, Prabhadevi, Juhu, and Bandra (West) commanding high capital values. The average ticket size in these areas ranges from Rs 20 crore to over Rs 60 crore, with apartments occasionally priced above Rs 100 crore.

Hyderabad is also emerging as a hotspot for luxury real estate, driven by a pro-business environment. Areas such as Jubilee Hills, Banjara Hills, Hitech City, Raidurg, and Neopolis report sales ranging from Rs 20 crore to over Rs 40 crore.

In addition to domestic options, India's ultra-rich are also investing in luxury real estate overseas, with Dubai being a favorite destination. Dubai offers a sophisticated version of Indian culture and entertainment, and around 20% of its offshore real estate is owned by Indian investors. These luxury residences serve as vacation homes or rental properties and may also be flipped for a profit.

The demand for luxury real estate in India is expected to continue growing, driven by the increasing number of High-Net-Worth Individuals (HNIs) and Ultra High-Net-Worth Individuals (UHNIs) with significant disposable incomes. This trend is further fuelled by the desire for lavish living spaces with cutting-edge amenities and the aspiration to create assets for the next generation.

Overseas investments

India's wealthy population is increasingly investing overseas, with a focus on developed nations offering greater tax advantages and stable market conditions. The country's outbound investments have evolved in terms of volume, geographic distribution, and sectoral makeup. In the last decade, Overseas Investment Destinations (OID) have shifted from resource-rich nations like Australia, the UAE, and Sudan to countries like Mauritius, Singapore, the British Virgin Islands, and the Netherlands.

Indian residents' overseas investments are regulated by the country's exchange control regulations and must be within the overall ceiling of the Liberalized Remittance Scheme (LRS). Under the LRS, residents can invest up to $250,000 per financial year in permissible investments and other purposes such as education, medical treatment, and maintenance of relatives abroad.

Indian firms primarily invest overseas through mergers and acquisitions (M&A), which grants them direct access to newer and more extensive markets and better technologies, enabling them to expand their customer base and achieve a global reach. This strategy has been particularly prominent in the United Kingdom, where Indian businesses have invested in 118 projects and generated around 8,384 jobs as of FY23.

In FY25 (April-September 2024), Overseas Direct Investment (ODI) by Indian firms stood at US$8.9 billion, with Singapore, the United States, and the Netherlands being the top three investment destinations. Notable ODI examples include the Aditya Birla Group's $50 million investment in a manufacturing and research centre in Texas, United States, and Infosys' acquisition of In-Tech, a prominent engineering R&D services provider in the German automotive industry.

Indian residents can also invest in overseas stocks of listed foreign entities, such as Amazon, Apple, Microsoft, and Tesla, either directly or through international mutual funds. These investments provide exposure to global markets and blue-chip stocks while reducing country and currency risk through diversification.

Overall, India's wealthy population is actively investing overseas, taking advantage of opportunities in developed nations with favourable tax regimes and stable markets. They utilise strategies such as M&A, ODI, and direct stock investments to expand their global reach and access new technologies and markets.

Startups

India's startup ecosystem is vibrant and innovative, with unprecedented growth and leading startups that are shaping both the Indian and global markets. The country's wealthy individuals are increasingly investing in startups, particularly in consumer goods, fintech, healthcare, and technology sectors. Here are some insights into where India's wealthy invest in startups:

• Consumer Goods Startups: India's wealthy investors are keen to invest in consumer goods startups to capture a slice of the country's booming consumption market. This trend is driven by the increasing number of middle to high-income households in India, making it an attractive prospect for investors.
• Fintech: Fintech is a high-growth sector that has attracted significant investment from India's wealthy individuals. Startups in this sector focus on simplifying insurance products, digital payments, and financial services, catering to the diverse needs of India's vast population.
• Healthcare: The healthcare sector, particularly e-pharmacies and health tech startups, has gained attention from investors. PharmEasy, an online pharmacy, raised $350 million and became India's first e-pharmacy unicorn.
• Technology: Technology startups continue to attract investment, especially in artificial intelligence (AI) and software-as-a-service (SaaS). AI-focused startups like Vernacular.ai and Skyroot Aerospace have raised significant funding and gained recognition for their innovative solutions.
• E-commerce: E-commerce startups in India have experienced exponential growth, with companies like Meesho, a reseller platform connecting sellers and customers, and Nykaa, an online beauty and fashion retailer, gaining traction among investors.
• Diversification: India's ultra-high net worth individuals (UHNWI) also invest in startups as a diversification strategy. Early-stage company investments and consumer goods startups are attractive options for portfolio diversification.

The Indian startup ecosystem is dynamic and resilient, and the country is expected to add 180,000 startups by 2030. The government's supportive policies and the fast-growing local economy further enhance the appeal of startup investments for India's wealthy individuals.

Art, vintage cars, jewellery

Art, Vintage Cars, and Jewellery: Where India's Wealthy Invest

Art

India's wealthy are increasingly investing in art, with a growing appreciation for both traditional and modern artistic styles. This shift in focus from luxury cars, premium properties, and diamond jewellery to art is driven by a desire to fulfil aesthetic needs rather than mere self-esteem or the need to show off. The Indian art market, valued at around Rs 1,000 to Rs 1,200 crore, has been steadily recovering, reflecting this growing interest from affluent Indians.

Notable collectors include Pankaj Kehr, a medical devices manufacturer and exporter, who has acquired works from various countries, including Vietnam, China, Argentina, the US, and Spain. Kehr's interest in art extends beyond personal taste, as he aims to support new art that connects with social, political, and historical contexts.

Other prominent art collectors in India include Arsh Goenka, Kiran Nadar, Tina Ambani, Parmeshwar Godrej, Malvinder Singh, Kiran Mazumdar-Shaw, Sangita Jindal, and Vivek Burman. These individuals have shown a preference for renowned artists such as Anjolie Ela Menon, Akbar Padamsee, MF Husain, and Atul Dodiya, while also supporting emerging artists.

Vintage Cars

Vintage cars hold a special place in the hearts of many Indians, representing a profound appreciation for craftsmanship, elegance, and a connection to the past. India's wealthy have been known to invest in iconic vehicles such as the Premier Padmini, Rolls-Royce Silver Ghost, Hindustan Ambassador, Hispano-Suiza H6, and Jaguar XK150. These cars are not just a hobby or a means of transportation but a celebration of heritage and a testament to the enduring appeal of timeless automobiles.

Jewellery

India is the world's largest consumer of gold, and this has contributed to the wealth of many jewellers in the country. When investing in jewellery, it is essential to look for hallmarked pieces, as this certifies the purity of the metal. Prominent jewellery brands in India include Tanishq, Malabar Gold & Diamonds, CaratLane, Tribhovandas Bhimji Zaveri (TBZ) Jewellery, BlueStone, Kalyan Jewellers, and Reliance Jewels. These brands offer a range of traditional and modern designs to suit different occasions and budgets.

In conclusion, India's wealthy individuals have diverse investment choices when it comes to art, vintage cars, and jewellery. Their investments not only reflect their personal tastes but also contribute to the growth and development of these industries within the country.

Equities

India's wealthy population is increasingly investing in equities, with experts noting that this asset class remains a favourite due to its potential for high returns. K. Joseph Thomas, Head of Research at Emkay Wealth Management, affirms that ""the main investment asset class for the super-rich still remains equity stocks and equity mutual funds".

Wealthy investors in India tend to have substantial allocations in blue-chip stocks, high-growth mid-cap companies, and sector-specific investments such as pharmaceuticals and technology. This trend is closely linked to the country's GDP growth and liquidity inflows, particularly into mid- and small-cap companies.

The appetite for equity investments among India's rich has been further fuelled by the pandemic, which has led to a surge in global tech and health stocks. This is particularly true for tech stocks, as many Indian investors are familiar with these products and brands as users, creating a sense of affinity.

Additionally, the general uptrend in the Indian markets and the country's economic growth prospects make equities an attractive investment option for those seeking high returns.

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