India’s ultra rich club is growing, here’s what they’re investing in

India is expected to see the fastest growth in ultra high net worth individuals globally over the next few years, according to consultancy Knight Frank.

Earlier this year, India’s financial center, Mumbai, overtook Beijing to become Asia’s leading billionaire hub. Globally, the city ranks third on billionaire count, after New York and London.

India’s ultra-wealthy population — people with a net worth of at least $30 million — rose 6.1% to 13,263 in 2023 from the prior year. This number is expected to surge 50.1% by 2028, marking the fastest growth in UHNWIs in the world, according to Knight Frank. 

So, where are India’s growing ultra-rich investing their wealth?

About 30% of India’s UHNWI investments go into luxury real estate, including overseas projects, said Alok Saigal, president and head of wealth management firm Nuvama Private. 

People have moved away from investing in land as it is less liquid, and more wealth has been allocated to residential real estate since the pandemic, he added.

On average, an UHNW Indian owns more than two homes, and around 12% of India’s super rich plan to buy a new house in 2024, data from the Knight Frank’s wealth report showed.

India’s ultra rich are also buying expensive real estate overseas, with Dubai being a favorite, said Chethan Shenoy, executive director at wealth management firm Anand Rathi Wealth.

“Dubai has all the Indian entertainment, Indian food … but just sophisticated. It’s a more sophisticated Mumbai, more sophisticated Delhi,” he said. Around 20% of Dubai’s offshore real estate pie is owned by Indian investors.

These luxury residential real estates tend to the vacation homes for the rich, or are rented out, and may also be flipped, the two experts said.

“Offshore has become a fairly significant and relevant topic for Indians today. So people are looking to move some part of their assets abroad or seek global exposure. And again, real estate becomes the starting point,” Saigal said.

Investing in startups is becoming increasingly popular, especially with the younger generation of rich Indians, wealth managers told CNBC. 

Over the last 15 to 20 years, a lot of India’s young people studied abroad, expanding their exposure, building networks, and then returning to run their own businesses or invest in startups, Saigal said.

“Their friends have started their startups. So investing with their friends, putting money into these startups has become one big thing for them,” he added.

Investing in early stage companies is also another means of diversifying their portfolios, said Nitin Chengappa, managing director and head of the affluent banking and distribution network at Standard Chartered Bank. 

India’s UHNWIs are in general turning to startup investments as a “dynamic strategy for wealth creation,” positioning themselves to capture significant returns in high-growth sectors such as fintech, healthcare and technology, Chengappa said. 

Consumer goods startups are a favored lot as these investors increasingly eye a slice of India’s consumption boom pie, said Anand Rathi Wealth’s Shenoy.

“They are now wanting to invest into companies that are bringing out goods which are unique, they want to be a part of the next big story in India,” he said. As the number of middle to high-income households increases, India’s consumer market is positioned to become the world’s third largest by 2027, according to estimates by Fitch Solutions’ BMI.

India is expected to add 180,000 startups by 2030, alongside 280 unicorns, according estimates of startup information provider Inc42 estimates. As of the end of 2023, India had 117,254 startups — an exponential increase from the 350 in 2014.

India’s wealthy are also actively pursuing alternative investment opportunities, Standard Chartered’s Chengappa said.

“UHNWIs typically have the resources to achieve a higher degree of diversification across a broader range of asset classes, geographic regions, and investment strategies,” he said. This means their portfolios tend to have more exposure to alternative investments such as luxury items.

About 17% of India’s UHNWIs’ wealth goes into luxury goods, with jewelry, art and watches as top preferences, findings from Knight Frank revealed.

These alternatives tend to have intrinsic value and can be enjoyed personally while appreciating over time, the Chengappa said, adding that investments such as jewelry and art also hold cultural significance and can be viewed as status symbols. 

Equities remain a favored asset class for India’s rich due to their potential for high returns, experts said.

“The main investment asset class for the super-rich still remains equity stocks and equity mutual funds,” said K. Joseph Thomas, head of research at Emkay Wealth Management. 

The general uptrend in the Indian markets is closely linked to the country’s GDP growth and liquidity inflows, particularly into the mid- and small caps, he said. 

The wealthy investors have substantial allocations in blue-chip stocks, high-growth mid-cap companies and sector-specific investments like pharmaceuticals and technology, said Standard Chartered’s Chengappa.