On What Do India’s Wealthy Spend Their Money?

wealthymattersWhat do India’s wealthy like to buy with their buckets of money?

Customized holiday packages, luxury watches, diamonds and jewelry, and home electronics (including fancy mobiles and high-end cameras) — in that order.They buy luxury cars, too, but not Ferraris and Lamborghinis as one would expect. More like Honda and Toyota, according to the study conducted by Kotak Wealth Management and rating and research firm Crisil Ltd.The wealthy here are defined as households with a minimum average net worth of 250 million rupees ($5.6 million) for the financial year ended March 31, 2011.

Researchers interviewed 150 super-wealthy individuals in India’s major cities of Mumbai, Delhi and Bangalore, and others like Hyderabad, Ahmedabad and Chennai to put together the study. Senior personnel at major global luxury brands, art gallery owners, product dealers and industry body representatives were also interviewed.

The study estimates that India has about 62,000 super-rich households, with a total wealth of around 45 trillion rupees ($1 trillion.) This is expected to grow to 235 trillion rupees ($5.3 trillion) in five years.

According to the study,a significant portion of the wealthy people’s expenditures goes to exclusive holiday packages, often for holidays abroad. However, this expenditure is typically planned in advance and the family plays a large role in deciding the holiday location and other details.

The rich also spend heavily on jewelry and precious stones including three-carat solitaires. The luxury jewelry market is estimated to be worth 229 billion rupees ($5.1 billion).

Luxury cars, defined as those whose on-road price is 2.3 million rupees ($51,000) or above, are another favorite expenditure. The popular brands, besides Honda and Toyota, include Mercedes and BMW.For regular use in cities, Japanese cars are preferred because they are trusted for Indian roads. The wealthy typically own two to four cars.Many wealthy people look to sports utility vehicles as “aspirational cars.”

Another major area of spending is electronics, such as home entertainment systems with television screens of 55 inches or more, custom-built entertainment rooms or theaters.More rich also are going for home automation, where appliances and gadgets at home can be operated through remote control.

“Art” and “luxury writing instruments” get the smallest portion of spending from the super-rich, but these are usually the most impulsive buys.

Interestingly, many of the rich fear buying goods, or even booking flights and holidays online because of potential credit card fraud. So, many of them tend to use their corporate credit cards rather than their personal cards.

The study found that a vast chunk of the wealthy are entrepreneurs, but professionals in the fast-growing industries of technology and financial services have also been able to jump into the super-wealthy bracket.

The study divided the respondents based on the source of their wealth, calling them “inheritors,” “self-made” (first-generation entrepreneurs,) and “professionals” (salaried individuals).Researchers found that the spending and investing patterns were slightly different for each of these categories.

Of the three, professionals spend the largest proportion of their money – nearly 29% — perhaps partly because they don’t feel the need to leave a large inheritance.The inheritors and self-made rich spend 21.5% and 20% of their income respectively, putting a larger portion of their money into their businesses. All three categories have cash savings of at least a fifth of their total income and invest another one-fifth to multiply their personal wealth.

Professionals are most concerned about social inequality, and take time to give back to society.

The inheritors prefer to do their shopping for clothes and luxury items abroad.They believe that the same international brands in India don’t have the same range, so they pick them up when they travel overseas.Also the cut, the finish and even the price are perceived to be better abroad.Meanwhile, the self-made buy within India and they also travel the least abroad (relative to the other rich),  because they spend more time on business.

New areas of potential spending include destination weddings, such as one on a ship to Australia, or theme weddings like underwater wedding ceremonies.

Owning aircraft and yachts has also become popular, although teething infrastructural problems such as ports for berthing, and bureaucratic hassles are discouraging factors.One of India’s billionaires owns four yachts. Another is believed to have purchased some islands in Lakshwadeep, and a luxury mansion on a secluded island off the coast of Cannes.

Some study respondents said they had even spent a considerable sum of money on storing their stem cells.

About Keerthika Singaravel

One Response to On What Do India’s Wealthy Spend Their Money?

  1. Sara says:

    Everyone has their own way on how they are spending all their money.

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