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Rich households in India prefer disciplined investments

July 04, 2012 10:07 IST

The investment allocation to debt by ultra high networth households (HNHs) increased nine per cent in 2011-12 and it remained constant for equities. Investments in real estate dipped seven per cent compared to 2010-11, although realty's share among asset classes remains relatively high since ultra HNIs expect healthy returns over the long term.

But generally, the appetite to take risk was subdued, with greater preference for a disciplined rather than opportunistic approach, particularly in high-risk instruments like equities and real estate. "Alternative assets like art are yet to catch up as an investment avenue in India," said Mukesh Agarwal, president of CRISIL Research.

"The fact that so many ultra HNIs said their spending habits had not changed due to the slowdown is an indication they do not expect the slowdown to continue for long. However, it would be interesting to see whether the caution that has crept into their investments would spill over into their spending if the economic crisis persists longer than expected," he added.

Currently, metro cities account for more than half the ultra HNIs. But that may dip by 3.5 percentage points in 2016-17 as cities like Ahmedabad, Bangalore, Hyderabad, Nagpur and Pune would see an increased number of HNIs.

While ultra HNIs in non-metros were extremely conscious about which brand of school their child should go to, their counterparts in the metros factored various other attributes such as curriculum and the quality of faculty.

Similar to the first edition, this time also the study identifies three distinct profiles of ultra UHNIs -- the inheritor, the self-made or entrepreneur and the professional.

CRISIL used the 'Idea' method to establish the findings of the report, that is, Income and Demographic Analysis, using NCAER data of bucket-wise income, census data on the number of households and GDP growth.

BS Reporter in Mumbai
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