If you are new to investment in the world of decadence and luxury, you may have asked yourself this question: what do I put my money in? Should I pick up that posh flat in what experts describe as the right address to live in? Or do I spend it on art, watches, wines, classic cars and the many indulgences that define a luxurious lifestyle?
As a journalist writing on luxury, some of these questions have often been thrown at me by young entrepreneurs I meet as part of my job. Here is where, I believe, wealth management reports come in handy. The experts involved keep a keen eye on the happenings in the global luxury world to tell us where exactly we should park our money.
Knight Frank is a pioneer of wealth management reports, which is surprising given that it is a global real estate consultancy. But its extensive network helps it track trends in spending, year after year.
Browsing through the Knight Frank Wealth Report 2018 throws up a few surprises. For instance, it tells me that 38 percent of UNHIs put their money into alternative investments like art, wine and cars. Or that only 47 percent of the rich in India have a succession plan in place, against the world average of 50 percent; around 58 per cent send their children to study abroad, against the Asia average of 49 percent (there are more Indian students in universities abroad than there are Chinese!).
Surprisingly, only about 36 percent Indians invest in luxury real estate against the global average of 43 percent. And only 18 percent of India’s UNHIs want to buy property in other countries besides India.
The report was launched at a
la-de-dah event in Mumbai and in attendance was Lord Andrew Hay, Partner, Head of Global Residential, Knight Frank India. “Indians are only interested in three destinations for luxury real estate – Dubai, UK and the US. They make for very shrewd investors. If I were to just take investments in property in the UK, I suspect that at the moment they are thinking of ‘Brexit’!” he tells me on the sidelines of the launch. “But I am sure those numbers will grow. I find Indians are investing incredibly well in investments of passion like wines, cars and art.”
Interestingly, Lord Hay believes that the largely entrepreneurial Indians will focus on investments in commercial space and, interestingly, in agriculture! “There is a growing food shortage, so shrewd people are investing in big blocks of agricultural land to ensure food security.” He predicts 2019 to be the year when more Indians will invest in wines and maybe the classic cars, a market that is still untapped. “When Indians take a look at that segment, the market is going to fly.”
Health is Wealth
Compared with Knight Frank, Kotak Wealth is a relatively new entrant to the world of wealth management predictions. Its seventh edition of the Top of the Pyramid Report claims that Indians are getting wealthier at a younger age; about 60 per cent of UNHIs surveyed, in fact, are below 40 years of age. Many of the younger UNHIs lived in tier II cities such as Ahmedabad, Pune, Hyderabad, Nashik and Ludhiana. The report also tells us that younger Indians spend much lesser money on jewellery, compared to the earlier generations. Instead, they spend on health, with about 76 per cent putting their money on good yoga teachers. It also talks about how three-fourths of this generation believes in philanthropy.
Jaideep Hansraj, CEO of Wealth Management and Priority Banking, Kotak Mahindra Bank is convinced that wealthy households in non-metros have contributed considerably to the growth in the luxury industry. “They are usually the first investors to identify and capitalise on trends and gravitate towards alternate assets. Real estate took a hit after demonetisation and debt wasn’t really throwing up exciting opportunities,” he says. “Against this backdrop, angel investing and private equities have gained tremendous traction. We have also seen increased spends on apparel and accessories, holidays, home décor, jewellery, automobiles and electronic gadgets.”
My one takeaway from the two reports is this: global luxury brands that have been struggling to crack the Indian market will find it easier to reach this younger, aspirational segment through ecommerce and e-tailing. I expect brands like Hermès and Gucci to begin delivering their chic bags and elegant scarves to the very doorsteps of the rich Indians in Tier II cities if they want to survive in India. That’s where their next generation consumers will come from.
Deepali Nandwani is a journalist who who keeps a close watch on the world of luxury.