Two hours away from India’s financial capital, the region of Karjat is suddenly awash in money.
The price for an acre of land has as much as doubled in four years to $120,000 according to Mihir Thaker, an architect who designs holiday homes in the area that’s considered a weekend getaway for Mumbai’s newly minted millionaires.
It’s even more expensive in Alibag, a coastal resort known as Mumbai’s Hamptons, where some buyers have been willing to spend almost $5 million on weekend homes, complete with touches like aquarium-style pools and large decks for parties.
Strict capital controls are forcing many of the nation’s elite to spend their money at home, pushing global firms that cater to the super rich to pile in. And despite a cultural preference for jetting abroad to Europe for shopping and vacations, domestic demand for everything from handbags to second homes has accelerated since the pandemic, adding to the debate about rising inequality in a country which has the world’s highest number of poor.
India has long been a home for Asia’s top billionaires. Oil refining tycoon Mukesh Ambani is the region’s richest person. He has a 27-story tower in Mumbai that’s often touted as the world’s most expensive home. Gautam Adani, who was rattled by accusations of market manipulation earlier this year, has Asia’s second-biggest fortune.
But a new class of wealthy entrepreneurs, executives and dealmakers are now broadening India’s luxury market beyond a handful of tycoons. Every year, fresh private members clubs are opening in Mumbai, a city with more people worth $100 million than Monaco, and as many billionaires as Singapore. Swiss lender Julius Baer Group Ltd. and watch maker Rolex SA are scouring second-tier cities for new clients. HSBC Holdings Plc has returned to India after a roughly seven-year hiatus.
“Luxury is no longer limited to a niche set of the super wealthy,” said Vijay KG, who founded Indian online luxury shop Luxepolis in 2014. “Everyone wants a piece.”
Like its powerful neighbor, India limits how much money its wealthy can take out of the country. Individuals can only wire $250,000 each year and starting this month those transfers will be taxed at 20%, except for education and medical expenses.
That’s helped to drive up luxury car sales 32% in 2022 from a year earlier, according to data from JATO Dynamics India, an auto data consulting firm. Sales in the first six months of 2023 were led by the Mercedes Benz E-Class.
New wealth has drawn the attention of private banks, along with top Wall Street firms like Apollo Global Management Inc. and Carlyle Group Inc. They’ve scaled up their operations in India as the South Asian nation takes advantage of a geopolitical sweet spot. The US and its allies are trumpeting India as an essential counterweight against China, and Prime Minister Narendra Modi has pushed to attract more foreign business.
HSBC exited India around seven years ago but returned this year targeting those with around $2 million to invest — and even introduced black metal credit cards for its private banking clients. The bank hired one of India’s most famous cricketers, Virat Kohli, as a brand influencer. For the relaunch, the bank flew in wealthy clients from Hong Kong and Dubai for a dinner served by the chef of Odette, a three-star Michelin restaurant in Singapore.
Other wealth managers are expanding beyond large cities like Mumbai and Delhi.
LGT Wealth India, backed by Liechtenstein royalty, has 14 offices across India and plans to build out its team in Lucknow, the capital city of Uttar Pradesh, the country’s most populous state. Julius Baer is also looking to increase its India presence from seven cities to 10.
It’s not just banks. On a Wednesday in late September, the parking lot outside the upscale DLF Emporio Mall in New Delhi was packed with BMWs and Mercedes. One woman wearing a designer dress drove from a town nearly five hours away to shop for upcoming birthdays. She dropped $7,200 in cash on two Louis Vuitton handbags before heading to Hugo Boss.
Inside the mall, the Rolex store was sold out and the waitlist for some styles is as long as 18 months, with gold watches that cost upwards of $28,000 the most coveted.
Last year, the Swiss watchmaker opened a store in Raipur, a provincial capital with links to the steel industry and a population of under two million.
LVMH-owned luxury retailer Bulgari is planning an exhibition of its watches and jewelry in Lucknow. Thailand’s luxury brand Lotus de Vivre, which counts India’s royalty among its clients, is prepping an exhibition early next year in Ludhiana, an industrial city in the northern state of Punjab that’s home to just over two million. A Japanese silk handbag with peacock-inspired motifs, rose-cut diamonds and carved jade from the jewelry and home decor firm can set you back about $57,750.
Elsewhere, India’s new money has spawned an array of cottage industries in high-end services like private members clubs.
Vivek Narain, who founded Quorum Club in 2018, said membership has increased 10-fold from before the pandemic to around 2,500 to 3,000 across locations in Mumbai and Delhi. Narain, a former Wall Street banker, said private equity types, top executives at banks and financial services companies, and start-up founders are among his regulars, and he plans to expand to Hyderabad, a tech hub, early next year.
Photographer: Dhiraj Singh/Bloomberg
For India’s nouveau riche, these clubs offer an alternative to colonial-era institutions like Bombay Gymkhana and Willingdon Sports Club, where the waitlist for membership can sometimes stretch years. At Jolie’s in Mumbai, which began its operations in 2021, members can store their cigars in a special vault and host guests over a $590 glass of cognac.
The ostentatious wealth of an elite few is adding to an ongoing debate about inequality which risks becoming a liability for Modi’s government with national elections due next year.
Grain handouts, free bicycles or subsidies on cooking gas can partially smooth what otherwise would be jarring differences. The top 1% in India had over 40% of total wealth as of 2021, according to Oxfam.
“Rising inequality in India is no longer debatable,” said Kunal Kundu, India economist at Societe Generale. “It is a fact, which is why the emerging demand pattern of the super consumers is making so many headlines.”
Meanwhile, a growing number of those super-rich are choosing to leave India. Wealthy clients are seeking residence permits in places like Dubai and Portugal, according to Gautami Gavanker, an executive director at Kotak Mahindra Bank Ltd., one of India’s biggest private banks.
“Better standard of living, basic infrastructure, education and setting up businesses are some of the reasons why more Indians are thinking of migration,” Gavanker said.
Source from: Bloomberg