Where do ultra-rich invest? Higher yields make commercial realty a favorite

Commercial real estate has emerged as the preferred investment choice for 45 per cent of Ultra-High-Net-Worth Individuals (Ultra-HNIs) in India, according to the latest edition of the Top of the Pyramid (TOP) Report by Kotak Private Banking, a division of Kotak Mahindra Bank Ltd. This preference comes as commercial real estate offers higher yields and better leasing terms compared to residential real estate, which is favored by 33 per cent of Ultra-HNIs.

 

The TOP Report, now in its 20th edition, provides detailed insights into the investment behaviors, spending patterns, and aspirations of India’s wealthiest individuals. It also delves into their evolving roles as global investors, with an emphasis on luxury assets and emerging digital trends. The survey, commissioned to Ernst & Young LLP (EY), sampled 150 Ultra-HNIs across India and highlights the significant shifts in their investment strategies.  " As India's economic landscape evolves, our report reveals how Ultra-HNIs are diversifying their portfolios and embracing both domestic and global assets, setting the stage for a significant rise in their spending by 2028," said Oisharya Das, CEO - Kotak Private Banking, Kotak Mahindra Bank. 

Real Estate follows Equities as the preferred asset class, making up, on average, 29% of the Ultra-HNIs’ investment portfolio. Commercial and residential

 

 

Commercial Real Estate often offers higher rental yield, more attractive leasing terms and longer lease contracts. However, preferences vary based on individual investment strategies and personal goals. Ultra-HNIs have also shown an interest in foreign real estate. 35% of Global Investors surveyed said they have foreign Commercial Real Estate in their

investment portfolios, and 47% had invested in Residential Properties abroad. Interest in foreign real estate may be linked to migration plans.

 

More than half of the Ultra-HNIs that are in the process of migration or intend to migrate have already invested in residential real estate abroad. 38% and 21% of Ultra-HNIs conveyed a preference for REITs and InvITs, respectively, within the Real Estate asset class. These assets allow Ultra-HNIs to invest in real estate or infrastructure projects via an intermediary that generates dividends for them without having to invest directly in the project.

 

The recent amendment by SEBI to the Real Estate Investment Trusts Regulations, 2014, facilitates the creation of Small & Medium Real Estate Investment Trusts (SM REITs), characterised by a reduced minimum asset size of ₹50 Crores and minimum investment ticket size of ₹10 Lakhs.[21] This effectively democratises the asset class, making it available to a wider range of retail investors, which will spur further growth in the REIT market.

 

Key insights from the Report:

 

Commercial Real Estate Dominates: Commercial real estate's appeal lies in its potential for higher yields and long-term security. This shift underscores the growing confidence of Ultra-HNIs in India’s commercial property market.  Calculate EMI: EMI Calculator Tool

 

Equities as the Top Asset Class: Ultra-HNIs allocate 32% of their portfolios to equities, with 89% focusing on individual stocks. U.S. equities, in particular, are gaining popularity among these investors.

 

Health & Wellness as a Post-Pandemic Priority: With health becoming a paramount concern post-pandemic, Ultra-HNIs are dedicating 10% of their budgets to health and wellness. This includes increased spending on preventive healthcare, home fitness solutions, and wellness travel to both domestic and international destinations.

 

Collectibles Are a Rising Trend: A growing number of Ultra-HNIs are investing in collectibles, such as fine art, vintage wines, luxury bags, and NFTs. Nearly 94% of these individuals own jewelry, and 73% invest in art, blending personal interest with strategic financial gains. Collectibles are a significant interest for Ultra-HNIs blending personal interest, cultural appreciation, and strategic investment. Collectibles include jewellery, fine art, vintage wines, classic automobiles, rare coins, stamps, luxury bags, and NFTs. NFTs are gaining favour over cryptocurrencies#, with 24% planning further digital asset purchases.

 

Succession Planning Gains Importance: As wealth management becomes more complex, 37% of Ultra-HNIs prioritize secure wealth transfer, with many relying on private bankers and accountants for estate and succession planning.

 

Global Horizons: Investing beyond Borders: 62% of Ultra-HNIs prefer aggressive equity investments, with a third having global investments, mainly in the U.S. and UK. Residential real estate, direct equities, and mutual funds are popular global assets

 

Unravelling Ultra-HNI Migration:

 

1 in 5 Ultra-HNIs surveyed are currently in the process of or plan to migrate, most of whom intend to reside in their chosen host country permanently while retaining their Indian citizenship. Professionals show a higher propensity to migrate than entrepreneurs or inheritors. Among those considering global migration, 69% cited smoothening of business operations as the key driver.

 

The Ultra-HNI concept of living with purpose:

 

While Ultra-HNIs continue to create wealth and reap its benefits, there is a deeper, more significant journey fulfils and cements their life's purpose. 26% of Ultra-HNIs aspire to be recognized as innovators who drive change in both their professional and personal lives.

 

Strong Economic Activity Fuels IPO Boom in India among Ultra-HNIs*: In late 2023 and 2024, strong economic activity and positive investor sentiment led to a surge in fundraising, with 14% of ultra-HNIs citing the sale of their primary business as their wealth source.

 

India led globally with 268 IPOs in 2024, boosting investor confidence and increasing its global IPO market share to 30%, while M&A and PE/VC activities declined. Investors shifted focus to sustainable business plans with clear exit strategies. 

For Ultra-HNIs, luxury is not just about owning expensive items but about embodying a lifestyle that reflects sophistication, exclusivity, and heritage. High-end goods are seen as more than possessions; they are symbols of status, craftsmanship, and legacy.

 

Luxury Handbags: Iconic brands like Hermès, Chanel, and Louis Vuitton are at the forefront. A Birkin or Kelly bag from Hermès, for instance, is more than a luxury accessory. It signifies exclusivity, with limited availability and often long waiting lists for bespoke designs. These bags are treasured not only for their beauty but also for their rich heritage and scarcity.

 

Luxury Automobiles: For Ultra-HNIs, luxury cars are not just vehicles—they are statements of power, elegance, and performance. Brands like Rolls-Royce, Ferrari, and Mercedes-Benz offer masterpieces that blend high performance with opulent design. A Rolls-Royce Phantom, for example, provides a smooth, almost ethereal ride, while a Ferrari roars with beauty and speed, making it a striking symbol of status.

 

Luxury Watches: Timepieces from renowned brands like Patek Philippe, Audemars Piguet, and Rolex are sought after not only for their technical precision but also for their legacy and craftsmanship. Owning a Patek Philippe watch, for example, is akin to being part of an exclusive community that appreciates the art of horology.

 

More Than Material Wealth: For Ultra-HNIs, luxury is about experiences as much as material possessions. These high-end goods are not just for personal enjoyment but also serve as heirlooms to be passed down through generations, making them a key part of family legacies. Each item is carefully chosen, with every detail personalized to reflect individual preferences and the highest standards. 

"The Indian Ultra-HNI is embracing a global identity as they transcend borders motivated by diverse factors. The Ultra-HNIs segment is one to watch, marked by dynamic growth, evolving needs, and a transformative shift in how wealth is managed and preserved across generations," said Saurabh Joshi, Partner – Wealth & Asset Management, EY India. 

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd