Luxury revolution sweeping India: What’s fueling the shift in consumer preferences?

During the 17th century, the tulip, a seemingly ordinary flower, became a symbol of luxury and prestige. This surge in popularity sparked speculative trading, driving tulip prices to unprecedented heights, ultimately culminating in what is now known as the Tulip Bubble. The bursting of this bubble not only devastated the Dutch economy but also marked one of the earliest recorded instances of a speculative bubble in modern history.

While this historical event may seem distant, it draws parallels to the enduring allure of luxury goods throughout the centuries. Luxury has been a fixture in human civilisation since ancient times, with people viewing possession of such goods as a symbol of power and status, setting them apart from other social classes. 

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Over a century ago, gold was perceived as a luxury item, reserved for special occasions and the affluent. However, today, it has transformed into a common household commodity, with widespread ownership and usage. This transition exemplifies a broader trend where items once considered luxury goods have seamlessly integrated into everyday life. 

In the past, the demand for luxury products in India was primarily driven by the wealthy class, seeking exclusive and prestigious items to signify their social status and wealth. 

However, in recent years, the demand has also been steadily increasing from the growing middle class, as rising incomes and aspirations propel more people to seek luxury goods as symbols of success and achievement. 

Indian consumers were traditionally known for their price sensitivity, prioritising affordability over other factors. However, this paradigm has shifted in recent times towards a more product-centric approach rather than solely focusing on price.

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Following the COVID-19 pandemic, there has been a noticeable shift in consumer behaviour, with many Indians embracing the concept of "revenge shopping." This trend, characterised by a surge in spending on luxury goods and experiences, has now become mainstream as Indians are increasingly venturing out and indulging in luxury purchases.

Factors driving the luxury boom

Similar to the surge in demand witnessed in China during the early 1980s, India is currently experiencing a notable uptick in the desire for luxury goods. This trend is being fueled by various factors, including the growing number of Ultra High Net Worth Individuals (UHNWIs), the expansion of the middle-income class, the introduction of entry-level luxury products by global brands, increased demand from Tier 2 and 3 cities, and the proliferation of e-commerce platforms.

Another significant factor driving Indians to indulge in luxury shopping is the increasing use of credit cards for spending. According to recent data from the Reserve Bank of India (RBI), credit card spending in India experienced a remarkable 26% year-on-year (YoY) surge in February, reaching ₹1.5 lakh crore.

In February 2024, the total number of credit cards issued by banks in India surpassed the 100 million mark, with an addition of 1.1 million cards compared to January. 

India's economy has seen steady growth in recent years, resulting in a rise in disposable income. This has prompted the middle-class section to increase credit card spending.

Also Read Credit cards in India to soon hit 100-million mark, RBI data reveals

A report titled “The Rise of 'Affluent India” by Goldman Sachs Research forecasts that the number of affluent consumers in India will rise from approximately 60 million in 2023 to 100 million by 2027.

According to the Wealth Report 2024 by global consultancy Knight Frank, the number of ultra-high-net-worth individuals (with a net worth of over US$ 30 million) is projected to increase from 13,263 in 2023 to 19,908 by 2028.

In 2023, India witnessed a 6.1% annual rise in the UHNI population compared to the previous year, reaching 13,263 individuals. Moreover, the counts of high-net-worth individuals (HNWIs) and very-high-net-worth individuals (VHNWIs) are also expected to experience significant growth in the next five years. 

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This surge in affluent individuals indicates a flourishing demand for the luxury market in India. According to a report by Bain and Company, India's luxury market is forecast to expand to 3.5 times its current size, reaching the US $85 to $90 billion mark by 2030 due to rapid economic growth. These forecasts position India as the fastest-growing luxury market globally.

Ultra-premium shopping malls - a new paradigm in luxury retail

There has been a sharp growth in ultra-premium shopping malls across the country in recent years. Amidst the luxury boom, Asia's wealthiest individual, Mukesh Ambani, made a significant move by launching the country's largest luxury shopping centre, JIO World Plaza, in November last year, at the heart of Mumbai.

Global luxury brands like Louis Vuitton, Gucci, Burberry, Valentino, Dior, Balenciaga, Rolex, Bottega Veneta, Cartier, Bulgari, Jimmy Choo, and many more can be found at this 750,000-square-foot shopping centre. 

Conversely, the mall is now home to the first Tiffany & Co., Versace, Bulgari, and Pottery Barn stores in India. The mall boasts 66 internationally recognised brands in total. 

Also Read: Italian luxury shoe brand Santoni to expand presence in India

On the other hand, the country's leading e-commerce stores for fashion and lifestyle products, such as Myntra, Ajio, Tata Cliq, Nykaa, and NNNOW.com, all have luxury online stores.  

Businesses that serve the ultra-wealthy are also paying attention. For instance, HSBC has returned to India following a nearly eight-year hiatus, introducing its Global Private Banking (GPB) division to serve the needs of ultra-high-net-worth professionals and entrepreneurs. 

Soaring demand for high-end wheels to lavish homes

The demand for luxury homes in India is witnessing a rapid ascent, fueled by substantial investments from high-net-worth individuals (HNIs) and ultra-high-net-worth individuals (UHNIs) into the luxury housing market. Cities such as Delhi, Mumbai, Bengaluru, and Hyderabad are witnessing a surge in demand for premium flats, prompting developers to introduce more projects catering to this segment.

In January, real estate giant DLF sold 1,113 luxury apartments priced above ₹7 crore in Gurugram, raking in ₹7,200 crore within just three days of pre-launch. Similarly, Signature Global sold 1,008 luxury flats in a new Gurugram housing project for over ₹3,600 crore within days of its pre-launch.

Also Read: Demand for luxury housing in India surges, villas most popular in metro cities: NoBroker

According to real estate consultancy JLL India, sales of luxury homes valued at ₹50 crore and above soared by 51% in 2023, reaching ₹4,319 crore in value. In 2022, at least 29 homes worth ₹2,859 crore were sold in this price category.

Luxury homes priced above ₹4 crore witnessed a remarkable surge of 75% in 2023, totalling 12,935 homes compared to 7,395 homes in 2022, as reported by real estate consultancy CBRE.

The Knight Frank India Attitude Survey, part of the Wealth Report 2024, revealed that 32% of India’s UHNIs allocate their wealth towards residential real estate assets, with nearly 14% of the residential portfolio allocated outside India.

Approximately 12% of the country’s UHNIs plan to purchase a new home in 2024, mirroring a similar percentage of wealthy individuals who acquired new homes in 2023.

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Knight Frank India's findings also indicate that, on average, an Indian UHNWI owns 2.57 homes, with a notable 28% renting out their second homes in 2023. The Wealth Report 2024 identifies Mumbai as a prominent luxury residential market globally, ranking it eighth on the list, while Delhi and Bengaluru secured 37th and 59th positions, respectively.

Besides, luxury car brands in India also experienced remarkable sales in 2023, underscoring the growing demand for high-end vehicles. Mercedes-Benz India achieved a historic milestone, selling over 17,400 units and marking a notable 10% growth. Audi also reported a substantial 89% increase in retail sales, reaching 7,931 units compared to 4,187 units in the previous calendar year.

BMW India witnessed an 18% surge in sales, reaching 14,172 cars, while Audi India experienced a remarkable 90% growth, nearing its previous peak with approximately 9,000 units sold. Lexus has also registered the best-ever sales in 2023 since its inception in 2017 in India.

The domestic luxury car segment as a whole witnessed a robust annual growth of 28%, culminating in sales of around 48,500 units. These impressive figures indicate a thriving luxury car market in India, with projections suggesting that sales could surpass the 50,000-unit milestone in 2024.

Projections for 2024

The luxury goods market in India is forecasted to reach a revenue of US$7.86 billion in 2024, according to Statista. The largest segment in this market is Prestige Cosmetics & Fragrances, which is estimated to have a market volume of US$2.28 billion in 2024.

Additionally, online sales are anticipated to contribute 2.6% to the total revenue of the luxury goods market by 2024, Statista data showed.

Disclaimer: We advise investors to check with certified experts before making any investment decisions.