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Global billionaires and ultra-high net worth (UHNW) individuals from India are now setting up family office branches overseas. A study by Henley & Partners (H&P) shows that 8,000 of India’s richest people have moved out of the country this year. The report also suggests that this trend will continue in the coming years as India will struggle to keep its wealth in the country.
Elsewhere, billionaires from India now have two new destinations to set up their headquarters branches – Dubai and Singapore. For example, Krishna Kumar Bangur, Chairman of Graphite India, originally from the Bangur family in Kolkata, is now a proud resident of Singapore. The chairman of Landmark Group Micky Jagtiany also lives in Dubai. Besides these two, business tycoons like Adar Poonawalla and Hinduja Group also live abroad.
The latest to join the club is Mukesh Ambani, chairman and managing director of Reliance Industries (RIL), who is reportedly setting up a family office in Singapore.
Ambani, Asia’s second-richest man, has named a person in charge of his first overseas family office, which is expected to be up and running within 10 to 12 months.
This raises a related question, why is the creamiest part of India’s economy moving out of the country?
A variety of reasons can be considered behind this high level of outflow. Primarily ultra-high net worth individuals are exploring family office avenues to manage their wealth, with Dubai, Singapore and Canada emerging as some of the top destinations for setting up an office.
high tax rate
One of the main reasons for the migration of billionaires in India may be the high tax rate on personal income. As Saraswathi Kasturirangan, Partner at Delloite India, said in The Economic Times (ET): “India’s 30% tax rate plus a 37% surcharge brings a top marginal tax rate of 42.74%. While lowering personal tax rates should be a priority, The number of days of stay in India to tax global income is also critical.”
To avoid such high tax rates, Indian business icons prefer to leave the country and settle down elsewhere.
Open up foreign markets
In terms of building a good consumer base overseas, the business icon is looking for a way out of India.
Why are Singapore and Dubai both attracting billionaires?
Some Indians are setting up family offices overseas, including in Singapore and Dubai, due to reasons such as lower capital gains taxes and ease of doing business.
Singapore’s emergence as an international financial centre with a strong regulatory framework is a key reason why Indian billionaires are moving out. Compared to India’s 30% corporate tax rate, Singapore offers only 17%. As a result, the number of family offices in Singapore increased fivefold between 2017 and 2019, nearly doubling from 400 at the end of 2020 to 700 in 2021. Additionally, a strong legal system and easy access to world-class financial advisors are other reasons for where there is money to explore.
Besides Singapore, Dubai is another destination for the wealthy. In August this year, the DIFC Board of Directors approved the opening of a global hub for family businesses and private wealth in the UAE.
The UAE recorded a net inflow of more than 2,000 millionaires in 2021, with an increasing number of ultra-high net worth families using the UAE as the home of their family office.
According to a report by the Boston Consulting Group, about 41% of wealth in the UAE in 2021 will come from ultra-high net worth individuals, and this proportion is expected to grow to 43% in 2026.
Can GIFT City compete with Dubai and Singapore?
India is seeking to lure the world’s billionaires to its Gift City in a bid to build a global financial hub. GIFT City covers 886 acres and has a Special Economic Zone (SEZ) that offers a variety of services. It is home to India’s first International Financial Services Centre and also has a Domestic Tariff Area (DTA).
In July, Indian Prime Minister Narendra Modi said Gift City should be a centre of excellence, comparable to the financial centres of the African continent,
“I want GIFT to be the gateway to global equity and debt capital for sustainable development,” Modi added. “GIFT should compete with hubs in Dubai and Singapore.”
In response to the continued export of Indian capital to these international financial centres, India established its own IFSC at GIFT City in Gandhinagar to develop a global financial centre in India comparable to the likes of Singapore and Hong Kong.
India is trying to become a market for foreign currency-denominated contracts. Gift City offers a range of tax breaks, but customer mobility is very low.
Various tax incentives, tax exemptions and relaxations have been offered over the past few years, creating a level playing field for GIFT IFSC to compete with other IFCs.
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