The Role of Family Offices in India’s Economic Growth

Family offices in India are emerging as pivotal players in the nation’s economic landscape, driving growth across sectors. These private wealth management entities, traditionally focused on preserving and growing family wealth, are now increasingly involved in investment strategies that support startups, infrastructure projects and sustainable initiatives. As India journeys towards becoming a global economic powerhouse, family offices are leveraging their resources and expertise to create a significant social and economic impact. 

Understanding family offices 

A family office is a specialised advisory firm that manages the wealth of affluent families, focusing on the growth and intergenerational transfer of assets of Ultra-High-Net-Worth Individuals (UHNIs). There are two main types of family offices: Single Family Offices (SFOs), which serve one family, and Multi Family Offices (MFOs), which cater to multiple families. SFOs typically offer a range of services, addressing the diverse needs of an entire family, while MFOs focus on essential areas like financial management, legal advice and trust services. In India, family offices provide services such as wealth management to oversee investments, customised financial planning and estate planning for a smooth wealth transfer. They also offer tax advisory to optimise tax positions, support philanthropic efforts and provide legal and compliance services to ensure regulatory adherence. Additionally, family offices focus on risk management to protect assets and may offer lifestyle and concierge services to assist with daily needs. Finally, they help establish family governance frameworks, facilitating decision-making and succession planning, ensuring that wealth is preserved and managed across generations. 

Growth of family offices in India 

Family offices in India have seen massive growth over the last 5-6 years. According to a PwC report, the number of family offices have risen almost seven times over the past six years, from 45 in 2018 to nearly 300 in 2024. This increase reflects a shift towards more structured and professional investment management and succession planning among wealthy families. Additionally, Sundaram Alternate Assets (SAAL) projects that Assets Under Management (AUM) for these family offices will grow by 50%, reaching US$ 45 billion within the next three years from US$ 30 billion as of 2024. 

Source : PwC report

Between 2023 and 2028 India is anticipated to witness the highest growth in the number of UHNWIs worldwide. Knight Frank’s ‘Wealth Report 2024’ indicates that the number of ultra-rich Indians will rise by 50.1%, reaching nearly 19,908 by 2028, up from 13,263 in 2023. This anticipated growth in UHNWIs will likely further drive the expansion of family offices in India, reinforcing their vital role in wealth management and contributing to the country’s economic growth. 

Source : Business Standard, Note: F-forecasted 

How family offices support India’s economic growth 

• Strategic investments: Family offices promote various industries by making sound investments. They facilitate generating income to the firms that they are investing in besides offering employment, innovation through strategic investing of funds in core industries such as technology, healthcare, real estate, and renewable energy. Among these sectors, FinTech is a major focus for Indian family offices, attracting substantial funding. As per a PwC report, in 2023, the fintech sector raised US$ 853.6 million. 
• Support for startups: Family offices play a vital role in supporting entrepreneurs and enhancing their personal wealth by investing in new economic businesses. Many family offices are increasingly directing funds toward startups, especially in the technology sector. By providing capital and mentorship, they foster entrepreneurship, which is essential for economic dynamism. According to a report by Praxis Global Alliance, family offices in India participated in over 1,700 startup investments between 2014 and 2019. It is estimated that Indian family offices will contribute around 30% of the projected US$ 100 billion to be raised by Indian startups by 2025, with many reaping significant returns from their early investments.  
• Job creation and economic resilience: Family offices actively support job creation in India by investing in new ventures across sectors. Their financial backing enables startups to grow, which stimulates local economies and fosters self-reliance. The growth of family offices boosts investments in tier II and tier III cities, thereby encouraging economic development. It creates a balanced distribution of economic opportunities across various regions of the country, thus generating new job opportunities and growth prospects in previously lesser-focused cities. 
• Philanthropy and social impact: Family offices are supporting the economy in India through philanthropy and social impact initiatives. According to the India Philanthropy Report 2024, private donations rose by 10% in FY 2023, with family philanthropy growing by 15%. Overall, it is driven more by ultra-high- and high-net-worth individual giving. This trend is expected to continue at a 16% annual rate through FY28. By adopting strategic approaches to wealth management, family offices can establish ‘family philanthropy offices’ that align their investments with philanthropic goals, maximising financial returns and social impact, contributing to the development of society. 

Factors driving the growth of family offices 

Family offices are growing rapidly in India through various salient factors. First, the growing UHNWIs contribute to increasing family offices in India and have grown at a CAGR of 37% from 2018 to 2024. Furthermore, globalisation allows these offices to diversify investments internationally, while favourable regulatory changes, like those in GIFT City, offer tax incentives that attract more families. Recent reforms in taxation also make wealth management through family offices more appealing like including a uniform 12.5% Long-Term Capital Gains (LTCG) tax and the abolition of angel tax and tax incentives for family offices in Special Economic Zones (SEZs). Additionally, the availability of high-quality financial, legal, and accounting services, combined with access to a skilled talent pool, provides a strong foundation for their operations. Culturally, there is a strong tradition of wealth preservation, prompting families to focus on legacy planning and effective governance. Together, these factors shape the future of family offices in India, positioning them as vital players in the financial landscape. 

Challenges faced by family offices in India 

Succession planning and governance of family offices in India have been a challenge, but these could be turned into growth opportunities. While many family businesses recognize the importance of preserving their legacy, only 63% have formalized governance structures, according to a PwC report. Implementing comprehensive governance frameworks, including shareholder agreements and family constitutions, can help families ensure smoother transitions and reduce conflicts. Besides this, increased cybersecurity and regulatory compliance risks necessitate more effective risk management frameworks. Advanced cyber measures and new technologies, such as AI, can be used proactively to assess the risks of family offices, making them better resilient. These measures avoid risks while further building a basis for sustainable success and a legacy for the future. 

Road Ahead 

The future for family offices in India holds significant promise as they increasingly contribute to the country’s economic development. With the ultra-high-net-worth individuals predicted to increase by more than 50% in 2028, family offices are adopting structured investment management and strong succession planning initiatives. This growth reflects a shift towards professionalism and a commitment to legacy preservation. Family offices also recognise the importance of sustainable and impact-driven investments, particularly in high-growth sectors such as healthcare, technology and renewable energy. They increase their financial returns and societal value by moving capital into these areas. They also must adopt the use of technology as the regulatory environment continues to change and compliance becomes an ongoing challenge. This adaptability will now prove to be very necessary for them to remain relevant and maintain their position as holders of generational wealth - a key player in the developmental economics of India.