Capitalizing on India's Diaspora

Indians are coming back | How DLF is the biggest beneficiary?

The Power of India’s Diaspora

Since 2010, India has boasted the world's largest diaspora, spanning continents and countries. According to Ministry of External Affairs data, the tally includes approximately 1.36 crore Non-Resident Indians (NRI) and about 1.86 crore Persons of Indian Origin (PIO), totalling 3.22 crore Overseas Indians (OI) worldwide. This growing diaspora is actively engaged in spending, saving, and investing, both within India and globally. As per the Reserve Bank of India, NRIs' bank accounts in the country received inflows of $7.99 billion (£6.27 billion) in fiscal year 2023 – more than double the $3.23 billion (£2.54 billion) from the previous fiscal year. This further has increased to inflows of $13 billion in fiscal year 2024! In essence, NRIs and PIOs contribute to India's soft power, enhancing its global stature and diplomatic influence. However, they now also wield significant economic power—the power of money.

Today, we'll delve into why DLF presents a compelling opportunity amidst the significant influx of NRIs planning to return to India. Long-time readers of ‘Finding Outperformers’ will recall our bullish stance on DLF since late 2022. With over five blogs dedicated to the topic, the share price of DLF has more than doubled since our initial coverage. Our structural optimism on DLF remains steadfast, as articulated in our latest blog published on January 1, 2024 - (Link here).

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NRIs want to come back!

An increasing number of non-resident Indians (NRIs), who ventured abroad decades ago in pursuit of better opportunities, are now contemplating a return to India's welcoming shores in their golden years. A recent survey conducted by SBNRI, a FinTech platform, indicates that at least 60% of NRIs residing in the U.S., the U.K., Canada, Australia, and Singapore are considering repatriation to India after retirement. The survey highlights that 80% of NRIs in Australia and Singapore, 70% in the UK, and 75% in the USA envision returning to India as part of their retirement plans, followed by 63% of Canadian NRIs. Furthermore, the research suggests that a substantial number of NRIs have already begun investing in India to support their decision to relocate post-retirement.

What could be driving this trend? India's rapid digital transformation, burgeoning middle class, improving infrastructure, enhanced lifestyle amenities, cultural familiarity, robust financial system, accessible healthcare, and expanding economic prowess converge to create an irresistible allure for retiring NRIs, who departed from a vastly different India in their youth.

India's emergence as a retirement destination is also bolstered by its rapid strides towards attaining developed nation status, coupled with its resilience amidst global crises and advancements in medical technology. These factors collectively reshape the retirement landscape of the country.

Moreover, it's not just about retirement. Individuals in their 30s and 40s living in the USA are experiencing a 'Fear of Missing Out' for not participating in the world's fastest-growing major economy, poised to become the third-largest economy globally by 2030. Even exemplars like Aadit Palicha and Kaivalya Vohra , who dropped out of Stanford college at the age of 19 to establish Zepto in India, a major player in India's quick commerce sector, valued at approximately $3 billion today, underscore this trend. These instances mark the beginning of a structural shift where successful NRIs will increasingly invest in or return to partake in India's burgeoning economic prosperity. One must note, India today contributes about 20% of the global growth happening in the world, which is expected to touch 25% to 30% in coming years implying a greater share of worldwide growth being contributed by just one country.

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Indians - Amongst richest communities on foreign land

Building upon the narrative of affluent Indians abroad, an article published in The Economist in 2023 highlighted that India's diaspora stands as the largest and most influential in history. Intriguingly, in 2021, India received $89.4 billion in remittances, according to a World Bank report, securing its position as the top global recipient. Projections by the World Bank estimated India's remittance flows to reach $100 billion in 2022, a figure that surpassed expectations, hitting $110 billion. By the calendar year 2023, this figure surged further to $125 billion, marking an impressive 18% compound annual growth rate (CAGR) over just two years, amid global banking institutions’ tightening liquidity conditions. Here's a comparative look at how India fares among other middle and low-income countries in terms of remittance receipts (in billion $):

The reasons for the recent rise in remittances are the changing profile of the NRIs. Between 2016–17 and 2020–21, the share of remittances from the US, the UK, and Singapore increased from 26% to over 36%, while the share from the five GCC countries (Saudi Arabia, United Arab Emirates, Kuwait, Oman, and Qatar) dropped from 54% to 28%, according to an RBI survey.

Indeed, the substantial remittance inflows from Indians residing abroad, particularly in developed nations like the USA, signify a notable trend. Recognizing the significance of remittances to India's GDP, the government has been actively engaged in efforts to reduce the costs associated with sending remittances to India. These endeavours include advocating for lower remittance costs at international forums such as the World Trade Organization (WTO).

It's worth noting that remittances today equal to nearly ~ 3% of India's GDP. Moreover, they are growing at a pace faster than the economy in nominal terms, underscoring their increasing importance as a driver of economic activity and stability.

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The “Ghar Vaapsi” factor

Post-COVID, DLF has ascended as an emblem of opulence, particularly in the North Indian/Delhi NCR region. The sale of flats in DLF's premier property, The Camellias in Gurugram, fetching prices in the range of Rs 90 to 100 Crores per flat, has established a new benchmark in luxury real estate. Across various projects in the Delhi NCR region, DLF has witnessed a remarkable increase in project property values, with some experiencing a surge of 2X to 3X from 2019 to 2023.

A significant driver of this price surge is the increasing involvement of NRIs in India's property market, with NRIs accounting for 23% of DLF's pre-sales/sales for the Financial Year 2024. This figure marks a substantial increase from the pre-COVID era when NRI pre-sales stood at or below ~10%. DLF has bolstered its NRI outreach program, deploying teams and channel partners (property dealers) to key NRI countries such as the USA, UK, Australia, UAE, and others, primarily in the second half of the financial year.

In the current year as well, the outreach efforts were concentrated from January to March 2024, during which DLF presented multiple upcoming projects slated for the next 1 to 2 years, alongside showcasing past successes and available ongoing inventory (if any). This outreach assumes greater significance as DLF plans to expand its footprint beyond the North India/NCR region, venturing into key cities like Mumbai and states like Goa, while also launching luxury projects targeted at the Chennai market. This strategic move indicates DLF's ambition to establish itself as a pan-India developer, offering NRIs a reliable brand with a diverse range of options to consider when contemplating a return to India.

In a recently organized award function by DLF called ‘Star Awards’ for its team and NRI channel partners to celebrate the success of selling Rs 3,400 Crores worth of properties to NRIs in FY24 which is the highest amongst any real estate player in India ever - a figure which is much higher than Rs 300 - Rs 500 Crore of annual NRI sales DLF used to do before covid. In the event, DLF also set up an ambitious target of Rs 30,000 Crores of pre-sales in the next 5 years combined which turns out to be a 19.6% estimated growth CAGR in the next 5 years for DLF.

It's worth noting that DLF operates on a scale unmatched by any other real estate player in India, particularly in its outreach and sales efforts targeting Indians residing abroad. This strategic approach holds the potential for exponential growth in the years ahead. Below is a screen snip from a video posted by a channel partner on YouTube:

Even though NRIs are yet to return to India in big numbers, NRI money is surely returning and investing in India. We shall wrap up today’s blog with an interesting comment dated 26th May 2022 by DLF’s management -

“So, if you ask my personal opinion, what Gurgaon was nobody could have imagined it today where it is. I hesitate to say, but I think we really can't even imagine what it is going to be in the next 5 to 10 years. It could be a far more powerful machine than we are all expecting.” - Rajiv Singh, Chairman, DLF

DLF went on to do a record ~Rs 15,000+ Cr worth of pre-sales each in FY23 and FY24, where they had just done Rs 13,000 Cr in pre-sales in FY16 to FY21 combined, boosted by robust demand of locals as well as NRIs :)

Let me know your thoughts in the comments. Thank you for reading till here and I hope you find this blog useful. Find me on LinkedIn here.

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Disclaimers-

We are not a SEBI registered advisor; personal investment/interest in the shares exists for the company mentioned above; this isn’t investment advice but our thought process; DYOR (do your own research) is recommended; Investing & trading are subject to market risk; the Decision maker is responsible for any outcome.