personal finance

Why you need to monetise those idle assets

By Uma Shashikant

Last week we visited a friend who owns a farmhouse on the outskirts of Mumbai. Set amidst a mango grove, the renovated house looked beautiful. We asked him how often the family had been able to ‘get away’ and enjoy it. They managed to visit twice a year, though weekend trips was the original plan.

We invest in assets we do not use. Not in our lifetimes at least. We don’t know if the next generation will find merit, utilise the assets, or muster the courage to sell it. The sanctity we bestow on heirlooms is why unused pure China teasets still sit in our crockery cupboards. Too expensive to use and too precious to sell. Idle assets all the same.

My friend owns a silk sari passed down from her grandmother. She never fails to bring it out when someone visits. She has to wow them with her splendid food, beautiful home, and the ancient treasures she has inherited. This one has real gold threads woven into it and has precious stones stitched on it. My friend has never worn the sari. Not once.

We derive great satisfaction from hoarded assets. That we do not use them at all does not seem like a problem. It seems like a badge of merit. We live with great humility and forbearance even as we have assets worth lakhs or crores hidden in our closets. We talk about them though.

That is the irony. Our pride in the asset does not come from any special qualities it has. We do not even have the ability to nurture it as it should be, or appreciate the finer aspects of it. Our friend has a swimming pool in the backyard, which is an abomination while living amidst nature. Why would you want chlorinated dead water to lie in, while gushing natural streams with ionized water are a few yards away? Our friend will only subtly bring up the cost to build the pool, and the pretentious burden of maintaining it.

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My friend would not give her sari to the museum, where others can appreciate it. But she will tell us it is priceless, and how another one like that cannot be bought or worn today.

We thus lean on hoarded assets for their monetary value, and the prestige that comes from the ownership of something that is so exclusive and expensive. But we cannot see it as an asset that needs to be managed for the money it can generate, or the place it has in our personal finance equation. These assets are just means to inflate our net worth, make us feel good. But they are useless to the finances of the family. Unless there is distress.

Unutilised assets are so common in households around us. Every NRI friend I have owns at least two properties in India. One is a house for the parent to live in, or a retirement villa for them. The other is a more expensive flat or house, which is supposed to be an investment. It is kept locked, or rented for a paltry yield.

Some of them nurture grand dreams of coming back some day and buy villas in new housing complexes designed for the NRI, with useless lawns and wisteria creepers. Mostly nothing happens to these plans, and the children neither agree to return, nor care for the asset.

There are plots that some buy. Even simple middle class households fall into this trap.

There is no purpose in that investment. It is just bought and kept in some nook beyond the suburbs. Nothing is built, nor does anything but weeds grow. But the household is proud of its asset. Some day, generations later, someone will sell and feel happy about the inheritance. Until then, it lies there, and everyone is convinced that the purpose of the land is to lie fallow.

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You will know of jewellery in lockers seldom used. This protective guarding of assets without using them extends to post office and bank deposits, equity shares of unknown companies bought and kept without review for years and deposit receipts of finance companies that have fled the scene. Some day all this will be useful, is the thinking. As of now, they can remain idle.

The idea that money is capable of earning returns for every day it is deployed into something useful, is not grasped by many. Oh, everything is not about money, people tell me. But spend some time talking about their lives, you find that families are obsessive about their everyday money decisions. Or make big money decisions from time to time, without addressing the idle assets.

The friend who has a farmhouse also has a dentist wife, who wants to expand her practice. She is convinced that the house was more important than investing in her clinic. Let me earn more from my practice and reinvest that she says. She cares for the RoI on a profession she earns from every day; she doesn’t care about RoI on the house the family uses merely 10 days in a year.

People who buy property as ‘investment’ do not buy commercial property, which can fetch a regular income. They build houses, spend a fortune on interiors, and convince themselves that the paltry rental income, if at all, is fine. A 10X10 space rented to a bank’s ATM will earn better, but we don’t see such thinking when it comes to personal assets. Personal assets must have marquee value, monetary benefits be damned.

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The sorry fallout of this hoard of unutilised assets is a compromise in our current lives. Money has an opportunity cost. It has alternative uses other than being locked into assets. Low rental income is a compromise; you are earning far lesser current income. You may be investing less or not at all in your hobbies, your current interests, your current professional growth, from the fear that the future holds something dark that can be redeemed only by these idle assets.

When I told my friend that her terrace garden needs a round of vermicompost, she asked me if that would be too much of an expense. Wouldn’t the coffee grounds she throws in be enough? Yes, the same woman who owns the real gold sari and swears that she simply loves gardening.

(The writer is Chairperson, Centre for Investment Education and Learning)


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