First to start let’s understand what is NPA?
NPA is an asset which is not performing as per market condition and our expectation and calculation. So the investment on this asset is like using cycle for travelling 400 kms you would reach the destination but probably after 10-15 days. So now what may be NPAs for us as an Individual. We invested in car in place of house and the value of car depreciated to half within six months now we are paying both house rent and car EMIs this is NPA. The car may be a priority but you know you cannot sleep or live in car so think before investment not after is my point. Another example we can purchase a flat in the city with 50% return of age 15 yrs and a plot of same price with 10% return of infinite age. Which option you would choose. Now the point here is house on plot after 15 yrs also needs a reconstruction and if you want to resale the land the purchaser is not going to give money for your house as he is going to demolish the construction and he will do a fresh new construction.
Here I want to slip in a point here that the above mentioned choices we come across daily.
So next question could be what if I am stuck in with an NPA?
There may be three possible solutions to any NPA. Taking second example
1st option:- remodel your house and push it on rent and with rent cover up your investment meanwhile search for a possible buyer who is interested in your construction more than on plot and you possibly you can get rid with good amount in hand.
2nd option:- Construct a floor or two above you and give it on rent or can sell it with a good amount as a flat. Later sell your portion and land with good amount.
3rd Option:- make it a commercial space like a office or school or may be a Godown and with the rent of it cover up the expenses and purchase the next plot to your land and expand your office area with that land.
So my point is these options could be implemented if you do a SWOT analysis to get away or make money out of your NPA so if you do a SWOT analysis of your investment before and keep track of market after and you would never face challenge of NPA. Even a trendy and happening asset today could be a NPA of tomorrow. So above techniques could save you from NPA and make your NPA a performing one.
Similar issues we face with our investments in FD PostOffice and even with shares. Outcome of these challenges is your money stuck in nowhere. So to avoid this make wise decisions and if you are not able to do a market research take time and purchase because you may end up paying more of that investment but you won’t regret paying more.
Last and most important know when to exit so keep your eyes open and don’t settle for something which you want to get rid off over a period of time.
Tele-Columnist!