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White Elephant

Reviewed by Sweta | Updated on Jan 05, 2021



White elephant refers to an asset or any property which is quite expensive to maintain in comparison to its usefulness or productivity. The property or asset carries a high cost of maintenance, and it rarely results in a profitable operation. The term is from customs of Thai origin where white elephants of a rare breed were part of gifts to the Monarch.

Understanding White Elephant

In the financial context, the term white elephant gets associated with an unprofitable or unviable business or ventures. The operational costs are high, the assets' maintenance and repairs are high, and there are no profits to the owner. The business assets may be quite large and difficult to find a suitor to sell and exit from the investments.

In general, and more related to the attractive investments in the decade of 2010s and some earlier, real estate was a profitable business. But after the subprime crisis in 2008, many people who invested at high prices could not realise enough to maintain their assets. The borrowers were unable to realise rents to pay the home loans and service the loans.

Due to various reasons, an investment may become unprofitable after its purchase or after investing. The factors could be personal financial problems, or they could be an external financial crisis. An external crisis affects the general economy or a sector, thereby diminishing the expected returns on the investment.

White elephants can become a burden on the investor, especially when its realisable value diminishes beyond the cost of the investment. The investment may be by the government in highway development, smart city projects or other infrastructure projects. At a common man's level, the investments may be securities, fixed deposits, real estate and so on.


White elephant often arises in an inflationary environment which consists of asset price bubbles. The prices of various assets, such as equities, gold, and real estate, are quite high. The loans or debt for the various assets and investments can be equally high.

The environment is of high risk and high return. In such a scenario, the high debt or leverage may lead to defaults and a crash in prices causing many assets to turn into white elephants.

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