Businessworld: Art of the Matter

The art market in India is now playing a major role in the investment plans of young Indians.

ATIYA HUSSAIN

Standing in front of a painting — a meditative, Madonna-style Anjolie Ela Menon — at an exhibition in September 1998, Uma Nair surprised herself. “For the first time I saw a work of art and felt I had to possess it,” she says. She didn’t baulk either when she heard the price, Rs 40,000, which was quite steep at that time. She paid for it in monthly instalments of Rs 5,000 over eight months. There was another surprise in store for her. “Before the night was out, the French ambassador had offered me Rs 3 lakh for it,” laughs Nair.

Times have changed, though. Nair is quite sure that in 2006 she wouldn’t be able to pull off her love-at-first-sight purchase of nearly a decade ago. “Today, a very small Anjolie would go for Rs 3 lakh-4 lakh,” says Nair, who was a schoolteacher before her interest in art led to a career as an art critic. There have been many more offers after the French ambassador’s. Nair, however, is not selling. She thinks the painting would now fetch between Rs 35 lakh-40 lakh.

Her purchase had been a collector’s instinct, an intimate connection with the work, an impulse that she says is increasingly crowded out by rich novices. “Collecting art is the new pastime for cash-rich Indians. For them, it’s not a passion, only speculation.” And unlike the collector, the buyer looks for resale value. This profound difference has changed the way many galleries operate.

“Eight years ago, a middle-class critic like me could buy because the gallery was not interested in escalating prices,” says Nair. Even if she could afford it, Nair doubts if she would be interested in buying anything like her painting these days. Other buyers — nouveau riche Indians, NRIs and a small but growing number of foreigners — have no such qualms. As a result, business is booming for art galleries in the metros. Auction houses are also doing well; details of Mumbai-based Saffronart’s online auctions often make it to newspapers while Osian’s no longer complains of the dearth of buyers that it faced earlier.

Unlike in the 1950s and 1960s, when patrons were mostly foreign diplomats, the market for Indian modern and contemporary art is growing rapidly as Indians become richer and more interested in art, says Abhay Sardesai, editor of the quarterly journal ART India. With stockmarkets in a state of volatility, some reckon art may be the best investment going. “In the metros, especially among younger executives between 28 and 40, anyone who is not collecting art feels he is missing out on something. You’d feel the same if you weren’t buying stocks when the Sensex was climbing,” says Arun Vadehra, whose Vadehra Art Gallery opened in 1998 in New Delhi.

For sure, the art market is on a worldwide bull run. A survey of 150 international contemporary art collectors, advisors, auction experts and dealers conducted in May by ArtTactic, a London-based market research firm, shows that bulls outweighed bears 14:1, the strongest reading since May 2005 when the company launched the indicator.

Yet, there is some concern that things could change fairly rapidly. “The highest risk to the art market is the state of the global economy — higher inflation, rising interest rates and the potential for slower growth,” says Anders Petterson, founder of ArtTactic. “The art market is unlikely to react instantly, but it will gradually become a factor over time.”

Petterson was speaking about the global art market, but buyers familiar with Indian art sound equally cautious. “When everyone says the same thing, it’s time to withdraw,” says Masanori Fukuoka, director, Glenbarra Museum in Japan. Fukuoka has built a private collection of over 100 works of Indian art over the past 16 years, including those of M.F. Husain, V.S. Gaitonde, Tyeb Mehta and Akbar Padamsee. This is one of the biggest collections of Indian modern and contemporary art in the world.

Fukuoka is significant for another reason. It was his 2002 purchase of Tyeb Mehta’s Celebration for $317,500 (Rs 1.5 crore) at a Christie’s auction in New York that broke the psychologically important Rs 1 crore barrier, and raised the bar for Indian art sales. And yet, in 2006, Fukuoka says that funds for his private collection are limited, and so to buy a work he wants, he has to sell another.

Osian's Tuli

In 1987, when the first auction of Indian contemporary art was held in India, Maqbool Fida Husain’s Mother Teresa sold for Rs 5 lakh. Two years later, his Tribute to Hashmi sold for Rs 10 lakh. In 1992, Amrita Shergil’s Village Group sold for Rs 11 lakh at Sotheby’s auction in New Delhi. Thereafter, the market lost a bit of its buzz, but sentiment recovered after Sotheby’s auction in 1995 of works from the private collection of Chester and Davida Herwitz. At that time, Tyeb Mehta’s work was estimated around $8,000-12,000, while M.F. Husain’s work was estimated at $20,000-30,000.

And then came Fukuoka’s buy. Until that point, according to Vadehra, prices of Indian modern art had been much lower than those from other developing countries. Fukuoka’s purchase paved the way for a climb in prices that has benefited masters and younger artists alike.

When M.F. Husain reached the Rs 1-crore mark he was gleeful, recalls Ilaa Dev Pal, his biographer. “He was excited when he got the first cheque. He brought its photocopy to me,” she says. ‘Here’, she remembers him saying, ‘I knew you wouldn’t believe it.’ Husain then went on to sign a deal that was perhaps more spectacular for its marketing genius. In 2004, Swarup Group of Industries agreed to buy 100 paintings for Rs 100 crore, an arrangement that was purely business for promoter Guru Swarup Srivastava. It wasn’t perhaps the happiest of agreements, given Srivastava’s troubled history in the aftermath of the deal and Husain’s exile from India after a bounty was issued for his head, but it certainly made headlines.

Still, the record for the most expensive Indian contemporary painting remains with Mehta, who produces far fewer works than the prolific Husain. Mahisasura, which sold for $1.58 million (Rs 6.96 crore) at Christie’s New York auction in September 2005, was the first work by a contemporary Indian artist to sell for more than $1 million. Very close behind is Amrita Shergil’s Village Scene (yes, the same one that went for Rs 11 lakh in 1992. It was called Village Group in 1992 and sold as Village Scene this year), which sold for Rs 6.9 crore at Osian’s auction in New Delhi in March.

Above: Amrita Shergil's Village Scene: Rs.11 lakhs to Rs.6.9 crores in 13 years

If you had been farsighted enough to get into that kind of action, it would have meant an annual return of nearly 36 per cent compounded annually for thirteen-and-a-half-years. Even younger artists such as Atul Dodiya have seen their prices soar. Dodiya’s As Though He Listened sold for Rs 1.2 crore at Saffronart’s online auction in March. “It’s a good time for artists, “ says Usha Gawde, deputy director, Sakshi Gallery, “Now there are so many buyers and the artists can only produce so much. That’s why auction houses are doing so well.”

Although the optimism is palpable at Osian’s, which just launched an art fund with much fanfare, the market is growing for everyone involved with Indian art. Neville Tuli, who founded Osian’s in 2000, estimates the market for Indian contemporary and modern art at between Rs 850 crore and Rs 1,000 crore and pegs growth at 35 per cent. The NRI market — Osian’s estimates it to be at 100-125 buyers, but expects that to cross 2,000 by 2007 — is likely to continue to fuel that kind of growth.

Owners of art galleries, whose sales don’t get the publicity that auction results do, are also upbeat. Indian contemporary and modern art, according to Vadehra’s estimates, saw sales of Rs 1,000 crore in 2005. He expects that figure to double this year, with gallery sales and artist sales accounting for about 60 per cent. “These are very conservative figures,” he says. “The art market will hit $1 billion (Rs 4,600 crore) in three years.”

Others, however, point to signs that the market may be consolidating, which may be a positive development given the signs of ‘irrational exuberance’ hinted at by ArtTactic’s sentiment gauge.

Gallery owner Pravina Mecklai, whose Jamaat gallery opened in Mumbai in 1999, says the surge in demand that has lifted prices across the board may not be sustainable for all artists. “There will be a shakeout,” she declares. “If you look at auction results, there is a plateauing for some artists. People are getting more discriminating, even with a Husain.” The glamour of Page 3 coverage for art parties notwithstanding, Mecklai urges a buyer to do as much research before buying as they would before investing in, say, the stockmarket. Understanding the artist and the artist’s evolution also gives a potential investor some protection against the murkier side of the art scene, inevitable in a market where quality control ultimately comes down to the ineffable ‘eye’ that can detect the artist’s subtle strokes. Fraud is not uncommon and is one of the main reasons why buyers should stick to established galleries.

Even the biggest names in the business have not been free of controversy. In 2004, the sale of several works attributed to Anjolie Ela Menon, which the acclaimed artist subsequently said were fakes, involved some very reputable galleries. Osian’s has also had to face allegations of auctioning off a fake; and earlier this year, both Christie’s and Sotheby’s are said to have removed paintings from their auction list. Market insiders are unanimous: buyers beware.

“It’s such a nebulous thing,” says Mecklai. It’s harder, she adds, if you are buying to invest, because then you have to think about returns. “If you have Rs 30 lakh, you can invest in a Tyeb Mehta and you know it will go up. Where you take a punt is on the younger artists.”

Which is why the newly-launched Osian’s Art Fund, whose chief advisor will be Tuli, will focus only on 25-30 established artists from the sub-continent. Tuli’s rules for investing in art are simple: “Only invest in that which is historically proven, in artists who have dedicated 25-30 years of their life, who have won awards.” He adds that this would also circumvent the highly illiquid nature of the art business, which makes it difficult to re-sell when you want to cash in on your investment. “I don’t have to hold a Gaitonde for three years. I can sell it even before I’ve bought it,” he says, referring to the work of V.S. Gaitonde, a major figure in the Progressive Artists Group that includes Francis Newton Souza and M.F. Husain. Requiring a minimum investment of Rs 10 lakh, Osian’s fund is for investors with deep pockets and little interest in becoming sophisticated art connoisseurs. The lock-in period is 36 months and Tuli says the investor can expect better returns than on other assets. “If equity gives a return of 16-22 per cent per annum, we will definitely try to better that.”

The returns Tuli speaks of are roughly in line with those expected from the Yatra fund that was launched last September by Sakshi Art Gallery and Edelweiss Capital. The closed-ended fund, which requires a minimum investment of Rs 25 lakh, will invest in a mix of artists and liquidate holdings at the end of five years, says Geetha Mehra, who is managing the fund. Mehra started Sakshi Art Gallery in 1984 and has launched several emerging artists over the years. Nilesh Shah, executive director, Edelweiss, says Yatra drew 40-45 investors and raised Rs 11 crore. “We would be happy,” he says, “with returns of 20-25 per cent per annum. The way art has performed in the past 8-10 years and in the West, I would say people should invest 3-4 per cent of their total assets in art.”. Funds such as these take out much of the risk an individual would face if he or she wanted to buy art directly. But the undeniable downside of such an investment is that you can’t display your art or admire it when you want to. The funds’ focus on the bottomline has some artists worrying that the buzz is missing from the most important aspect of the market — the art.

“First of all, people have to look at art. Visual education is lacking in India,” says Nalini Malani, a Mumbai-based visual artist who currently has a year-long solo show at the Peabody Essex Museum in Massachusetts. “Actually, art is priceless,” Malani says. “The joy, the excitement, the zest for life, that’s what the buyer should be looking for. You must crave to see it, even if it has been hanging on your wall for a long time.” A price analysis will tell you that Subodh Gupta’s Idol Thief sold for HK $1,440,000 (roughly Rs 84 lakh) at Christie’s Asian Contemporary Art auction in Hong Kong in May. But Malani wants it to be known that his work featured in the Venice Biennale last year. It was the first India pavilion at the Biennale, but Gupta’s work featured in the more prestigious international exhibition. India was represented by Atul Dodiya, Anita Dube, Ranbir Kaleka, Nalini Malani, the Raqs Media Collective and Nataraj Sharma.

“In the international arena, Indian art barely has any place at all,” she says. “It is only the Indians who are getting hyper ventilated. I hope we get hyper ventilated about art itself.” Indeed, the centrepiece of Christie’s Hong Kong auction, which also showcased works by Atul and Anju Dodiya, was Chinese-born artist Cai Guo Qiang’s Drawing for Man, Eagle and Eye in the Sky: Eagles Watching Man-Kite, which sold for HK $6,952,000 (roughly Rs 4 crore), more than double its estimated price.

By contrast, Atul Dodiya’s Devoured Darkness series sold for HK $840,000, (roughly Rs 49 lakh) exceeding the estimated range of HK $620,000-775,000 (roughly Rs 36 lakh-Rs 45 lakh). ArtTactic’s Petterson agrees that the Indian market is still mostly for Indians and NRIs, with foreigners mostly lacking knowledge about Indian art. He says: “I think people are waking up to what is happening in India but I’m not sure if it is for the right reason — the art itself or the enormous potential the country has for growth and wealth generation.”