Indian art is appreciating at a blazing rate, and not just in the Rs 1-crore bracket. But is it a bubble?
16 Jan 2006
Sizzling hot; since 2000 Indian art has appreciated a staggering 10 per cent faster annually than the stock market. Your art investment would have doubled its value in two-thirds the time taken by your equity shares. And we thought the stock market was on fire. The buzz resembles the late eighties, when Japanese demand sent art to bizarre levels. Their bids were driven by hopelessly over-leveraged assets, and ended in tears when many winning bidders couldn’t even take delivery of their prizes. But like the mad 1980s, available liquid funds have helped drive the Indian art surge.
The rise is still strong. But funds can dry up, and prices will eventually seem stretched. For every ArjunSrinivasan, Chennai-based banker who mutters darkly about the Badri Narayan he should have bought at 3 per cent of its current value in 1990, there’s a RoshniJaiswal. The Mumbai-based entrepreneur and art collector worries the recent spectacular growth is a case of too much, too fast. So is it?
Indian contemporary art has arrived as a credible capital asset. Financial institutions are ready to invest in art as part of a diversified portfolio. Tax authorities are conducting ‘surveys’ to gauge the scale and nature of this wealth.
At a recent Osian’s auction Ranjit Malkani, chairman-CEO of Kuoni Travels shot to fame for buying the most expensive painting ever sold in India, Tyeb Mehta’s Gesture (Oil on canvas, 1978) for Rs 3.51 crore (including taxes). He’s clear about his decision: "Art is a fine asset to hold as part of one’s portfolio. But it is essential to know the subject well, to do one’s homework, and buy an artist who has a clear resale brand value."
Similar sentiments are reflected across the spectrum of the urban elite. Sangita SinhKathiwada, the owner of fashion boutique Melange, says, "Growing up, I thought land, property and jewelry were the best financial assets for a woman, little realising that my joy and hobby of collecting art would prove to be the best asset and investment I ever made. Today most of my savings are in contemporary art...but to buy what one likes isn’t enough. The aesthetic eye needs to be trained and that takes time."
And as Neville Tuli, chairman and CEO of Osian’s- Connoisseurs of Art, explains: "Art should be seen as having four key dimensions–aesthetic, historical, financial and educational, all functioning within a legal context. In the past India has not given any respect to the financial, because she was unable to systematically link the historical to the financial. History is the key to pricing art. Once public perception clarifies on this issue the momentum is irreversible."
India head of investment banking for Citigroup, PramitJhaveri, reaffirms the bright future and is optimistic on the investment prospects for art: "Handled right, art is an asset class with great potential. It has the interest of the high net worth community across the world."
Today, it isn’t only the very wealthy who’ve noticed the remarkable appreciation in Indian art. Good art doesn’t necessarily cost lakhs orcrores. It can be had for as little as several thousands of rupees. A dedicated art fund (see box) could lower the entry price even further.
But whatever the price, are you getting value? Today the public is aware that art compares favourably with other financial investments. Once the environment to love and invest in art becomes more transparent and information moves with greater ease the growth in the art market will receive its next major impetus. Simplification of the tax and duties structure will further add momentum to the growth.
Launching credible art funds, towards developing a mutual fund structure, like with the real estate market, now seems to be the future path for investments in art, one which can attract the larger public.
Yet for this to become viable the most important condition of the public knowledge base reaching a certain maturity is the key. Understanding the history of art, the growth of its infrastructure and a clear international exposure is thus essential stepping stones.
Kito de Boer, head, McKinsey & Co. (Middle East) and one of the largest collectors of Indian contemporary art in the world, with a focus on the works of GaneshPyne, Rameshwar Broota and F.N. Souza, is clear about the need to love art: "Only if you have passion can you enter the subject deeply. Only then can it become a sustainable investment. The amounts of money today are very serious, comparable to middle ground European art at many levels. Soon the collector of Indian art will have new global options and then the sustainability of the prices will be really tested. But as the Indian across the world becomes economically powerful, I’m sure the market can only grow. The future’s bright even though prices are seemingly rising rapidly."
But rapid price rises should be seen in the right context. In December 1987, when the first auction of Indian Contemporary art was held by Christie’s upon the invitation of theTatas, and M.F. Husain’s Mother Teresa sold for Rs.5 lakh, the financial buzz was palpable. The Times of India Group invited Sotheby’s to hold the Timeless Art Auction in March 1989, and Husain’s Homage to Hashmi sold for Rs 10lakh. The appreciation had started in earnest, and cries that prices were too high followed almost immediately. That the same works today would sell for 20 times those levels is the regret most wannabe but did-not-be collectors must live with.
The development of the art market since 1990 has seen various landmark events, each triggering a paradigm shift in the market awareness and financial benchmarking process. The attempt by Sotheby’s to establish a base in India failed after their 1992 auction was mired in controversy, which in turn led to a ‘depression’ in the art market, which was then reignited with the Landmark auctions by Sotheby’s in New York from the Chester and Davida Herwitz Collection (1995-96).
These two auctions showed the finest private collection of Indian contemporary art to date. New pricing benchmarks forM.F. Husain, Tyeb Mehta, Ganesh Pyne, S.H. Raza, Bikash Bhattacharjee, RameshwarBroota, among others, were established. However, these prices, set in New York and London, still faced no serious competition or found interest from the domestic Indian buyer. As a result they lacked energy and any serious international credibility. "Unless your domestic economy drives the market no international boom is possible," saysTuli.
He helped develop the local market with a seminal publication on Indian contemporary painting–The Flamed-Mosaic–along with organising the first major festival of Indian contemporary painting along with the HEART, NGMA, Bharat Bhavan and the key galleries of Mumbai, and then culminating it with India’s first professional auction: The Intuitive-Logic II. Ravi Varma’s Begum Bath fetched Rs 32 lakh in November 1997, becoming the most expensive Indian modern painting.
In 2000 Tuli established Osian’s, an auction house and arts archive. The systematic widening of the knowledge bases and the art market began in earnest. Knowledge-base building was stepped up, new artists were constantly introduced to global art markets, along with new pricing highs, which created the sustained growth and interest.
Soon Dinesh and Minal Vazirani entered the fray and established India’s first online art auction site, Saffron
art.com, opening up a new focus on the Indian NRI. With time this buyer base was to prove influential in achieving new highs for various artists catching the NRI fancy. Patrick Bowring, formerly of Sotheby’s & Bonhams, came to India to establish another professional auction house, Bowrings, but unfortunately the project was relatively short-lived, as once again controversy vis-รก-vis Indian antiquities forced a shut-down of operations. The process of transforming a black economy into a transparent, cheque-dominated system was in full motion, with the inevitable controversies in tow.
During the last three years the pricing boom accelerated beyond most expectations. The crossing of the Rs 1-crore mark by Tyeb Mehta’s Santiniketan Triptych ($317,500) at a Christie’s New York auction opened the floodgates. Thereafter many modern masters comfortably passed the once difficult-to-imagine Rs 1-crore target, such as M.F. Husain, F.N. Souza, S.H. Raza, Ramkumar, Akbar Padamsee, V.S. Gaitonde and J. Swaminathan.
Today, the prices of many national art treasures such as Ravi Varma, Amrita Sher Gil, Abanindranath, Gaganendranath and Rabindranath Tagore, Nandalal Bose and Nicholas Roerich, await similar recognition. Their non-exportable status has adversely affected the prices in the past but now as the Indian domestic market flexes its muscles, these artists should fundamentally appreciate, becoming the most sought after art works in India.
Soon thereafter artists like Ganesh Pyne, Bikash Bhattacharjee, Bhupen Khakhar, Rameshwar Broota, Jehangir Sabavala, K.G. Subramanyan, A. Ramachandran, along with relatively younger artists such as Sudhir Patwardhan, Chitrovanu Mazumdar, Atul Dodiya are waiting in the wings to pass the Rs 1-crore mark with some masterpiece done during an age where economics was far removed from the artistic day.
The recent strength in the art market only underlines this desirability. Markets everywhere have shown that as they develop mechanisms to ensure transparency, safe trades and good mechanisms for funding, insurance, settlement and price discovery, the valuation of the assets they trade itself rises.
Liquidity and the short, sharp craze of fashion typically don’t last as long. And any market that has outperformed one of the most attractive equities markets in the world cannot retain its performance edge forever. Yet a healthy art market will eventually help keep a smile on the face of anyone who ponders the long-term trend for the value of Indianart.
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