Art Bubble

from an article in Business Standard

“Earlier, art was bought mainly as expense accounts by corporates. But as prices of art rise, today the buyers are individuals looking at investments,” says gallerist Sharan Apparao, who also brings out a newsletter called Art Venture in partnership with Citibank.

Today, to be known as an art collector is to proclaim social status. When industrialist Guru Swarup Srivastava daringly offered Rs 100 crore for 125 paintings of Maqbool Fida Husain’s “Our Planet Called Earth” and other works even before he’d laid eyes on them, he qualified the growing trend of art as an investible commodity for future returns.

Art has become like any other asset, whether equity, bonds or gold. As Srivastava, then four months into collecting art, declared in September after the mega-buck deal, “I bought the works more with financial vision than aesthetic sense.”

Today, buyers are ready to shell out the money if they desperately want to own a piece of art. Good art is a brand. Puroshottam Bhageria, a stockbroker, says he started collecting Progressive artists a year-and-a-half ago to diversify his portfolio. “You can safely invest in art as it gives you good returns ,” he says.

Neville Tuli, chairman of Osian’s Connoisseurs of Art, reckons there are nearly 300-350 serious Indian art collectors. “Typically, we have about 100-125 collectors who invest about Rs 1 crore a year and about 100 others who invest between Rs 50 lakh and Rs 1 crore. About 350 investors put in between Rs 25-50 lakh on art,” he says.

Nilesh Shah, director of Edelweiss Capital, who has been mandated to raise finances for India’s first onshore art fund called Yatra, reckons the number to be even higher. He says there are nearly 3,000 art investors in India who invest above Rs 20 lakh a year.

With an eye on prospective new investors in art, Yatra, a four-year close-ended fund that promises 20 per cent compounded annual rate of growth, was floated by venture capitalist Pravin Gandhi, Sanjay Kumar of Synergy Art Foundation and Geeta Mehra of Sakshi Gallery.

“Art has become fashionable. International auctioneers like Christie’s and Sotheby’s have brought out the true value of art,” says Shah. According to Gandhi, the fund has attracted Rs 10 crore from 50 investors so far. “We will mainly buy, hold, trade and hold auctions,” says Gandhi.

Gallerist Arun Vadehra should know. It took him nearly five years to convince Christie’s to open their auction doors for Indian art a decade ago. “In 1995, Indian art was valued at $300,000, which was small change when the art world market was valued at $3 billion.”

But the demand for Indian art is now setting new price records. An untitled work by V S Gaitonde sold for Rs 92 lakh at Osian’s, earlier this year. “Kali”, a work by Tyeb Mehta, snapped Rs 1 crore at the Saffronart auction.

Akbar Padamsee’s “Mirror Image” fetched $176,000 at Christie’s New York auction. While Indian art connoisseurs such as Kito and Jane de Boer and Masanori of Fukuoka Museum are still paying the highest price for Indian works, and non resident Indians constitute a majority of the buyers, it is also setting a new trend: in 1995, 95 per cent of the auction buyers were NRIs. Last year, this number fell to 70 per cent, says Vadehra, now a consultant at Christie’s.

“The Indian art market, fuelled by domestic buyers, is growing at 30-40 per cent today as against the world art market that is growing at 3-4 per cent. It will become a Rs 1,000 crore industry in the next five years,” he predicts. This year, Christie’s expect its Indian art sales to touch $10 million, while Saffronart is targeting $8 million. Osian’s too expects its sales to cross Rs 16 crore this year.

As the market expands, galleries such as Vadehra, Pallette, Art Alive and Nature Morte have expanded their premises to feed the growing interest in art. Artists are so much in demand today that some gallerists organise art camps in locales such as Cambodia, Turkey or Myanmar to acquire a work or two in exchange for the holiday.

Meanwhile, auction houses such as Christie’s and Saffronart are scrambling to put fresher works at auctions to feed the ever-growing demand. Trading in art has picked up to the extent that at the Christie’s auction in New York this year, seven fresh works were consigned for auctioning even before they had circulated in public venues, including those by S H Raza, Krishen Khanna, Ganesh Pyne and K M Adimoolam. At Saffronart’s London auction, five of a total of 46 lots were only a few months old, including one of G R Iranna’s untitled works that literally travelled from his studio to under the hammer.

This sudden price rise has created a flutter of concern about price rigging for certain artists. Fashion designer and art collector-turned-gallerist Rohit Gandhi says that even average works of artists are being sold at three to four times the value at which they’d be offered at galleries.

“This price rise is very unhealthy for artists,” he says. Besides, some people report instances of dummy bids to scale up prices of works at auctions.

Thus, as the mad scramble to acquire art builds up and speculation comes to play a critical role, art has also become a dirty word. Art historian Tapati Guha Thakurta feels that while there is hype around art, there is not enough intellectual engagement with it.

She sees the attempts of galleries that bring out sleekly produced art journals and publications as an attempt at creating a “new kind of literacy”. “There is a real poverty of art criticism in this country,” she says.

Will the art price bubble burst? “With more art funds expected in the market, we are going to see the luxury of liquidity. Prices are going to snowball in a way we haven’t seen before,” says Tuli.

WHAT PRICE, ART?

Venture capitalist Pravin Gandhi thinks there is one crucial structural difference between art and equity. “Unlike equity, art does not have a common standardised product,” he says. But as art is increasingly viewed as a commodity and less as an individual’s aesthetic response to a social and political commentary, a parallel concern is gripping the art world; the irrepressible increase in art prices — especially among younger artists.

If a small work (3’x3’) of G R Iranna fetched Rs 25,000 in 2002, today a similar sized work would command a price of Rs 1-3 lakh. Jitish Kallat’s prices have shot up by over 65 per cent per cent within eight months — from Rs 1.9 lakh (47”x60”) in May 2004 to Rs 3.2 lakh (41”x60”) in the year-end December sale.