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Buying artwork is expensive but a lucrative investment

Buying artwork is expensive but a lucrative investment

Buying artwork is an expensive but lucrative investment. Make sure you stay put for the long term.

In May 2010, Pablo Picasso's painting, 'Nude, Green Leaves and Bust', was sold for $106 million (Rs 475 crore), the highest price ever paid for an artwork. The same year, international auction house Christie's sold Indian artist Syed Haider Raza's painting, 'The Saurashtra', for $3.5 million (Rs 16 crore), making it the most expensive painting by an Indian artist.

Is buying art or investing in it a rich man's game? The above figures suggest so. However, over the last few years, a number of options have emerged, especially from emerging artists, that have made investing in art more affordable.

Investing in art can be lucrative. For example, an M F Husain work could have been bought for Rs 1 lakh in the mid-90s. Today, a typical work of the master painter could cost upwards of Rs 50 lakh. It is a similar story with other Indian painters such as Raza and Anjolie Ela Menon.

For years, artwork was synonymous with international artists like Leonardo Da Vinci, Vincent van Gogh, Pablo Picasso, Rembrandt and Monet, to name a few. It was only in the mid-90s that Indians started to gain recognition around the world, with artists such as Husain, Raza, Francis Newton Souza and Anjolie Ela Menon taking the centre stage, says Vickram Sethi, promoter of The Arts Trust, which organises exhibitions and hosts art camps, and an art connoisseur.

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In India, paintings comprise 99% of the art market, says Swapnil Pawar, chief investment officer, Karvy Private Wealth. Although there are other forms such as sculptures and installations, too, for various reasons, these are usually bought by museums and collectors. Sculptures, for instance, require a lot of space, says Jesal Thacker, an art consultant and book publisher. Although as investment they both may be equally good, she adds.

Syed Haider Raza's The Saurashtra that Christie's sold for Rs 16 crore
In paintings, the Indian market can be categorised into phases. Artists like Husain, Raza, F.N. Souza and K.H. Ara belonged to the progressive group that emerged after independence. Before them there were masters like NS Bendre and Jamini Roy. Then there are artists from the 1990s who are known for the number of forms they use. Paintings and sculptures remained important, but investors found a new direction in works of leading artists such as Subodh Gupta, who used installations, as well as Jitish Kallat, Jagannath Panda, Atul and Anju Dodiya.

The art market in India is not regulated, unlike in the US. For example, a buyer abroad can sell art to the gallery he bought it from. This cannot be done in India. Although the gallery may promote a new artist, he does not remain committed to the same dealer, says Sethi.

If you are keen to invest in art, it is important to understand what the game is all about and a few basics of this asset class ' if we may call it so.

Art is a good investment. Having said that, you cannot buy art as just an investment, you have to buy it as something you like, says Pawar. If you own a painting of a well-known artist backed by a good gallery, chances are it will see a slight appreciation over five-seven years. But real appreciation will happen over 10-12 years, says Sethi of The Arts Trust.

What if you are a first-time investor? According to Ajay Seth, chief mentor at Copal Arts, you should take advice from experts and buy only works of renowned artists. "That is, of course, if you can afford them. This is because of availability of detailed auction history of their works. These works are often termed as blue-chips with an established track record," he adds.

Should you still eye the works of only the veterans? The answer is yes. If your budget is limited, you can also look at cheaper forms offered by veteran artists.

Things to remember when investing in art
>> Art is not for trading; invest for the long term.
>> Not all pieces done by a renowned artist are masterpieces. You must take help from experts to recognise a masterpiece .
>> Buy art that you like. It is something you may keep for a lifetime, as you don't know whether you will be able to sell it or not.
>> Research the artist you want to buy and his works. Understand what he does and what he is best known for. Ideally, go to galleries and see which artists they are promoting. Treat it like stock investing.
>> Prices of a renowned artist's works do not necessarily shoot up when he dies.
>> Art does not give you any additional income like interest or dividend.

For instance, an oil on canvas is perhaps the most expensive form of painting. The next is an acrylic on canvas, followed by an acrylic on paper. "A water colour on paper painting would be cheaper than these, while charcoal on paper would cost the least," said Seth.

If you want to invest less, you can consider water colour on paper paintings of masters like Raza and Ara, says Seth. Depending on the type of work, Ara will cost Rs 5-15 lakh. You can also buy works of known artists who use water colour on paper, like Badri Narayan, says Seth. A work from Narayan may cost Rs 5-10 lakh. If you can spend a little more, you can find a reasonably good acrylic on canvas painting, although small, by Raza for Rs 15-24 lakh.

"Having said that, any painting by an established master, even a water colour on paper, cannot be bought for less than Rs 10-12 lakh", adds Seth.

Do remember that all works of renowned artists may not be good. These artists come up with various series at different points in time and each may be priced differently.

Rise and fall of the masters
For a relatively lower investment, you may look at paper works by renowned artists, which may be prints, sketches, pen on paper, or charcoal on paper. Prints, for instance, are replicas of an original painting, created through techniques such as etching.

Original prints are usually signed in pencil by the artist. These are numbered to identify individual prints and indicate how many prints there are in the edition. More prints mean lower value.

Thacker says you can also find good digital prints, such as serigraphy prints, at auction house Saffronart. Having said that, she prefers buying younger artists instead of prints, as prints have a greater adornment value, but if you want to sell these you do not know what price you will get.

Although the art market is dominated by the veterans, a number of emerging artists have broken new ground of late. Experts say you can look at investing in emerging artists whose works are available from Rs 1 lakh onwards. Though they may be a good option, it is difficult to predict who will make it big in the future. For this, you need to take advice from experts in the field, says Seth.

Copal recommends Dhaneshwar Shah, a sought-after artist internationally, known for the beauty of scale he brings by playing with the size and proportion of objects. Three years ago, his paintings - acrylic on canvas -- cost Rs 50,000-60,000. They are now available for Rs 2 lakh, says Seth.

However, as an emerging artist does not have an established track record, you need more research into the gallery that represents him and his history. According to Sethi, over a few years, almost 50% new artists become irrelevant.

Internationally, the art cycle, says Sethi, lasts about nine years. However, for the Indian art world, the recent crash was its first.

During the global financial meltdown, the works of most artists saw a steep fall in prices and leaders of yesteryears remained on top (See chart on valuations of progressive artists). In fact, after the recession, qualitative work is more in demand, says Thacker, and that too of renowned artists.

  • Art should be stored in an environment that does not get direct sunlight
  • There should be proper air flow to prevent damage from mould and moisture
  • If the painting is of value, we recommend speaking to a professional
  • If any artwork is stored for an extended period, check it periodically
Today, the most sought-after artists, says Sethi, are Husain, Raza and Souza, who he calls the "holy trinity of Indian art". Prices of works of a number of established contemporary artists continue to fall. This is because a number of buyers of these paintings between 2005 and 2008 were non-Indians, who are now selling (see chart on valuations of contemporary artists).

If you are a first-time buyer, it may be worthwhile to buy through an art consultant or an advisor who has an in-depth knowledge of the market. Many private wealth firms offer services wherein they design your portfolio and even store your paintings and help you sell. They have art connoisseurs and savvy collectors on board. You can also tie up with a gallery.

You can end up paying a consultant 2-5% fee for expensive works. The service for smaller works may cost 5-15% of the value of the artwork.

Ideally, buy from an established art gallery or an auction house like Saffronart in India or Christie's and Sotheby's internationally. These also give you an indication of which artists are up for sale, along with prices and a history on their works.

Seth says you must check a few important documents while purchasing art - certificate of authenticity, authenticity guarantee, a provenance certificate, that is, the whole chain from where the artwork has moved, and a full-value invoice. Also, a note on what the painting depicts.

In west countries, art has a much bigger market. These countries have institutes that value art. In India, we do not have certified galleries to value art. It is a function of demand and supply of an artist's work, the quality of the painting, its size and the year it was made. Of late, insurance companies have started valuing paintings for the purpose of insuring them.

Pawar says the price of an artwork is a function of excess money in the system. As an asset class, it will do very well in a bull market.

You may not get huge returns if the market is range-bound, he adds.

Since there is no liquid art market, you must buy for end use, says Pawar. Else, invest only if you can afford to put this money away for years to come. Many times, low-value art can be difficult to sell to galleries.

Art should not form more than 5% of your total investments, says Pawar.

Published on: Sep 16, 2011, 12:00 AM IST
Posted by: Gaytri Madhura, Sep 16, 2011, 12:00 AM IST