Art Investment: The Fine Art of Collecting

This article was published in Tapasya, a publication by the Indira Institute of Management Pune
 

The Fine Art of Collecting

The last couple of decades have seen a tremendous surge in terms of awareness and interest in art. Suddenly names like Souza, Raza and Husain are familiar, not to just those within the art community but also outside it. Clearly, this change has not taken place overnight. The economic liberalization policies in the early nineties and the subsequent spurt in economic growth resulted in substantial amounts of disposable income that was accessible for splurging and also for financial investments. Simultaneously, the advent of global luxury brands in India introduced the middle and the upper middle class to luxury products, symbols of societal status and high living. For the first time one could purchase a wide range of aspirational products in India. This exposure to luxury brands and hi-end products was instrumental in creating and widening a buyer base that had a penchant for art, artefacts and collectibles.

This was also a period when many art galleries set up operations or expanded their businesses, thereby increasing their reach and creating multiple access points for art connoisseurs. In fact, this was a phase when art was positioned and promoted as a viable asset class that could generate large financial returns. Unfortunately, the subsequent crash in the market led to the economic downturn which also affected the art market immensely. It helped in dispelling the myth that all art could be a financial asset in the short term, or that there were parallels between investing in art and in stocks and shares, real estate or gold. In a way this led to correction of art prices and has eventually helped in stabilizing the art market to an extent. It has also shifted the focus back on art as a medium of creative expression, its aesthetics and its visual content rather than stay confined to names, price brackets and returns.

In this context, collecting art has caused some confusion especially for the first time buyer and collector. It becomes difficult for them to gauge and assess which art to buy, at what price points to enter the market, which artist to invest in and in general what to expect. Yet, art as an aspirational collectible continues to draw connoisseurs who have an eye for the finer things in life and can afford to indulge in luxurious living. Research and an avid interest in art can aid in developing a keen eye for art and also empower buyers on commercial aspects.

For instance, paintings by old masters or contemporary art in various media are coveted for the artist names which have become synonymous with high end brands; however, apart from artist names, thematic content, concept and execution are paramount in contemporary art. With increasing art awareness, a familiarity with artists’ names, local galleries and prominent auction houses is created which empowers the buyer when buying art. As art events, shows and auction reports are widely publicized in the media it helps in keeping abreast of upcoming artists, trends and sale figures. All of which can be valuable when buying art.

Collecting art

Building an art collection can be a rewarding experience, both aesthetically and as a viable investment option, albeit in the long term. It is important to be clear and identify the motives for collecting art, and a passion for the arts should be the driving force. A visual investment should take precedence over all other aspects.

One should also realize that significant collections are difficult to build overnight, but instead they tend to evolve organically over a period of time. In the initial stages, they are driven by the collector's tastes and preferences, however, later on they may get refined further due to conscious efforts. Sometimes, the choice of the collector is governed by considerations such as budget, available space, and time required for such an activity.

When selecting art, it helps to keep in mind if the collection is a private one or if it might be put on public display at a later date. One can buy representative art from various periods or focus on a specific school, style of painting, era or artist. It is also essential to realize that an art collection, unlike one comprising of smaller collectibles needs a larger space, and special care in terms of lighting and maintenance.

The process of buying art can be an exciting and rewarding one – visiting art shows, interacting with artists, critics and gallerists, reading and researching on art are activities which help immensely in selecting art for the collection. It is possible that there will be times, when one is forced to overlook personal tastes in favour of deliberate choices, which would benefit the entire collection as a whole.

When one is collecting art, irrespective of the initial investment, the overall value of the collection is likely to go up with time. Therefore, it is important to do the necessary research and take the time to build one that will be significant in terms of historical content and also its financial worth. When collecting art, it is essential to periodically review the artworks and see if some of them need to be sold off to either make space for new works or in order to build a more coherent compilation.

The Indian art scene

The current art scene has much to offer to discerning collectors and buyers. The recently held India Art Fair, New Delhi has grown to be a significant event in the region and attracts a large number of international audiences as well. The Kochi-Muziris Biennale has also emerged as a major art event which showcases several exhibitions and organizes art and culture related programmes for its entire duration. A number of other art exhibitions and festivals that are organized in tier II cities ensure that local audiences are engaged and there is a buzz around art.

Art auction major Sotheby's will be opening its first office in the country in Mumbai in March this year. The auction house Christie's has seen its business grow at a faster clip in India since its first sales in December 2013, and its auction figures saw a sharp surge in 2015.

The contemporary art scene is clearly vibrant and should thrive further in the years to come. The online space is a fast evolving and attractive arena which is expected to see more players. Art ecommerce ventures are likely to grow and hopefully offer greater diversity and curated artworks to its buyers. There is a marked interest in Indian modern and contemporary art and an emerging attentiveness towards classical Indian art, which makes it an exciting phase for art connoisseurs.

 

Also read,

• Art Advice: Market Mantra, Education Times, Bangalore
• Guide: The Fine Art of Buying
• 10 Tips For Buying Art
• 6 Tips On How To Approach An Art Gallery And Find Gallery Representation
• Exhibiting Art in Non-Gallery Spaces
• Guide To Exhibiting Your Artworks
• How To Write An Artist Statement
• How to Create an Online Presence
• How to organize an art exhibition

Guide: The Fine Art of Buying

Art is a visual investment, and as a medium has the ability to alter the aesthetics of the environment 

Buying your first work of art can be intimidating and perhaps, also perplexing. How does one decide which artist’s work to buy or where to buy it from? Similarly, there are questions related to style, genre, medium, size and of course, the price of the artwork. These can all add further to the confusion. So, here are a few tips to guide you towards selecting and buying an artwork.

Empower yourself

The first step is to visit a few art galleries to see the works that are displayed there, and consider what engages you - which works do you feel aesthetically, emotionally and intellectually drawn to? Notice your reaction to the works displayed and this will give you an indication of the kind of works that you relate to. Visualize these on your walls now and consider if you would like to look at them over and over again. Remember that art is a long term investment and that is very unlikely that you would purchase a new work of art for your living room every couple of months.

The next step is to look up online galleries and browse through images to learn more about various genres, styles and corresponding prices. Again, this will give you a sense of the kind of art which engages you, as well as direct you to artists whose works you like.

Make sure, you do this only after you have visited and viewed art galleries, since the physicality of viewing art is an important step in understanding its nuances, for instance the tactility of the medium, use of pigments and materials, textural quality and the dimensionality of the artwork are evident only when you stand before it. In fact, also visit artist studios and interact with artists whenever possible. This will facilitate an understanding of processes, and materials and media.

In parallel, read up on articles to know more about artists and current exhibitions. It will give you a sense of art trends, popular artists and will cultivate familiarity with the language used in describing art. This will also help you in understanding text accompanying art, which in turn offers insights into the work.

Set a budget

It is important to set aside a budget for art so that there is clarity on the amount that you are willing to invest in art. It would be advisable to begin with a small amount, perhaps in the Rs 20,000 - 50,000 range, which allows you to gain confidence in the initial period of learning. You could consider buying works by upcoming artists as these are likely to be in the affordable range. You could also purchase limited edition prints, drawings and watercolours, which are generally priced lower, in comparison to oils and acrylics.

Following these steps will ensure you learn about art and the art market, enabling you to make the right choices when it comes to buying for your home. Even if you are buying art at your interior decorator’s advice, take the time to be personally involved.

Art is a visual medium of expression, which can be used creatively to complement home interiors. It is a visual investment, and as a medium has the ability to alter the aesthetics of the environment completely and as you learn more about its finer aspects, you can incorporate both style and substance in your home interiors.

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• TIPS: 10 Tips For Buying Art
• ART COLLECTION: Chitrakala Parishath, Bangalore
• ART COLLECTION: Jaganmohan Palace, Mysore
• ART COLLECTION: NGMA, Bangalore

10 Tips for Buying Art

Very often people are hesitant about buying art for the fist time.  Not only is there a hesitancy in entering a gallery premises but there is an overall sense of awe and apprehension when considering the entire process of buying art.  Clients wonder if it is all right to purchase a single artwork, should they negotiate on the price or is it going to be embarrassing! Then there are questions about where should the buy from and would they be able to resell it when required.  Also, there are doubts regarding how to go about buying art for the sake of starting a collection, should they consider it as a financial investment or should they only consider enhancing aesthetics from an interior decor perspective.

 Research on Art

1. One of the first things to do before buying art is to empower yourself by reading up on art, visiting local art galleries, meeting artists and other people who are actively involved in this field.  Talk to artists, consultants and curators to get insights about the functioning of the art market and to also network with like-minded people. 
2. Find out about current trends, read about exhibitions and reviews, and try to get a sense of the art market, prices and resale options. 
3. Look at images and artworks to get an idea about the kind of art that you prefer.  Are you inclined towards traditional paintings, contemporary art or perhaps experimental art?  It helps to be clear about what you enjoy and what kind of art engages you.
4. Next find out about reputed galleries and dealers.  Visit galleries to see how comfortable you feel while interacting with them.  If you are planning to buy art from an online source, find out about safe and credible sites who deliver authentic works. Check with galleries if there is a buy back clause or if they will help you in reselling at a future date.
5. Get familiar with provenance and authenticity and all the necessary precautions that you must take to ensure you buy an original artwork which is authentic.

Why are you buying?

6. I find that it is also important to establish your reasons for buying art – is it to cover up a vacant wall or floor space, is it a part of your investment portfolio or do you want to start building an art collection?  It helps in deciding the kind of art that you should buy and also in planning a budget for it.
7. It is always a good idea to begin in a small way and put in only a small amount of money in the artwork initially.  You could then see how you feel about the entire process, how the artwork engages you and how confident you feel about investing larger sums in art.  

Budget

8. Perhaps the most important criterion, allocate a budget for art and put in sufficient effort to stay within it.  It is often easy to get carried away and spend much more than you had initially intended.
9. Decide if you are going to spend small sums over a period of time or whether it is going to be a one-time investment for you. 
10. Do make sure that it is only a small percentage of your disposable income and not a portion of your primary investment portfolio.

 

One of the major reasons why it is advised to buy art that you enjoy is that unlike any other asset class, art has a distinct advantage where it can engage you intellectually and emotionally.  It is not just another piece of paper in which you have invested but has the potential to enrich your life and affect the ambiance of your surroundings.

Investing in art

24 JUL, 2011, 10.11AM IST, NALINI S MALAVIYA,ET BUREAU

Investing in art needs some research

With reports in the media focusing primarily on the merits of investing in art and making it appear as an attractive option for all investors, it raises a lot of questions for investors who are attracted to art as a financial investment instrument. Art can undoubtedly give huge returns in the long term, but there are many layers to it, which may not be immediately evident to nouveau buyers, but are nevertheless present and hence require a healthy understanding of the workings of the art market.

It is important to consider various aspects related to investing in art for instance, the risks associated with it, its liquidity and also how it fares against other investment assets. It is inadvisable to consider art from a purely financial investment angle; after all, it is one of the few (such as antiques and collectibles) options which has a ‘decorative’ side to it. It would therefore be rather inappropriate and superfluous to override the aesthetics and visual content of art.

One should consider investing in art only after allocating funds to conventional assets such as stocks, real estate and gold. Also, consider art as a long-term proposition and keep in mind that it may take some time to sell it off when necessary.

Most people who have made a lot of money through art are those who bought works at low prices by artists who would have then gone on to establish themselves in a big way later on. However, it is important to realize that not every artwork will appreciate considerably in the future - prices are likely to increase with time corresponding with the artist’s career but not all will show a significant change or a dramatic graph. This implies that the element of risk is probably high when buying artworks priced in the lower bracket range. Art which is priced higher and is done by established artists is a safer option in terms of investment, but requires a larger outlay from your part. It is also essential that as a buyer or investor you have some knowledge of art and understand the dynamics of the market to an extent.

Investing in art needs some research

24 JUL, 2011, 10.11AM IST, NALINI S MALAVIYA,ET BUREAU

With reports in the media focusing primarily on the merits of investing in art and making it

appear as an attractive option for all investors, it raises a lot of questions for investors who are

attracted to art as a financial investment instrument. Art can undoubtedly give huge returns in

the long term, but there are many layers to it, which may not be immediately evident to nouveau

buyers, but are nevertheless present and hence require a healthy understanding of the workings

of the art market.

It is important to consider various aspects related to investing in art for instance, the risks

associated with it, its liquidity and also how it fares against other investment assets. It is

inadvisable to consider art from a purely financial investment angle; after all, it is one of the few

(such as antiques and collectibles) options which has a ‘decorative’ side to it. It would therefore

be rather inappropriate and superfluous to override the aesthetics and visual content of art.

One should consider investing in art only after allocating funds to conventional assets such as

stocks, real estate and gold. Also, consider art as a long-term proposition and keep in mind that

it may take some time to sell it off when necessary.

Most people who have made a lot of money through art are those who bought works at low

prices by artists who would have then gone on to establish themselves in a big way later on.

However, it is important to realize that not every artwork will appreciate considerably in the

future - prices are likely to increase with time corresponding with the artist’s career but not

all will show a significant change or a dramatic graph. This implies that the element of risk

is probably high when buying artworks priced in the lower bracket range. Art which is priced

higher and is done by established artists is a safer option in terms of investment, but requires

a larger outlay from your part. It is also essential that as a buyer or investor you have some

knowledge of art and understand the dynamics of the market to an extent.

(Published in Financial Times)

Art in Home Decor

1 MAY, 2011, 06.03AM IST, NALINI S MALAVIYA,ET BUREAU

Buying art as an investment option

Now that the recession is considered to be behind us, people are once again looking at various investment options. Real estate, gold and the stock markets are taking precedence as investment avenues. Many are investing in their dream homes and are willing to spend anything between Rs 50 lakhs to Rs 1.5 crores, while others are buying their second or even third houses. There are people keen on doing up their homes to the best of their ability and are willing to spend substantial amounts on the interiors. As part of this process, homeowners are increasingly considering original artworks as an essential element of decor.

It is noticed that in such cases the prime focus is on purchasing a work of art which fits in well with the space and the interiors, rather than be driven by a purely investment motive. Although, this is a positive trend and must be encouraged, what would work better is if the buyers choose art with a right amount of emphasis on aesthetics , and at the same time consider a few points, which can contribute towards building up an art portfolio in the long run.

While buying art, you can consciously opt for original artworks (instead of reproductions or prints) by emerging artists, students or established names depending on the budget available. Drawings, limited edition prints such as etchings or serigraphs, watercolours and photographs are some of the options which are priced lower than oils and acrylics on canvas . Canvas works by students and young artists are also likely to be more affordable in comparison to paper works by senior artists.

Most people tend to buy art according to specific colour themes or motifs in an effort to coordinate with the existing decor, but this may not always be the right approach to adopt. When buying, the emphasis should always be on the quality of the artwork, while keeping other aspects in mind.

Essential to understand markets while investing in art

13 MAR, 2011, 05.27AM IST, NALINI S MALAVIYA,ET BUREAU

For those who are looking at buying art, it is important to tread cautiously at this point in time and do a thorough background check before investing large sums of money in it. One does not want to repeat the same mistakes which were made prior to or during the boom phase. What is positive is that there is a lot of interest in art, and there are many collectors and buyers who would like to invest in art. Yet, there is a slight hesitance due to past experience , which may not have been pleasant.

One of the best ways to go about it is to empower yourself to be able to make the right judgment about artworks, artists and prices. Therefore, it only makes sense to learn more about how the art market functions, the factors that influence and affect prices, how to choose the right gallery to buy from and most importantly , how to ensure that what you are buying is at the fair market price.

One of the things that were very common a few years ago was the trend that prospective buyers, essentially young professionals with disposable income, would approach art galleries with a specific amount of say, Rs 5-10 lakhs and request them to suggest artists or to even create a portfolio. The drawback with such an idea is that although a gallery of repute would ensure that your money is invested safely with appropriate buyback options, flyby-night operators would be bound to take advantage of such an offer.

Today, it would be wiser to either approach established, reputed galleries or professionals, or to research as much as possible before buying. This way, the responsibility of decision-making is in your hands, which is not only prudent but also enhances your involvement in the whole process.

(Published in Financial Times)

Buying art

There is no denying that there is a lot of interest in art these days. There are a number of new entrants in the form of galleries, dealers, curators and of course artists on the scene. Also, there are a number of people now who are buying art for the first time and find themselves at a loss when it comes to deciding about the artwork itself. They find themselves wondering what to buy, where to buy from, is the pricing fair, while facing a hundred other dilemmas.

One of the most important things when it comes to buying art is to make sure that you always buy from credible sources. It is imperative to set aside a budget and determine whether you are looking at buying art as a one time option or are you considering making art a part of your investment portfolio. In the latter case, you might be looking at buying several pieces spread out over a longer period of time. Very few people indulge in impulsive buys, unless the work is really affordable, but even then it helps to set aside an amount dedicated to art. In case, you are buying art to diversify your investment portfolio it might be advisable to consult a financial or investment advisor who is knowledgeable about art.

If you are visiting an art gallery either to buy or just to look at art, you need not be intimidated by the staff or the gallery ambience and make sure you ask all the right and relevant questions which can help you garner information regarding the artwork, the artist and his/her antecedents. Incidentally, people are a lot friendlier now than they were earlier, making it easier for the buyer. It is also perfectly normal to not make an on the spot judgment but to come back with an informed decision.

The track record of the artist for the last five years at the minimum can offer some insight into his/her price growth and overall demand. However, if you are in doubt then do not hesitate to take expert help, someone with the right credentials and who you can trust with your money is a good advisor.

(Published in Financial Times)

Changing profile of art buyer

In the olden days, which some would say were the 'good old days', people who bought art did so either because they had a passion for it or to help out a friend. The last thing on their mind during those days was to make money out of it. Then, in the late nineties, it was evident that art could be seen as a viable financial investment.

That insight played a huge role in altering the mindsets of buyers and collectors, and also in changing the dynamics of the art market significantly. Buyers realised they could make a quick buck by buying and selling in quick succession, which was amply aided by the booming economy. This trend lasted till the recent recessionary period, when it became clear that just as any other market which had grown too fast too soon there were huge gaps in infrastructure and systems.

In the meantime, it had become fashionable to collect art or to be seen as a patron of the fine arts, and again, the fast-growing economy acted as a catalyst in supporting luxurious lifestyles. Art was a conversation piece and adorned the homes of all those who could afford it.

Then there was a phase where there were a number of art funds in the market catering to a clientele that was not interested in art, but only in the dividends that it could offer. However, the recent economic downturn has been an eye-opener of sorts, in many ways.

There was abundant disappointment and disillusionment, especially for those who had entered the business of buying and selling art without understanding either the art or the dynamics of the market. But it may have contributed towards a more aware and knowledgeable collector and investor base, and overall, in the establishment of a more mature market. Today, loyal collectors are continuing to buy art with a renewed focus on quality. There are a few investors in the field.

They are treading cautiously and short-term investors are wary of making the same mistakes again. The young, upwardly mobile professional is still interested but not completely convinced or confident. For all practical purposes this continues to be a transition phase and the next few months where activities will increase may help in determining how the situation unfolds.

(Published in Financial Times)

The fine art of collecting

(By Nalini S Malaviya)

Now, that once more there is an interest in art, there are people who are looking at art either as a financial investment or as a collectible. To begin an art collection it is important to identify the motives behind it. One of the main reasons why people collect art is that they are passionate about it.

There are collectors who buy representative art from various periods or they focus on a specific school, style of painting, era or artist. Again, it is important to be clear whether the collection is going to be a private one or if it could be put on public display at a later date. It is also essential to realize that an art collection, unlike one comprising of smaller collectibles needs a lot of space, and special care in terms of lighting and maintenance.

Once you have identified the kind of collection that you are looking at building, you can begin by making a list of artists or works that you wish to acquire. In fact, there are some people who might begin collecting in a small way and then get so passionate about it that they decide to convert it into a more organized and larger collection. There are some people who prefer to collect only modern art or contemporary works, or old prints or only new media works. Sometimes, the choice of the collector is governed by considerations such as budget, available space, and time required to dedicate to such an activity.

Whatever the reason behind collecting, the process of buying art can be an exciting and rewarding one. However, there will be times, when one is forced to overlook personal tastes in favor of more intelligent choices, which would benefit the entire collection as a whole.

When one is collecting art, irrespective of the initial investment, the overall value of the collection is bound to go up with time. Therefore, it is important that you do the necessary research and take the time to build one that will be significant in terms of historical content and also its financial worth.

(Published in Financial Times)

Understanding art prices

(By Nalini S Malaviya)

Now that the art market is beginning to look up, there is a lot of interest in understanding the intricacies of the market. The pricing of artworks has been a component that often requires a greater understanding of the market dynamics in order to analyze it. And, even then it may not appear entirely rational, as it is not completely deterministic or quantifiable.
Many people fail to comprehend the logic behind art prices and their upward movement due to its multivariate nature, there are a certain amount of elements that influence it. Also, it is important realize that there is a difference between the commercial price of an artwork and its value. The price of an artwork is determined by physical attributes such as market conditions whereas the value is its perceived worth or a subjective opinion of the viewer.
Typically, the price of an artwork depends upon the medium and size of the work, previous price points, its rarity and the artist. Art prices in the primary market are driven essentially by the artist and the gallery, whereas prices in the secondary market are often driven by demand. For instance, in an auction there is a reserve price which is estimated for a given piece of work prior to the auction, and its subsequent sale price could be much higher, sometimes in multiples of the reserve price. The sale price is driven up by the demand and may be a result of competitive bidding.
It has also become common to estimate prices of an artwork based on per-square-inch / foot or centimeter. And, some auction houses tend to follow this system of computation as a basis. However, there are no standard formulae to evaluate the price or value of an artwork, and hence the discrepancies that are seen in the market.
As a buyer it would be wise to crosscheck comparative prices before making a decision, but at the end of the day, if there is a particular piece of art that you wish to own, be prepared to pay for it.
(Published in Financial Times)

Allocate appropriate budget when investing in art

(By Nalini S Malaviya)

There are many people who would like to buy art but are unclear as to how to go about it. Lacking exposure to the world of art, they are unsure about artists, prices, which galleries to go to and the value of artworks. On the other hand, there are numerous collectors who keep succumbing to practically every new work of art. The excitement of collecting new and different works of art can even become addictive unconsciously.

There are some collectors who keep buying works from every new series of a particular artist for a variety of reasons. They either like that artist’s creations a lot, or because they know the artist personally they find it difficult to decline his latest works.
Then there are those who begin collecting in a small way, but in a few years time they get so involved and passionate about it that they find themselves unable to stop. This may happen even at the cost of their budgets going awry. With every new purchase they tend to stretch themselves, and slowly over a period of time this grows beyond control. Collecting art by well known names is a reflection of one’s status and there are many buyers who invest in them just for this purpose. Peer pressure can also be the driving factor in many cases. Then there are those collectors who are forever on the look out for newer artists and cutting edge works. They look for artists from a purely financial investment angle.

Therefore, while some may consider art as a frivolous expenditure, there are a large number of people who invest in art for various reasons. However, it is important to apportion a budget to art investment and remain within its limits. Just as you would invest a percentage of your disposable income on various conventional assets, follow the same rules when buying art, at least wherever applicable.

(Published in Financial Times)

Investing in art

(By Nalini S Malaviya)

A recent report on the state of the stock market highlighted that the Sensex was climbing up in the last couple of months based on the fact that a few stocks were performing exceptionally well. A similar trend is seen in the art market, too. In the past, when prices of certain artists shot through the roof it not only created a wider market for art, but riding on this wave most of the other artists, too, hiked up their rates. And, in fact, a majority of them succeeded to a large extent. It was seen that anything related to art was on a high during that period.

However, as an investor it is important to realize that not every painting or sculpture will fetch the same returns. Incidentally, a few years ago, students and new artists were able to price their works beginning at Rs. 5,000. But soon after, the starting prices were close to Rs. 20,000. In a way, the base price itself has gone up considerably.

One question that has always emerged is that how does one evaluate whether a work of art is actually worth the quoted price. Apart from logical factors such as rarity and quality of the work, historical value, the artist’s name and its worth from a collector’s point of view, one finds that pricing is predominantly driven by demand, or, its perceived investment value.

In that respect, claims that were rampant a few years ago regarding appreciation in investment potential of art were not entirely true. Not every painting or artwork fetched the same amount of projected returns. In fact, a very small percentage of artists saw a large appreciation in price. Now that interest in art is once again rising, it helps collectors and investors to be aware of these points. Just as one invests in stocks after a lot of research, one must do the same to invest in the right kind of art. But, in case money is not a criterion, and one is not looking for a financial investment, then obviously one can just go and buy anything that is appealing.

(Published in Financial Times)

Investing in art

(By Nalini S Malaviya)

A couple of years ago when people had Rs.2-5 lakhs as disposable income they were more than happy to invest in art. It was not uncommon to find people walking into galleries and soliciting their help in buying art. Most of these people had limited knowledge about art and relied completely on external sources to make a judgment. However, when the recession happened, it caused a lot of heartburn and many of these investors, who were looking at short term gains found themselves in a quandary. Unable to sell the work at even the cost price, they lost confidence in art as an investment instrument, and also blamed their advisors for the situation they found themselves in.

Now that the market appears to be looking up, a similar situation could surface again, but, hopefully buyers who have burnt their fingers are likely to be extremely cautious now. It is important, as in every financial investment situation, that the investor be in a position to make an informed decision. The buyer should be more proactive, collect all vital information and use good judgment to come to a decision regarding art. Especially, when one spends so much money on art, it does not make sense to rely on any one gallery, dealer or consultant to take a decision for them.

In fact, it is ridiculous to compare investing in art directly with investing in stocks and shares. Although, there may be certain broad similarities, but as financial products they are extremely different and involve different dynamics.

One can remember that as an investor in art one should
- Do ones own research
- Think long term
- Be aware of the shortcomings and pitfalls of investing in art
- Use only spare liquidity in art
- Invest in art only after investing in conventional asset classes

(Published in Financial Times)

Is the art market on a recovery path?

(By Nalini S Malaviya)

There are faint indications that interest in art is once again on the rise. With the stock market improving in the last few weeks, there is a perceptible change in the financial situation and buyers are now showing a renewed interest in art. As financial markets are invariably interlinked, it is not surprising that once again attention is shifting to art. Although, the change is marginal, yet it is a good sign compared to the past several months where conditions had worsened to the extent that footfalls and sales in galleries were close to negligible. Most auctions that took place in this interim phase too performed poorly.

At least now, there are enquiries about interesting shows and specific artists. Although, this is still very early to predict if the market is on the revival path, there is a strong possibility that things could improve. It is still early days and how much of this interest translates into financial tractions one will have to wait and watch.

It also appears that this time, buyers are likely to be more cautious in investing heavily in art. In the recent past, there were several instances where investors found it difficult to off load their artworks at the prices at which they had bought. Readers will remember that in the last couple of years, art prices were at an all time high and it was not easy for investors to exit during the recession that followed soon after. Investors who had held onto their works are in fact in a better shape, as with the improvement in the financial markets, art prices too will rise.

Investors who have gone through this ‘boom and bust’ period will now tread cautiously. According to most analysts, it is unlikely that art prices will witness a similar short term surge in the near future, but as a long investment art should still be a fairly safe option.

(Published in Financial Times on Jun 14, 2009)

Is the art market on a recovery path?

(By Nalini S Malaviya)

There are faint indications that interest in art is once again on the rise. With the stock market improving in the last few weeks, there is a perceptible change in the financial situation and buyers are now showing a renewed interest in art. As financial markets are invariably interlinked, it is not surprising that once again attention is shifting to art. Although, the change is marginal, yet it is a good sign compared to the past several months where conditions had worsened to the extent that footfalls and sales in galleries were close to negligible. Most auctions that took place in this interim phase too performed poorly.

At least now, there are enquiries about interesting shows and specific artists. Although, this is still very early to predict if the market is on the revival path, there is a strong possibility that things could improve. It is still early days and how much of this interest translates into financial tractions one will have to wait and watch.

It also appears that this time, buyers are likely to be more cautious in investing heavily in art. In the recent past, there were several instances where investors found it difficult to off load their artworks at the prices at which they had bought. Readers will remember that in the last couple of years, art prices were at an all time high and it was not easy for investors to exit during the recession that followed soon after. Investors who had held onto their works are in fact in a better shape, as with the improvement in the financial markets, art prices too will rise.

Investors who have gone through this ‘boom and bust’ period will now tread cautiously. According to most analysts, it is unlikely that art prices will witness a similar short term surge in the near future, but as a long investment art should still be a fairly safe option.

(Published in Financial Times on Jun 14, 2009)

Valuation of art

(By Nalini S Malaviya)

Every art collector, at some point or the other, likes to know the financial worth of his art collection. The monetary valuation of an artwork comes in useful not only in estimating the monetary worth of a collection, but also when art needs to be sold. Again, it forms a crucial element for the purpose of insurance and wherever property assessments have to be done or when estate issues are involved. In such cases it is important to get a fair estimate from an independent source.

Today, when prices have corrected drastically, many people who are attempting to sell their artworks privately have to resort to some kind of a valuation which gives an idea about its current market price. Having a reasonable base price as reference helps the seller in making a prudent decision regarding the sale of the artwork. A valuation may also be necessary when an heir is in doubt about the value of an inherited artwork. Many corporate collections and private individuals as well opt for a valuation of their art collection as it gives an estimate regarding the total financial worth of the collector.

The process of valuation should be done by experts in the field as it is a fairly complex procedure, involving several factors such as, comparison of data of various price points, significance or rarity of the work, condition of the artwork and current market estimates. Incidentally, most auction houses provide this service.

Generally, in case of private sales most people tend to approach either galleries or independent consultants for a fair market evaluation. The important factor here is that one should obtain the services of an expert who is unbiased and has no stake in the financial worth of the artwork.

The Indian art market has grown phenomenally in the last few years and although there is a slowdown at the moment, valuation of art is one field that is bound to see a lot of demand and growth in the near future.

(Published in Financial Times)

Some tips for buying art

(By Nalini S Malaviya)

It may sound a little surprising but there are still a number of people who are buying art, although not many are flaunting the fact. If you are one of those considering buying art, I have put together a few points here which should help you go through the process.

Investing in art has always been a fairly controversial subject where purists believe that art should be bought only if one has the passion for it, while, investors with a high risk appetite have looked at art as just another investment instrument. Therefore, it is important that you identify your reasons for buying art. In any case, if you are spending a large sum of money on art use only any spare cash that you have.

If you are planning to spend less than Rs.50,000/- this is comparatively a small amount when you consider that prices of artworks can go up to lakhs and even crores. In such a case you can look at art which is aesthetic and one that appeals to you visually. If you are spending bigger amounts it is important to evaluate and analyze the financial investment potential of the artist. Also, instead of spending a large sum at a time you can distribute it within a certain timeframe. Incidentally, you should not consider spending more than 10-15% of your disposable income on art.

Buying art can be a fairly addictive process as many collectors have found out. There is always a better and more exciting work of art round the corner. Therefore, it is important to define ones budget and stick to it.

Make sure you buy from reputed galleries and dealers who have established their credentials over time. It is always better to pick an artist who is represented by a well established gallery, which ensures that the artist is promoted appropriately. In case you are buying from a resale be extra cautious about the authenticity, provenance and the condition of the work.

When you do a background check on the artist, also see how his prices have evolved over the years. A stable rise over time is a good indication that prices may follow a similar pattern in future. However, do not go entirely by the artist’s name, but also check for quality. There will be variations in every artist’s work and remember that someone who is very prolific is less likely to focus on quality.

At the end of the day buying art is a matter of personal choice, and you should be able to make the final decision after collating all relevant data.

(Published in Bangalore Mirror)

Where is the trust vote?

(By Nalini S Malaviya)

During the boom period art was projected as the next biggest investment class and many private individuals and dealers were quick to encash on this popularity wave. During that phase buyers were promised returns anywhere between 100% and 1000%, backed by data that was carefully weaned to suit the purpose. “Investment Art” emerged as a convenient bait to lure buyers to the maximum. The phrase was meant to identify a class of art that was sure to maximize investment. The situation today has altered drastically. One wonders where these promoters are now. What has happened to these so called Investment Art or Artists? The ground reality has always been different from the hype prevailing in the media.

Today, the market is abuzz with investors trying to offload their art. Unsuccessfully. In desperation many are willing to settle for whatever little is offered. This has resulted in the investors being a disillusioned lot. Many people had also invested in art funds, some of which have failed to provide the returns that were promised at the launch of the funds. At least those who have invested in art directly can take solace in the fact that they can see their art on the wall.

A number of people have lost faith in art as an investment. However, one cannot blame unscrupulous promoters and dealers only; some amount of responsibility has to be borne by the investor as well. After all, when one invests a substantial sum of money, say in real estate, one checks the credentials of the builder or developer, looks for clear titles and so on. The same is true for art. How can one invest without doing any background research? It is always essential to have an independent and unbiased opinion in such cases.

In any fast growing field, there will always be many speculators and people who will manipulate the market to suit their own purpose. At one time, many artists too, were churning out works by the dozen when there was a huge demand.

Today, demand is low, prices have fallen, and everyone has the time to introspect. During the last phase, gullible investors who believed they could treat art as stock or shares, and could exit at any point they wished are the ones that have suffered the most. It is only now that many have realized how difficult it is to resell art, especially now when liquidity is hard to find. At the risk of repeating myself, I have to say that this is a particularly bad time to sell, but a good time to buy, if you can afford to.

The market will take a while to recover, and hopefully there will be better regulation soon. And meanwhile, remember the old adage, it maybe clichéd, but still holds true – buy art that you can live with.

(Published in Bangalore Mirror)

Not the best time to sell art

(By Nalini S Malaviya)

During a financial crunch, people like to have the option of selling part of their assets to obtain liquidity. In the recent past art had been promoted aggressively as an alternative asset class and many buyers invested large portions of money in it in the hope of receiving good returns. However, most people who had invested in art without sufficient knowledge of the art market dynamics are now struggling to resell their works. Although, many galleries began offering buy back guarantees on the works they sold, this often came with clauses regarding timeframe, returns and valid for only select artists. Now that investors are facing major problems in reselling art, most of them are disappointed and disillusioned with art an investment option. It is important to realize that investing in art is an altogether different ball game compared to investing in traditional assets such as stocks, real estate and gold.

At this point in time, there are a large number of people looking to exit but unfortunately given the financial constraints permeating all sectors of the market, it is a difficult option. Many of these investors had bought art hoping for quick and high returns, and while this did happen during the boom period it is an extremely unlikely scenario at the moment.
Still, if an investor needs to exit now, he could either sell directly to a private buyer or through a gallery or a dealer. Rare or high quality works can also be sold through an auction house and one may want to consider that also as an option. As art prices have dropped recently if one is selling now, one should be realistic about the selling price. As we have mentioned in the past also, ideally this is not a good time to exit unless one is forced to. If possible hold on to the work for at least another two to three years.

(Published in Financial Times)