If you are buying art as an investment, there is something you should know about the art world. It’s murky to put it mildly.
Manju Sara Rajan | 02 Dec, 2009
If you are buying art as an investment, there is something you should know about the art world. It’s murky to put it mildly.
You could say it starts with a party. In 2007, an art party was the coolest extra-curricular activity in Mumbai. During the gallery ‘season’ (usually from September to April), there were so many cocktail hour art openings that I could have written a feature on Mumbai’s catering business more accurately than I wrote about art. But it was the period of the Indian art boom, all a reporter had to do was write about the big sales figures, and cover every artist who was worth a certain price.
The first art show I ever attended was an exhibition by Reena Kallat at Mumbai’s legendary Chemould gallery in 2004. A fairly successful art consultant at the time described Reena as someone who would definitely ‘go places’. I remember looking at the canvases, trying very hard to figure each one out, or even whether I liked them. (I can’t recollect the details but there was some allusion to playing cards.)
Art is all about your personal reaction to a work. You don’t always need to understand everything, sometimes you like a work, it reminds you of something, excites you, makes you happy, or sad, and sometimes you just hate it, even though the ‘experts’ and PR machinery are saying something else. Consider the art market’s Goliath, Damien Hirst, from UK. The world’s richest living artist got that way by dunking animals in formaldehyde. He does the sort of work many writers would never understand without a press release. And most of us do only understand art from press releases. Which is partly why despite all the art coverage in our newspapers, for many people, some of the most basic questions about the Indian art market still remain unanswered. Like, can you ‘invest’ in art? How is an art gallery really different from an auction house? Who decides the price of an artwork?
THE WINE IS IMPORTANT
Like any commodity, the art business is divided into primary and secondary markets. New works sold directly by galleries inhabit the primary market; to resell that work, a collector ‘consigns’ the piece to an auction house, which, along with so-called ‘art dealers’, functions in the secondary market.
The launch of a new show, accompanied by an hors d’oeuvres-and-wine party, is the most public symbol of the primary market, when new works first go up for sale. It’s an important barometer of market interest, but it is also just a party, with gossip, and networking; if there’s an exceptional turnout, it’s difficult to even see the art. It is the culmination of weeks, even months of preparation for the art gallery, from conceptualisation of the show, and alerting everyone on the gallery’s mailing list, to securing a licence from the municipal corporation to serve alcohol on the night, there are a million tiny details. The only folks who get to circumvent the tedium of party conversation are good clients, aka collectors or ‘patrons’. They get a sneak peek of the pieces, maybe even a one-on-one with the artist before opening night. In the good old days, 90 per cent of works were sold this way, and by the time the party rolled around, there were discreet red dots on almost everything.
For the wine, the party, the invites, for the publicity, for a hundred other sundry costs, and most of all for the faith reposed in an artist, a gallerist gets about 33 per cent commission. It’s far less than the international standard of 50 per cent, which some Indian galleries are now beginning to charge. In return, an artist is supposed to be faithful. For years, mom-and-pop galleries in India worked together with artists on the basis of these informal agreements. For instance, Mumbai’s Chemould gallery gave Jitish Kallat his first show, and so for years, he was attached to them. That is, till he, like everyone else, got ‘Bodhified’.
THE DARK LORD AND OTHERS
Bodhi Art, promoted by Amit Judge, a man always referred to as ‘a serial entrepreneur’, changed the way the Indian art world functioned. Judge embodied the speculator-driven buying-spree that was the Indian art boom. During Diwali season in 2006 and 2007, galleries resembled jewellery stores; everyone wanted to buy art. Judge was a man of excellent provenance—former Prime Minister IK Gujral’s nephew, husband of the late Nandita Jain (her family owns The Times of India), head of Turner Morrison, and founding father of Barista cafes. He had a tendency to flit from venture to venture, setting up when times are good, closing shop when they aren’t. In 2004, he opened Bodhi Art in Singapore, and then he spread the business to Mumbai, New Delhi, New York and finally Berlin. It was an enterprising gallery, well managed, professional, their exhibitions were by far the most interesting in town. For example, they were among the first to promote ‘alternative’ art like video and performance. And with better terms and management, or sometimes business-class air tickets, loans, even just a mobile, Judge wooed (insiders say ‘Bodhified’) some of the biggest artists in the country away from his competitors.
I first understood that the art business, like the movie industry, had a mean streak (one auctioneer is referred to as the ‘Dark Lord’) when I realised how much so many people hated Bodhi. Even the superior quality of the vinyl signage (the lettering that spells out the name of an artist or work on the wall) that Bodhi used was a matter of discussion; the fact that Judge held his post-launch parties at Mumbai’s haute Indigo restaurant instead of the mid-level Joss like everyone else, irritated.
Judge was at the right place at the right time and he used his sometimes reckless sales techniques to make good. There is a story he loved to tell: in 1990, when he launched Stencil Apparel, a brand of menswear, Judge found it difficult to entice retailers to stock it. He finally made a deal with them: keep the shirts on a trial basis and if they managed to sell a few units then they could become a permanent stockist. Once they agreed to this seemingly fair trade, Judge ensured he would have positive results: he allegedly sent his own people to buy the shirts. “The way he said it you understood he believed he had to do whatever it takes,” says one person who’s heard him tell that tale.
Among the many accusations against Judge was that he overpriced works. But so did many gallerists when there was stratospheric demand to justify it. Art is inherently difficult to price, especially with a new artist, because it’s not just a sum of production cost, you have to value an artist’s intellectual merit. “Besides material cost, how do you put value on creativity? It is based on past works, demand and supply, and there’s always a shortage in art, and the moment an artist starts becoming popular, demand increases, and gallerists hike up prices because people are willing to pay,” says a curator. With high-value, always-in-demand names like Nalini Malani, or Riyaz Komu, a gallerist can hike the price to any number, depending on demand. Good collectors get the best rates, these days they could even negotiate a payment plan. The gallery will also happily send the works home before a sale so a collector can see how it looks on his wall. During the boom, some gallerists even computed a rate per square inch, so that all the works of a valuable artist had an approximate standard value. But it is a very subjective system, and one that isn’t considered very credible.
Once the economic meltdown began in mid-2008, Judge’s calculations went awry. Beginning in October, one Bodhi outlet after the other shut down. Like most galleries, Bodhi was an autocratic set up where only Judge knew exactly what was going on. His employees were shocked when the end came. “None of us had any clue what happened,” says one former staffer. “Where did the money go? We don’t know. One minute we were spending on everything, opening galleries everywhere, the next minute we heard the funding was drying up.” Judge has since disappeared from the art scene, and the artists on his roster are trying to figure out their next move.
SO, CAN YOU INVEST IN ART?
Unlike a gallery, auction houses thrive on the illusion of openness, you can usually see the competing bidders, and the amount of the winning bid is well publicised. The price at which an artist sold at an auction can be used as a benchmark of his (or her) popularity. It may not be the real value, because after all, that amount was decided by two people caught up in the heat of a moment, trying to outdo each other, but prices indicate a certain sentiment. “If there were no auction houses, galleries would have been happy in their black box putting whatever price they want on works,” Dinesh Vazirani of Saffron Art, India’s only online auction house, once told me.
One of the first major interviews I did as an art correspondent was of Minal Vazirani, Dinesh’s wife and co-founder of Saffron Art in April 2007. The year 2000 was a seminal year for Indian art because two indigenous auction houses—Neville Tuli’s Osian’s and Dinesh Vazirani’s Saffron Art—were born. The fact that these individuals with extensive knowledge of the art world could make a business out of their passion signalled that the Indian art market had ‘arrived’. All of them maintained that their chief intent was to enlighten the public, and release the spirit of Indian art, which had for so long thrived within a neighbourhood-network of galleries. When Minal and I met, she told me of their past and their future, of how they’d forced a certain open working culture in the art market, and how their success had been chronicled as a case study by Harvard Business School. Just a few days after I met her and even before the piece I wrote on her was published, Saffron Art was raided by Income Tax officials, hurling accusations of price fixing and tax evasion, among other things. So were Osian’s, and Sakshi art gallery. When I asked her about the event, Minal said they were simply being harassed.
In The Osian’s Art Fund’s First Annual Report for 2006-2007, Tuli, its chief advisor, wrote that, ‘The recent income tax raids conducted by the income tax authorities of the GOI on the Indian Art fraternity is another attempt to understand and monitor one of the fastest growing sectors in the world.’ In an effort to give the incident a positive spin, he said he believed the endeavour would lead to “regularisation of the Indian art economy where only legitimate and transparent institutions shall operate”.
Of the major names that were raided in April 2007, both Sakshi gallery and Osian’s run art funds. The headline of a Rediff news report published in late 2006 perfectly summed up the allure of art funds: ‘Want to get rich? Invest in art fund’. It was grammatically incorrect but punchy. At a time when ‘investing’ in art had become fashionable, the art funds were supposed to let people who couldn’t afford high levels of exposure have a small, supposedly safe experience of a new asset class. The 2006-born Osian’s Art Fund was reportedly worth Rs 100 crore, with minimum investment of Rs 10 lakh. It came with a promise of up to 22 per cent return per annum upon redemption three years hence, i.e. now.
Last week, I wrote to Tuli asking him if he’d managed to keep those promises; if he’d at least begun to repay his investors. He replied: ‘The Redemption Guidelines clearly allowed us the time up to 10 December 2009 to make the payments, which we have begun making. Yes, the expectations were much higher in 2006, but that was the case for all investments prior to late 2008. The liquidity throughout the modern and contemporary art markets has suffered significantly, and naturally the returns are lower than anticipated, at around 5% p.a. The timing was wrong, of entry at the highest point and exit at the lowest, but that risk is part of the process when you take the lead or start new platforms.’
The low returns of the fund is just one of the problems Osian’s is experiencing this month. On 20 November, Osian’s filed a case against its New York-based competitor, Christie’s Inc, claiming that ‘Christie’s has refused to deliver artworks worth $800,000 that Osian’s has fully paid for; and Christie’s is threatening to sell Osian’s artworks without notice.’ Osian’s claims that it bought 29 artworks between September 2007 and September 2008, and paid for it with staggered payments by May 2009. (Normally, buyers have to pay auction houses within a week, good clients, a month.) But, according to Tuli, Christie’s refused to release the works, and instead put them up for auction again. Yvonne So, communications manager at Christie’s Asia says, “Christie’s finds this complaint completely meritless. We have been seeking to recover a significant debt from an Osian-related party for more than one year.” She is alluding to a company called Bregawn Jersey, which owes Christie’s considerable sums. But Tuli maintains that he is not associated with Bregawn Jersey.
The lawsuit is the first public spat between Tuli and an international auctioneer, despite longstanding rumours that Osian’s isn’t forthcoming with payments. It’s unclear if Tuli will be allowed to bid in the sales of international auction houses again.
Ultimately, the only thing people want to know is if they’ll make money from art. I’ve met so-called collectors who think even a Rs 15,000 print should be ‘worth’ something, even though they spend as much on a pair of shoes. Avinash Gowariker could set them straight. Gowariker is a prolific photographer and cousin of Bollywood director Ashutosh Gowariker. I met him in 2007 when I was working on a story on affordable art. Avinash was inducted into the world of art-for-investment by fashion photographer Atul Kasbekar, and it wasn’t long before the latter began buying pieces he didn’t even like, believing they would reap rewards later. Today, Avinash doesn’t mince his words: “They’re all dead investments. I didn’t even try to offload some because I know there’s no point.”
Avinash’s collection is a mixture of established artists, and mid-career folks he believed would prove lucky. But almost all of them have let him down. “Art cannot be a logical investment, it cannot be a planned investment. Especially not for a normal person, not for anyone from the middle or even upper-middle class,” he says. “And here’s the worst thing, when you buy an artwork you think is pretty, you’re also thinking it’s a good investment, but when you lose your money it stops looking pretty.” After three years of the art ‘beat’, it’s the biggest lesson I’ve learned: don’t ‘invest’, buy what you love. At least you’ll be able to live with it. And yourself.