25 Jun 2007

Investing in Art

(By Nalini S Malaviya)

As the market for art is expanding there is a corresponding increase in the prices of artworks, where some of the artworks are being sold at exorbitant rates. For instance, paintings which cost between Rs.50,000 to Rs.2 ,00,000 just a couple of years ago are now in the range of Rs.5,00,000 to Rs.8,00,000. This phenomenal growth can be attributed to the enhanced recognition of contemporary Indian art at the international level, and a buoyant Indian economy. Another factor that has contributed enormously to this exponential price growth is media hype; and artists, dealers and galleries have been quick to seize the opportunity. Similarly, branding in art – where the demand for an artwork is entirely related to the celebrity status of the artist - plays a huge role in determining prices of artworks.

For buyers, a budget upwards of Rs.10,00,000 ensures that they can invest in artists who are fairly well established and thereby a safe investment option. However, with that kind a budget one can pick up only one or two works. With a larger initial investment amount one can diversify one’s portfolio and pick up works by upcoming, established and senior artists, thus spreading the risk.

Riding the art boom, art funds too, have caught the imagination of investors who are looking at art from a purely investment angle. Art funds are especially attractive to people who are not particular about owning a work of art. Also, if an investor has limited knowledge of art, such funds work well for them, as long as the fund manager is sound on art. It is very probable that the near future will see more art funds being launched.

Prints, lithographs and serigraphs offer another avenue for investment in art. These limited edition prints cost a fraction of the price of an original artwork by the same artist, and therefore make for a more affordable option. These are also growing in popularity as more and more original works go beyond the reach of most buyers.

(Published in Financial Times, Bangalore)