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Art as an investable commodity

Volatile stock markets have become the norm. Real estate requires huge chunks of investment and bank deposit rates are hardly able to keep up with rising inflation rate. Given this scenario, art seems to have become a safe option for investment. Art experts feel that, apart from gold, it is the only commodity which gives steady returns. Art can make its own money over a period of time.

The flip side is equally relevant. With surging salaries for technology and finance professionals and a growing middle-class ready to splurge, art in India has many takers. It has also led to art prices increasing substantially over the past decade.

The organised art market in the country is valued at around Rs 800 crore a year, which experts say is growing at a rate of over 30 per cent per annum.

According to Osian's-Connoisseurs of Art Private Ltd, a leading archive and auction house, those eager to invest must come ready not only with funds but also with expertise. Apart from taking a call on the type of artist, art collectors have to take a long-term stand towards this form of investment.

Given the steady rise in the value of artwork, this form of investment is certainly not short term. Give it some time and this does not mean lifetime but at least around three years. In some cases, certain pieces of art have given 100 per cent returns and more.

Financial institutions such as Citibank, ABN Amro, ICICI Bank and Kotak Mahindra Bank have had to foresight to look at art as a viable form of investment. Banks have set up art advisories, where high networth individuals (HNIs) are offered advice to select and purchase or sell art works. Several banks have tied-up with auction houses and art galleries for the purpose. A number of financial institutions like Edelweiss Capital and Dawnay Day have also come out with art funds or schemes, trying to cash in on this growing new market.

Art funds typically operate by pooling in money from select investors and use it to buy art objects that have huge appreciation potential in a short period of time. These funds may soon come under the purview of market regulator, Securities and Exchange Board of India (SEBI).

Apart from private collectors and art galleries, art can also be purchased through online auctions. Through this medium, collectors can purchase works of artists in other parts of the country and also get a mix of well established and lesser-known artists.

Online auctions like Saffronart, which featured the work of painters, sculptors and installation artists, attracted art lovers and investment oriented people from across the globe.

Prices of works of art are surging like never before. Recently, a 1971 water colour by M F Husain titled “Shiva” recently sold for Rs 34 lakh. About a decade ago, Hussain’s works fetched about Rs 60,000.

Auctions of modern and contemporary Indian art have fetched million of dollars in overseas markets in recent years. For example, Christie’s sold a Tyeb Mehta painting for $1.6 million just two years ago.

With international auctioneers taking a keen interest in the Indian art scene, a growing brood of art curators, advisories, auctioneers and online galleries, there is no dirth or ways and means to purchase art. Potential investors are however advised to do their homework about the artists, his previous works, the authenticity of the artwork and the dealer or gallery.

Source : Sify

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